Studies and Scientific Researches. Economics Edition, No 30, 2019 http://sceco.ub.ro 65 CORPORATE SOCIAL RESPONSIBILITY (CSR) PRACTICES OF BUSINESS ORGANIZATIONS IN SOUTH WOLLO REGION - ETHIOPIA S M Uvaneswaran Wollo University, Dessie, Ethiopia. uvaneshsm@wu.edu.et Tsega Zemen Wollo University, Dessie, Ethiopia tsegazemen@gmail.com Seid Muhammed Ahmed Wollo University, Dessie, Ethiopia. seidmuhammedahmed@gmail.com Abstract Corporate Social Responsibility ( CSR)is the commitment of business to contribute to sustainable economic development – working with employees, their families, the local community and society at large to improve the quality of life for the business and public. In Ethiopia, companies are spending portion of profit for developing the society and corporate under different verticals. This paper highlights the demographic and company characteristics of corporate social activities performed by the organizations in the areas of Employee, Community, Environment, Customer and Suppliers. To meet these objectives, a- stratified-random sampling design was used, followed by proportionate technique. The primary data were collected from the merchandising; manufacturing and service render business organizations. To keep representativeness of the sample units, 142 business organizations were chosen based on the category A Tax payers. The data collected are analyzed by using Simple percentage and Likert scaling techniques to find out the participating companies in CSR activities. Thus the paper concludes that CSR contributions relating to community are more compare to other activities like environmental protection, customer and supplier support, employee motivation and social development. Keywords Corporate Social Responsibility; Business Organizations; Employee; Community, Environment; Suppliers and Customers JEL Classification M14; M41; O14 Introduction Corporate social responsibility (CSR) refers to the voluntary integration of social and environmental concerns in the business daily operations and their interaction with business stakeholders. The concept of corporate social responsibility is strongly connected with the ‘Triple Bottom Line’ approach advocated by John Elkington in 1997. ‘Triple Bottom Line’ is a frame work for measuring and reporting corporate performance against economic, social and environmental parameters. The idea behind this concept is that for an organization to be sustainable, it must financially secure, it must minimize its negative environmental impact and it must act in conformity with social expectation. CORPORATE SOCIAL RESPONSIBILITY (CSR) PRACTICES OF BUSINESS ORGANIZATIONS IN SOUTH WOLLO REGION - ETHIOPIA 66 The sole aim of establishing an organization is to improve the quality of life in the society. Measures need to be put in place that determine and reports the extent to which the organization has impacted on the society from time to time. This has been the basic function of the accounting systems of organizations (Francis, 1990). Corporate Social Responsibility (CSR), which social accounting and reporting is part of, is one area that organizations can use to gain competitive advantage over firms that do not practice it (Price water house coopers, 2002). Porter et al (2006) outlined the link between CSR and competitive advantage. Society is seen to benefit when organizations implement a social approach to accounting and reporting in a number of ways; honoring stakeholder’s right of information, balancing corporate power with corporate responsibility, increasing transparency of corporate activity, identifying social and environmental costs of economic success (Gray, 2000). The process of reporting on responsible business performance to stakeholders help in integrating such practices into business practices, as well as identifying future risks and opportunities. Critics of this approach point out that the benign nature of companies is assumed and therefore, responsibility and accountability is largely left in the hands of the organization concerned (Gray, 2000). Ethiopian firms have not been left behind in the practice of corporate social responsibility accounting practices and also observed a spectacular evolution in community and investors stance towards the environment in the past few decades. The firms do disclose their social activities in the annual statements though what they report is limited and often reflect only the positives of these activities (Kalunda, 2007; Uvaneswaran, 2017). They also use other channels of communicating such as newspapers and the company websites. The study will try to establish the nature and mode of corporate social responsibility practices amongst Ethiopian firms located in Dessie Town as per the list of Ethiopian Chamber of commerce and sectoral association and the ministry of trade whether by engaging in such practices. Research Problem According to the concept of Corporate Social responsibility, business corporations should incorporate social and environmental information in the annual financial reports to users of financial reports. Furthermore, with the advent of the era of transparency and accountability the demand for social costs disclosure is increasingly being of concern and desirable by products of economic activities (Kalunda, 2007). Today, active consumer groups, the public and the government departments demand it and in future, legislations promoted by these groups may make it mandatory. In Ethiopia, the business organization are rendering variety of social service to the downtrodden community in the region as free polluted environment, employee motivation, community development and customer support etc. but they did not have practices of showing this information in the media like newspaper, magazines and also the habit of transparency in the financial statements to claim tax reduction. Even though some companies are voluntarily engaged in reporting several social responsibility activities in their annual financial reports and it appear that companies have progressed substantially further than literature. Apart from these the large and midsized companies located in Dessie are more in different sectors and the contributions towards CSR is limited or unlimited has to identify and also the application of CSR practices. Whereas many studies have been done on CSR in general and o n social and accounting and reporting, none has been done to ascertain the CSR practices followed by the organizations. This paper aims to bridge the Uvaneswaran, Zemen, Ahmed 67 existing gap and will address itself to the following objectives and attribute some knowledge of CSR practices in Ethiopia. Research Objective • To understand the demographic factors and also the characteristics of the selected business organizations. • To identify the corporate social activities performed in the areas of Employee, Community, Environment, Customer and Suppliers. Scope of the Study Although there are different categories of Tax Payers in Ethiopia, this study targeted on Category A class Tax Payers companies found in Dessie Revenue Authority office and also companies located in Dessie town. Specifically, the research was confined on the organizations involved in manufacturing, merchandising and service business and also to identify the companies rendering CSR activities relating to employee, Community, environment and Customers. Literature Review Freeman (1984) defines a stakeholder as any group or individual who can affect or is affected by the achievement of the firm's objectives. Stakeholders of the firm include stockholders, creditors, employees, customers, suppliers, public interest groups and governmental bodies. The major objective of the firm is to attain the ability to balance the conflicting demands of the various stakeholders in the firm. Ullmann (1985) presents a three-dimensional model for explaining all correlations among social disclosure and social and economic performance. As indicated above, he presents stakeholder power as the first dimension of the model. He explains this by indicating that the firm will be responsive to the intensity of stakeholder demands. The more critical the stakeholder resources are to the continued viability and success of the corporation, the greater the expectation that the stakeholder demands will be met. A series of studies carried out have shown that corporate social reporting by companies is increasing (Deegan et al., 1996). Maunders (1982) carried out a survey of published accounts of 300 large companies for the period 1981 to 1982 and concluded that the largest incidence of voluntary disclosure was in the area of human resource. Gray et al. (1995) concluded that for the various categories of social disclosures which included environmental, community and safety the average amount of disclosure had steadily increased from the year 1979 to the year 1991. Corporate Social Responsibility reports on a firm’s social and environmental performance from a variety of perspectives; including community involvement, employee relations, Product safety, Philanthropy and the impacts of the firm on the environment. Numerous studies have been conducted based on the belief that a responsible company is rewarded by its good reputation. Further, these studies are conducted about the contribution of corporate social responsibility (CSR) activities and the social accounting practices in the cooperative societies in Ethiopia but none of the them studied as per source of the investigator about the application of this concept to the Manufacturing and Service companies in Ethiopia. From the summary above, it is known that the researchers have not been decisive regarding how Ethiopian companies perform their CSR activities relating to employees, customers, environment and society. Therefore, this study aims to show the gap in contributions and shortage of CSR activities in different verticals among the selected business organizations in Dessie. CORPORATE SOCIAL RESPONSIBILITY (CSR) PRACTICES OF BUSINESS ORGANIZATIONS IN SOUTH WOLLO REGION - ETHIOPIA 68 Methodology The study was carried out using a descriptive survey design, employing primary qualitative data. The target population in this research is limited to business organizations in Dessie town, Ethiopia. The population of the study is those business enterprises which are found in Dessie town. According to the data obtained from Dessie town revenue office, of the business organizations available in the town, totally 2129 business organizations have been registered as category - A (949) and category B (1180) are tax payers. In terms of firm type these business organizations are categorized under manufacturing, merchandized and service. The researcher conducts study only in the category A tax payers companies by selecting samples which are governed under Dessie town revenue office. Since these organizations are well organized, the researcher believed that they have proper financial statements and also contribute more to the corporate social responsibility activities. Stratified random sampling was used to select sample business organizations from the population. This technique is preferred because it is used to assist in minimizing bias when dealing with the population. With this technique, the sampling frame can be organized into relatively homogeneous groups (strata) before selecting elements for the sample. In addition, purposive sampling was used to get respondents from trade and industry office of Dessie town because informants were selected intentionally/purposefully to obtain the required data. In this study for the purpose of sample size determination Cochran, (1977) statistical model was used. Accordingly, the appropriate sample size used for this study at 93% of level of significance with marginal error 7% was determined using the Cochran formula. As a result, 142 samples were taken out of 949 business organizations for this study. The total population was stratified as manufacturing, merchandized and service under category A tax payment. Then, from each stratum proportional samples were randomly selected by applying proportional sampling technique. The table below shows the proportion of sample size used from each firm type and category of tax payment. In order to realize the target, owner/ managers/ operators of the enterprises and government officials from trade and industry office of Dessie Town were the sources of primary data. The study employed quantitative methods as an important means of generating the required primary information from the field. The quantitative method was functional through administrating a household- b a s e d survey using questionnaire. To collect relevant data from the selected samples a questionnaire which consist both closed and open- ended questions had been applied. The questionnaire was prepared in English language. Since the sources of data were business enterprises owners/managers, it is translated into Amharic in order to make the questions simple, clear, and understandable to respondents. Uvaneswaran, Zemen, Ahmed 69 In this study, questions related to CSR activities were rated on a 5- point Likert response scale. Based on this, an internal consistency reliability test was conducted with a sample of 20 business organizations and the Cronbach's alpha coefficient for the instrument was found about 0.809, which is highly reliable. Typically, an alpha value of 0.70 or higher is taken as a good indication of reliability, (Internet source). Since instruments were developed based on research questions and specific objectives; it is possible to collect necessary data from respondents. Results and Discussion To achieve this objective, data were gathered through questionnaire from 142 business organizations rendering manufacturing, merchandising and service operation in Dessie. The data collected about Demographic factors like Age, Gender and educational qualification of the respondents are shown. As indicated in the above table, regarding to the sex of the respondents, from total respondents, 66.9% of the respondents are males. With regard to age of the respondents, 39.4 % of them are found in the age group of below 20 years, 38.1% of them are between the age of 21 and 30 years, and the rest 22.5% of them found between the age group of 31 to 40 years. This implies that the majority of respondents who were running the business firms are relatively young. Concerning to the educational qualification, the information in the above table reveals that about 59.2% of the respondents are second grade completed, 39.4% are diploma complete and 1.4% of the respondents are First Degree holders. This implies that a majority of the business organizations entrepreneurs are educated up to second grade. From the table 3 reveals that about merchandise firms constitute a sizeable number of business organizations in Dessie town when compared to service and manufacturing sectors. 23% of the sample respondents are pursuing family owned business only as per the above table. This shows that the majority (67%) of business organization in Dessie town is owned by sole proprietors and at the same time 56 respondents are running merchandise business in this category. With regard to the age (years) of the company that the 50 respondents are merchandising and 39 of them are service sectors having 1-10 years of business experience from the total sample respondents. This means that majority (87%) of the business organization have 11-20 years of experience in merchandising business from the study area. CORPORATE SOCIAL RESPONSIBILITY (CSR) PRACTICES OF BUSINESS ORGANIZATIONS IN SOUTH WOLLO REGION - ETHIOPIA 70 Regarding to the CSR activities relating to employees from the table 4, from total 142 respondents, about 27% of the employees doesn’t encouraged by the organization to develop real skills and long term careers through Performance Appraisal and Training & Development. The majority of the organizations take adequate steps at some extent to solve the problems of the employees. 25% of them say that the organizations consult some extent to take important decisions on issues. This implies that a majority (27 %) of the organizations are committed on employee’s health and safety at very little extent only. About 32% of the respondents replied that the firm ensures the work /life balance to some extent, the majority (35%) of the employees getting average wage rate when compare to the concerned sector’s average wage rate. Studies and Scientific Researches. Economics Edition, No 30, 2019 http://sceco.ub.ro 71 From the table 5, it is clear that more than 50% of the facilities like Gender equality/ diversity, Representation of women as Board of Directors and Organizing day care centers and pre-schools children are provided to employees by the firm. similarly, less than 60% of the facilities like Training, Freedom of association, collective bargaining and complaint procedure, Medical Facilities/health care/ Health assistance /Maternity leave, Promotion policies for women and minorities and Prevention child labour, Labour discrimination (Women) were not provided by the firm. Thus, it can be concluded that the majority of facilities like Gender equality/ diversity, Canteen offering subsidized refreshment / free lunch, Representation of women as Board of Directors and Organizing day care centers and pre-schools children are provided at maximum level and at the same time certain facilities like Prevention child labour, Freedom of association, collective bargaining and complaint procedure, Labour discrimination (Women), Promotion policies for women and minorities, Residential Complexities and Medical Facilities/health care/ Health assistance /Maternity leave are provided to the employees at minimum level. Regarding to the CSR activities relating to Social and community in the table 6, from total 142 respondents, about 25% of the firms donate funds to charity at some extent Further, 36% of the organizations make their staff to involve in charity work voluntarily on behalf of the company. About 31 % of the respondents expressed that the organizations will favor at some extent. On the other hand, about 27% of them express as very little extent and 20% of organizations replied that their recruitment polices don’t favor to the local community the 15% of them were not at all involved in supporting of community projects. Majority (32%) of the organizations are some extent favor in their purchasing polices to the local community. Studies and Scientific Researches. Economics Edition, No 30, 2019 http://sceco.ub.ro 72 As indicated in Table 7, that the organizations contribution to the society. More than 50% of the respondents don’t provide any contributions to the establishment of Educational Institutions and support for education, Recreation and public clubs, Road construction, Sponsor sports tournament, encourage employees to community development activities and Organizing awareness Programmes about prevention of Uvaneswaran, Zemen, Ahmed diseases like HIV, AIDS, CANCER . On the other hand, more than 50% of organizations providing funds to Rural Development, Donations to NGO for social activities, Religious charities and Organizing video/audio programmes short films, Poster presentation / distribute pamphlets for understanding the causes of drug addicts like alchool, chat chew, Cigrattes. This shows that, the majority of business firms do not provide funds to community developments like establishment of Educational Institutions and support for education, Recreation and public clubs, Road construction, Sponsor sports tournament, and Organizing awareness Programmes about prevention of diseases like HIV, AIDS, and CANCER. From the table 8, statements 1, regarding to the extent of CSR activities relating to customers, from total 141 respondents, about 28% of the firms don’t provide accurate information’s about products and after sales service, (43%) of the organizations show interest on resolving the customer’s complaints on time. About 38% of the companies provide quality assurance at some extent and shows that the organization provide adherence on production criteria to some extent on quality assurance to the products. Further, 35% of the organizations are committed at some extent to provide value to the customers and 33 % of the respondents expressed that the organizations consider little extent on issue of accessibility. On the other hand, about 24% of them express as some extent, 19% of organisations replied that their issue of accessibility as very little extent and 12% of the respondents shows that great extents and not at all accessibility issues. This implies that a majority (33%) of the organisations have little extent on the issue of accessibility (disabled to the customers). Studies and Scientific Researches. Economics Edition, No 30, 2019 http://sceco.ub.ro 74 Regarding to the extent of CSR activities relating to environment in table 9, from total 4 Manufacturing companies, about 28 % of the organizations consider to some extent about environment impact on developing new product such as energy, usage, recyclability and pollution. This indicates that the majority (31%) of the organizations not at all using environmentally friendly packaging and containers for their products. It is clear from the table 10 that the more 75% of the organization did not have any environmental protection in energy conversation, air pollution reduction, purchase of dust absorption machine, packaging reduction and no companies have waste products recycling machine. Studies and Scientific Researches. Economics Edition, No 30, 2019 http://sceco.ub.ro 75 Conclusion and suggestions The conclusions were made following the foregoing discussions above, each corresponding to the specific objectives of the study. This study found that the majority of business organization having the ownership of sole proprietors with less than 10 years of experience. With regard to the CSR activities relating to employee certain facilities were not provided such as training, medical, bonus, child labor prevention and relating to Community few amenities are very less like Education support, community development engagement, funding for disabled person and relating to environment protection certain facilities are lacking such as energy conservation, waste products recycling, dust absorption and relating to Customers and suppliers needs to concentrate more in about labeling of products and service and maintaining of standard and voluntary code of advertising . In respect to the conclusions made in the study, the companies should concentrate or contribute some percentage of profit to engage in CSR activities relating to the areas of employee, community, environment, customers and suppliers. 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