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Article

Corporate Social Responsibility Preferences in South Africa

by
Roselyne Cheruiyot-Koech
1 and
Colin David Reddy
2,*
1
Centre on African Philanthropy and Social Investment (CAPSI), Wits Business School, University of Witwatersrand, Johannesburg 2193, South Africa
2
School of Management, University of Johannesburg, Johannesburg 2092, South Africa
*
Author to whom correspondence should be addressed.
Sustainability 2022, 14(7), 3792; https://doi.org/10.3390/su14073792
Submission received: 10 February 2022 / Revised: 4 March 2022 / Accepted: 7 March 2022 / Published: 23 March 2022
(This article belongs to the Section Sustainable Management)
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Review Reports Versions Notes

Abstract

:
What leads firms in South Africa (SA) to prefer specific CSR initiatives over others? The researchers analyzed secondary data from publicly available information of 231 listed firms on the Johannesburg Stock Exchange. To determine national/institutional level preferences, ten CSR activities were identified among all firms and ranked in terms of their mean score of whether each firm participated in an activity or not. To determine industry/stakeholder influence, CSR activities were regressed against the firms’ industry. The preference for two CSR activities, education and training and enterprise development, are common across industries. This demonstrates the institutional effect of SA’s national Black economic empowerment (BEE) policy, which promotes such activities. Charitable donations, infrastructure provision, employee voluntarism and efforts in arts, culture and sports prevail in certain industries. The preferences of firms in the mining and construction industries stand out relative to other industries. Managers have to carefully select CSR activities that respond to various societal pressures. We show an example of management responses to pressures arising from both the national and industry level context. The study is the first to rank CSR activities of South African firms. We also reveal the promise of institutional theory to examine the phenomenon of CSR in the South African context.

1. Introduction

A firm’s corporate social responsibility (CSR) approach can encompass a wide variety of activities. These may include philanthropy (donating to charities), volunteering by employees, ethical labor practices, and implementing environmentally friendly operations [1]. Firms do not implement the entire range of CSR activities. To guide their choice of activities, firms look to the desires and requirements of different stakeholders and institutions in their respective countries of operation. Diverse stakeholders and nationalities may view certain social initiatives as less or more important than others [2,3]. As a result, firms respond by prioritizing those CSR activities that stakeholders in their operating environment consider important. This leads to firms having CSR preferences for some social and environmental activities over others.
One observes, for example, that while firms from Europe may prioritize climate change [4], firms from the Middle East and Africa regions pay attention to the social issues facing the surrounding communities [3]. While some regions allow for voluntary activities, others prescribe certain CSR activities. Firms in state-led market economies, such as France, are faced with regulated versions of CSR. In contrast, firms from liberal market economies, such as the U.S.A., are free to select CSR activities [5,6,7].
CSR preferences may also align with subnational influences of industry norms and regulations [8,9]. For example, the food industry prioritizes consumers willing to pay for environmentally friendly products when firms select CSR activities related to environmental responsibility [10]. Influential stakeholders, such as large customers, may also drive preferences [11,12,13].
As South Africa is a country of the Global South, burdened with socio-economic problems, we have yet to learn whether firms from South Africa possess different CSR preferences to firms of the other countries explored by researchers to date. Overall, the overarching driver of CSR preferences is a mix of institutional pressures often activated through stakeholders [14]. In South Africa, with BEE policy featuring an important institutional driver and a state-driven variant of CSR, it will be interesting to explore whether the topmost CSR activities also feature in the BEE codes of practice. Additionally, to capture any heterogeneity in management responses, we believe stakeholder pressures across industries become salient. Mining firms, for example, are located next door to local communities that serve as essential stakeholders, while service companies tend to be in cities full of middle-class consumers. With various CSR preferences across nations, this paper explores what leads firms in South Africa to select specific CSR initiatives over others.
We thus designed an exploratory study to first capture the firm’s CSR preferences in South Africa and then establish any industry influences on these preferences. To this extent, we analysed secondary data from publicly available information of 231 listed firms on the Johannesburg Stock Exchange (JSE).
Located in South Africa, the study contributes more broadly to the under-researched CSR context in Africa and the Global South more broadly. Our results confirm Brammer et al.’s [2] observation of location or context-specific CSR preferences. We also show that regulatory type institutional influences, such as the coordinated market economies of Europe, do indeed feature strongly in South Africa. Many managers also continue to respond to industry norms. Thus, we contribute to attempts to delineate influences on CSR preferences according to the industry context [5,14,15]. Industry context represents an important subnational influence on CSR preferences [14].
The rest of the paper is structured as follows: we first cover the CSR context in South Africa. We develop our research questions, describe the research method, present the results, and end by discussing the implications of our results.

2. CSR in South Africa

Earlier, Bowen [16] referred to CSR as the obligation of managers to act in the interest of society. Davis [17] suggested that these actions must be beyond the firm’s direct economic interest. The components of CSR, proposed by Carroll [18], include legal, ethical, discretionary, philanthropic, and economic aspects. Notably, the economic component includes the principle of fairness, where businesses are obliged to sell their goods and services at a fair price to make a profit.
As various difficulties experienced by society have arisen, public expectations of corporate responsibility have also evolved. From the original focus on social issues, CSR scholars now argue that social issues include the “stewardship of the natural environment” where environmental issues are viewed “as trespasses against society” ([19] p. 107). This has led to viewing corporate performance as a triple bottom line: economic, social and environmental [20]. A helpful guide to the key performance indicators of each dimension of CSR can be found in the Directive 2014/95/EU [21].
As a result of the rigorous discussion about implementing corporate responsibility in Europe, CSR has been revised from its voluntary posture, originating in the U.S., to a hybrid of voluntary and regulated elements [7,20] For example, in Europe, it has been proposed that “public authorities should play a supporting role through a smart mix of voluntary policy measures and, where necessary, complementary regulation” ([22] p. 7). It has been argued that the spirit of regulatory measures is not to reduce the discretion afforded to firms; instead, they should guide firms [23].
The South African environment presents private firms with abundant opportunities to help to address social ills. South Africa has the highest level of inequality globally, with a Gini index of 63 [24] and about a third of its population lives in poverty [25]. A significant reason for this inequality is the stubborn unemployment rate, now at 35% [26]. Many of the unemployed are less educated and unskilled, and the demand for them arising from, for example, primary industries, such as agriculture and mining, has continued to decline. Structural changes in the economy have demanded more skilled labor. South Africa has been described as a land of “two nations” [27]: a rich, formal economy and a poor, informal economy. With low national skill and education levels, high crime rates, and poor access to clean drinking water and housing, the provision of social services, traditionally supported by charities and the government, is under severe strain [28]. In this case, the private sector’s social responsibility efforts, using private resources that can be used efficiently and effectively, become valuable to compensate for the inadequate social services delivered by the government.
Traditionally, CSR in South Africa was delivered through corporate social investment (CSI): a philanthropic effort with firms implementing their social responsibility through charitable donations targeted at the education and healthcare of a firm’s surrounding communities [29,30]. Education efforts, for example, included providing monies towards schooling infrastructure, teacher training, and equipment. Firms’ move to broader versions of CSR can be traced to their international activity and subject to corporate governance rules in London, for example, and the Global Reporting Initiative (GRI) abroad; the local King Code of corporate governance and formation of the Johannesburg Stock Exchange’s (JSE) socially responsible investment (SRI) index; and state legislation in terms of Mines Health and Safety Act of 1996 and Black Economic Empowerment (BEE) policy [24].
BEE has since become a “prominent local variant of the global CSR movement” ([30] p. 573). However, the BEE Codes of Good Practice “focus on one area of CSR, namely, social issues directed at direct and indirect empowerment of Black people” ([31] p. 677). Specifically, the Codes recognize the firm’s efforts towards introducing Black owners, executives, and other employees and managers, and the skills development of both internal and external beneficiaries (see Table 1). For example, external beneficiaries may be targeted for internships and bursaries, contributing to the nation’s attempts to increase its tertiary educated population. The Codes also encourage firms to develop new Black-owned enterprises and existing suppliers across the supply chain. This involves support through procurement as well as funding. Lastly, the Codes encourage firms to contribute at least one percent of net profit after tax to the nation’s socio-economic development initiatives. This might take the form of grants and pro bono services towards the development of local communities. Many of the CSI efforts of firms in the past fall within this socio-economic development element of the Codes, reflecting the breadth of the post-apartheid state’s CSR requirements compared to historical CSI efforts.
Notably, BEE policy has been designed to be implemented via state procurement and licensing. The SA state has legislated BEE in the government sector allowing state departments and state-owned enterprises to procure goods and services from the market based on two criteria: price and BEE. The state will also view the BEE status of license applicants in certain industries, e.g., a license for mining rights and a license to provide telecommunication services. Notably, when business is conducted between two private-sector firms, BEE compliance remains voluntary. In practice, firms that wish to conduct business with the state must also demonstrate that they procure goods and services from suppliers that comply with BEE regulations. In this way, BEE policy affects the entire supply chain of firms that conduct business with the state [32,33].
Except for Black ownership and management control, the general upliftment of Black people through human resource and skills development and socio-economic development, as a version of social responsibility, has been uncontested [34]. However, ownership and management control may be considered as “special measures” accommodated in international human rights law [35]. In addition, Black ownership has a recursive relationship with efforts to promote procurement and enterprise development type equity (compared to employment equity). These efforts rely on the state and established private firms locating Black-owned enterprises across all sectors of the South African economy. Additionally, currently, they remain scarcely represented in the South African economy.
The King Codes of Governance for South Africa is another influential regulation. Firms are required to report their CSR performance and make those CSR disclosures to be independently assured [36]. Although these reports do not oblige firms to engage in CSR projects, the Johannesburg Stock Exchange (JSE) has, since 2010, mandated integrated reporting and requires all listed firms to comply with its principles [37]. Firms that are part of the FTSE/JSE All Share Index are invited to participate in the annual assessment. Performance criteria are aligned with the “environmental, social and economic pillars of the triple bottom line” ([38] p. 246). As a result of all these initiatives, sustainability reporting is now commonplace in South Africa with the publication of spheres of the triple bottom line in corporate economic performance reports [39].
Our approach to CSR emanates from the debate about the suitability of the Global North approach to social responsibility indices (SRI) for the Johannesburg Stock Exchange (JSE) (see, for example, Heese [40]). Eventually, the JSE developed its version of a SRI by borrowing from, among others, the FTSE4Good Index, the GRI, King Codes of Good Governance, and the Sullivan Principles [40,41,42]. Though the Index includes metrics connected to the natural environment, South African organizations have prioritized the socio-economic aspects of international standards. These include training and development, employee and community relations, equal opportunities, health and safety, stakeholder engagement, BEE, and HIV/Aids [40,42].
With the efforts of South African organizations at CSR thus far, South Africa is the top performer on the African continent with an overall CSR index of 55 out of 100 [43]. By comparison, the top-performing country in Europe, Latvia, has 64. South Africa was also ranked at 106 of the 165 countries rated on the 17 sustainable development goals [44]. Figure 1 below shows that South Africa has an SDG Index score of 63.7 out of 100 based on all 17 SDGs. The low SDG Index scores in low-income countries have been attributed to putting less effort on environmental aspects, ending extreme poverty, and providing access to essential services and infrastructure.

3. National Level

Though social and environmental issues are spread worldwide, these issues occur to differing extents across countries. With firms selecting the most pressing issue within their immediate country environment, CSR preferences are likely to differ from one country to another. Visser [45], for example, found that social issues are given more prominence than environmental issues in the Global South than in the Global North. In another example, European firms prioritize climate change [4]. Firms from the Middle East and Africa regions gave prominence to the surrounding communities’ social issues [3]. Firms in state-led market economies, such as Frances have different CSR preferences to liberal market economies, such as Australia [5]. As South Africa is in the Global South, we have yet to learn whether firms from South Africa possess different CSR preferences to firms of the other countries explored by researchers.
For CSR in this South African context, we propose an exploration of both national- and industry-level pressures on firms to adopt specific CSR initiatives. At a national level, firms respond to the state who exerts pressures codified through laws and regulations [33], which is the case in SA with BEE policy. In this way, BEE significantly influences CSR preferences in the South African context [46]. Though the BEE policy influences firms to seek societal level legitimacy through a distinct regulative pressure, it does so within a market system. The state and its enterprises leverage their purchasing power to obtain suppliers to implement employment equity, skills development, enterprise development, Black ownership, Black management control, and community development. This sees firms initiate CSR activities to also seek legitimacy at an industry level from stakeholders across the supply chain. In the mining industry, firms may also face pressure from communities living near the mines [30].
The need for firms to seek legitimacy, through their CSR activities, from various stakeholders at a national and industry level has been explained by institutional theory (e.g., [47]). Institutional theory offers explanations for firms selecting different CSR activities and proposes why certain CSR activities become entrenched in the business world [2,48]. The theory suggests that certain actors in similar environments will demonstrate isomorphic behavior over time: in their drive to seek legitimacy, they will all converge to certain behaviors. Isomorphism arises through the operation of three forms of pressure: coercive, mimetic, and normative [49], which have also been categorized as regulative, normative, and cultural-cognitive pressures [50]. The regulatory component emphasizes the firm’s conformity to specific rules. It operates through coercive isomorphism: BEE legislation is a clear example of regulative pressure operating through coercive isomorphism. The normative component emphasizes a moral base for evaluating legitimacy. The cultural-cognitive component emphasizes the legitimacy that arises from adopting or mimicking “a common frame of reference or definition of the situation” ([50] p. 6). Legitimacy itself has been defined as “a generalized perception or assumption that the actions of an entity are desirable, proper or appropriate within some socially constructed system of norms, values, beliefs, and definitions” ([51] p. 574).
We regard BEE as an institutionalized version of CSR driven by the state at a national level. BEE takes advantage of the organizational field where various organizations—suppliers, client organizations, and even regulatory agencies—in aggregate constitute an area of institutional life [52]. Regulations operate through a process of coercive isomorphism where the first few movers respond to regulations to either survive or gain a competitive advantage. Firms from the same organizational field eventually follow the first movers and adopt the regulations to remain competitive. In the end, those regulatory-driven CSR preferences across firms are unlikely to be different. One way to test this idea is to explore whether CSR preference has specific industry effects. In other words, some CSR preferences are not the same across industries.
Though we understand country differences in terms of broad categories—social versus environmental, for example—the literature has yet to rank CSR activities in a country to display specific firm preferences. Campbell [47] showed that “socially responsible corporate behavior may mean different things in different places to different people and at different times”. CSR encompasses a wide range of initiatives, and not all are viewed equally. However, instead, some are preferred more than others [53]. For instance, a study by Ghosh [54] showed that Indian private sector companies preferred CSR activities in education, health, and the natural environment. To determine whether national-level CSR preferences in South Africa are institutionally driven, we first must explore the preferred CSR activities amongst South African firms. Then, we can assess what these topmost CSR activities share with SA’s BEE policy. Thus, we begin by posing the following research question.
Research question 1: What CSR activities are preferred by South African firms?

4. Industry Level

While we conjecture that national-level institutional pressures arise from BEE policy to influence CSR preferences, we remain curious about specific industry differences in the CSR response of firms. As part of their strategic outlook, firms may attempt to identify with certain stakeholders and the norms within their respective industries. Thus, we need to explore whether certain CSR preferences are more likely to occur in some industries than others.
Indeed, CSR preferences have also been found to differ within a nation (e.g., [15]). Often, firms align their CSR activities to their industry [9]. For example, the food industry prioritizes consumers who may be willing to pay for environmentally friendly products when firms select CSR activities related to environmental responsibility [10].
In certain industries, there are powerful stakeholders, such as industry associations, who set specific rules and standards [47]. These rules and standards may involve concerns about social issues, such as employment, worker health and safety, and the natural environment [55]. Firms often pressure one another to abide by these rules and standards they compete to participate in the supply chain [56]. Industry-specific stakeholders, such as mining associations, for example, have been shown to place both regulative and normative pressures on their member firms giving rise to particular CSR preferences [57].
Research also shows that, in industries where operations pose environmental and social risks, e.g., the chemical sector, firms will tend to select CSR activities connected to taking care of the natural environment in addition to the health and safety of employees and surrounding communities [58]. Financial services, retail, and IT (Information Technology) have been portrayed as minimal risk industries [5]. For example, while mining and petrochemical industries select CSR activities associated with the natural environment, firms from the service industry tend to choose social upliftment activity and governance transparency [59]. There may also be multiple industry influences because a diversified firm operates in more than one industry [60]. This leads to a firm responding to both environmental and social issues when, for example, firms operate in both petrochemicals production and services.
In South Africa, considering that BEE policy, through its sector-specific charters, encourages specific efforts conducive to a firm’s industry, one wonders if those industries that developed specific BEE charters represent strong stakeholder influences. For example, we have noted that, while financial services firms may prefer social and philanthropic issues, chemical, oil, and mining firms tend to select environmental and health, and safety issues [59]. Additionally, in the finance sector, education initiatives tend to be a preferred way of community involvement [61].
Though there exists knowledge about industry influences on CSR preferences along its broad dimensions, e.g., environmental versus social, we lack knowledge about industry influences on specific CSR activities in South Africa. In exploring industry influences, we pose the following question:
Research question 2: Do the CSR preferences of firms in SA vary across industries?

5. Method

5.1. Sample and Data Collection

The sample selected was limited to only local and multinational firms that engage in CSR activities in South Africa. We considered only those CSR activities related to social upliftment in the country. Environment-related CSR activities were left out since all firms are mandated to report on their environmental engagement. From a total of 374 firms listed on the Johannesburg Stock Exchange (JSE) for the 2019 financial year [37], we located data for social type CSR activity in a total of 231 firms. This represents 62 percent of listed firms.
The study examined both sustainability reports and annual financial statements for the 2019 financial year of private sector firms listed on the JSE. The reports were sourced from the firms’ official websites. CSR activities were extracted from the disclosures of social activities under the social category of the sustainability reports, while financial data was obtained from annual financial statements. Private-sector firms are all mandated to disclose their CSR activities in their integrated yearly reports making the content credible and exhaustive. The most recent sustainability reports of JSE-listed firms reflect the current social issues in the South African context.

5.2. Measures

5.2.1. National CSR Preferences

To establish firms’ preferences for CSR activities, we ranked the CSR activities by firm participation. Whether a firm participated in a particular CSR activity was coded with 1 representing participation and 0 representing nonparticipation. CSR codes were adopted from the JSE SRI. Just to mention a few, the education category includes keywords, such as ‘scholarships’, ‘tutoring’, ‘teacher’s training’, ‘research funding’, ‘science, technology, engineering, and mathematics (STEM) programs’, while the charitable donation category includes keywords, such as ‘donations’ and ‘grants’. However, because of the generalizability of some of the categories—such as community relations, stakeholder engagement, and Black economic empowerment—we modified the categories to capture a broad array of CSR philanthropic/community activities that firms disclosed using the common phrases used in the CSR domain as found in the literature. For example, Visser [57] found commonality in charitable donations, health and safety, and SME empowerment, which we renamed enterprise development. Education, training, and skills development are important strategic CSR activities [62]. Notably, youth development and education are the main CSR activities in Africa [63].

5.2.2. Industry

The twelve sectors identified per the South African National Accounts Classification include finance, real estate, mining, manufacturing, construction, communication. Others are catering and accommodation, wholesale and retail trade, agriculture, support services, transport, electricity, gas, and water. Table 2 shows a summary composition of the market-specific sectors used.

5.2.3. Control Variables

Two explanatory variables were used to control the variation in the overall characteristics that may affect CSR participation: profitability and firm size. The model controlled for profitability because private sector firms are profit-making entities, and generally, profit has positive implications for CSR performance [64]. Likewise, firm size was controlled for the possible existence of scale economies that can influence the relationship between CSR activities and the firm’s performance. Larger firms are more likely to contribute more funds for CSR activities than smaller firms due to their tendencies to achieve better efficiencies, including greater purchasing power and reduced costs [64,65,66]. A log transformation of assets alleviated non-normality problems, since company total assets are unlikely to be normally distributed.

5.3. Data Analysis

To address the research question about CSR preferences, the mean scores of firms’ preferences for each type of CSR activity were computed and ranked to determine their level of preference. We conduct ten logistic regressions to address whether CSR preferences differ across industries. This analysis was conducted in Stata.
Yi = β0 + βI × Xik + e
where Yi represents whether a firm participated in a CSR activity or not. Xik represents explanatory variables, which include industry, profit, and size. To avoid a dummy variable trap, we estimated m-1 dummy variables in each case. β0 is the intercept, βi the coefficient and e is the error term. Since all the models follow the same pattern except for CSR activity that changes, we present below an illustrative model, with education (EDU) as a CSR activity.
EDU = β0 + β1Industryi + β2profit + β3lnsize + ε
Logistic regression is well suited for exploring the relationships between a categorical outcome variable and one or more categorical or continuous predictor variables ([67] p. 4). Logistic regression outputs odds ratios instead of effect sizes. Notably, our models contain industry dummies. The odds ratios for a dummy variable are the factor of the odds that the outcome, say, education type CSR, exists for a particular sector compared to the odds that the outcome exists within the reference sector. Wholesale and retail trade was defined as a reference industry.

6. Results

We delineate our results according to the two research questions: (i) What CSR activities are preferred by South African firms? and (ii) Do the CSR preferences of firms in SA vary across industries?

6.1. CSR Preferences in South Africa

A total of 10 types of CSR activities were identified in the CSR reporting of firms. These are education (EDU), training and skills development (TSD), health and safety (HS), youth development programs (YDP), employee engagement (EmpE), charitable donations (CD) and enterprise development (EntD), infrastructure development (INF), food security (FS), and arts, culture, and sports (ACS). Six of these CSR activities are preferred in over one-third of our sample: education, training and skills development, charitable donations, enterprise development, infrastructure, and health and safety (see Table 3 below). Education and training and skills development can be consolidated into education and training. Focusing on the top three CSR preferences, we arrive at education and training, charitable donations, and enterprise development.

6.2. Industry Influence

Only four models show some association between CSR preferences and industry (see chi-square significance in Table 4). The four CSR preferences include charitable donations, employee engagement, infrastructure, arts, culture, and sports. Stata selected Wholesale and Retail Trade as the reference dummy for industry influence. Notably, out of the top three CSR preferences, efforts in education and training and enterprise development do not have any strong differences across industries. We also notice that our controls for firm profitability and size for this particular sample did not significantly affect any preferences.
Out of the top three CSR preferences, firms’ efforts towards charitable donations differ significantly across industries. These industry influences stem from Mining, Manufacturing, and Construction. Firms from all three industries have a stronger preference for charitable donations than firms operating in the Wholesale and Retail Trade sectors.
Firms from the Mining and Construction industry also possess stronger preferences than other industries for infrastructure provision. As noted in Table 3 above, infrastructure-type CSR activity involves firms building and upgrading roads, schools, health facilities and contributing towards water supply to communities.
Firms from the Finance industry tend to prefer employee-engagement activities strongly. As we have described it for this research, employee engagement recognizes those social responsibility activities where the firm’s employees participate in outreach programs and other voluntary activities within the firm’s surrounding communities. The remaining industries, such as Mining, Communication, Transport, and Construction, are similar to Wholesale and Retail Trade in their preference for employee engagement. The Support Services industry tends to prefer arts, culture, and sports-type CSR activities strongly.

7. Discussion

This paper explored the main CSR activities preferred by South African firms and whether these CSR preferences are industry driven. We show that South African firms’ three main CSR activities include education and training, charitable donations, and enterprise development. As far as industry influences are concerned, we show strong influence on charitable donations, employee engagement, infrastructure and arts, culture, and sports.

7.1. National Level CSR Preferences

One might infer that the top three preferences have an institutional driver: BEE policy. Education and training include, among others, scholarships, bursaries, learnership programs for the unemployed, financial literacy and money management skills as well as adult literacy and numeracy skills. Many of these aspects of education and training feature in the skills development element of BEE.
Charitable donations represent corporate philanthropy. Donations are made to charities referred to as public benefit organizations in South Africa. However, if these public benefit organizations have a BEE status, firms can gain points towards the socio-economic development element of BEE. However, firms cannot claim both a tax benefit and BEE points for charitable donations because claiming BEE points negates the original philanthropic and altruistic motivation of the donation.
Enterprise development includes incubator programs for small businesses, credit solutions, financial support and coaching small and micro enterprises, partnership efforts with existing local suppliers, and purchasing goods and services from local community businesses. These efforts correspond to the enterprise and supplier development element of the BEE Codes.
South African firms’ preference for education and training is shared with other developing countries, such as India (see [54]). On the other hand, South African firms consider enterprise development as part of social responsibility, which features less amongst Indian firms. Notably, though CSR involves firms’ societal concerns about social, environmental, and ethical issues [22], South African firms place greater emphasis on the social aspects than on the environmental dimension of CSR. Again, the state’s BEE policy has given firms a valuable avenue to implement the social dimension of CSR [34]. Notably, country-specific community challenges are an important influence on CSR preferences [68,69]. These results confirm Brammer et al.’s [2] observation of location- or context-specific CSR preferences. The results also show that regulatory type institutional influences, similar to the coordinated market economies of Europe, do indeed feature strongly in South Africa.

7.2. Industry Influence

Notably, out of the top three CSR preferences, efforts in education and training and enterprise development do not have any strong differences across industries. As stated above, these two preferences can be traced to South Africa’s BEE policy, which places pressure on firms from all industries to participate in education and training and enterprise development. Regulations operate through a process of coercive isomorphism where a few first movers respond to regulations to either survive or gain a competitive advantage. Firms from the same organizational field eventually follow the first movers and adopt the regulations to remain competitive. This can be explained by mimetic isomorphism, where firms copy their competitors [70]. In the end, those regulatory-driven CSR preferences across firms are unlikely to be different.
Out of the top three CSR preferences, firms’ efforts towards charitable donations differ significantly across industries. Notably, before BEE came to the fore in SA, charitable donations have featured as the traditional philanthropic type of CSR activity in many industries. It might be that certain stakeholders in Mining, Manufacturing, and Construction still possess strong expectations for firms to continue this tradition. These industries are all characterised by potentially significant societal impacts, such as pollution, health and safety concerns, and displacements due to the nature of their work. Therefore, they invest in charitable contributions to show their commitment to the social agenda as a way of counteracting the negative impacts caused by their operations. For instance, there have been claims of conflict between mining sector firms and host communities that range from land use, environmental pollution and erosion, sedimentation, and vegetation removal [71,72]. Since legitimacy and identity are essential to these sectors, firms counteract such conflicts by interacting with the local communities to understand and address their needs through charity donations [73,74].
Hamann [30] comments that mining firms lobby communities using philanthropic activities to improve social conditions for marginalized South Africans. Manufacturing firms respond by donating extra food to communities addressing food sustainability and waste reduction [75]. This is relevant in the South African context, where statistics for 2017 showed that almost 20% of the households had inadequate or severely inadequate access to food [76].
Other CSR activities outside of the top three—arts culture and sports activities, infrastructure provision, and employee engagement—also enjoy industry-specific influence. In particular, firms in the Mining and Constructions industries possess strong preferences for infrastructure provision. This might be traced to South African firms’ historical response to certain stakeholders in the operating environment. Mining and construction are intensive activities that rely on heavy energy and machinery. Most mine sites are often located in highly remote areas; hence reliable infrastructure is needed in roads, water, and electricity supply. This infrastructure has benefitted certain stakeholders—surrounding communities—who have not enjoyed such infrastructure from the state, and this dynamic likely continues today. Firms respond by selecting a more comprehensive appealing CSR activity to a broader consumer stakeholder group in more service-oriented industries, corresponding to a diverse and less location-specific stakeholder influence. Our results have shown that service firms strongly prefer arts, culture, and sports-type CSR activities.
Service firms also tend to deploy their employees to participate in outreach programs and other voluntary activities. The emphasis on employee engagement through CSR among service firms has been explained by the frequent interaction between customers and employees in the service industry [77]. As CSR is an essential source of employee engagement [78], it is not surprising that employee engagement features a CSR preference in our South African sample. South African firms provide opportunities for the voluntary participation of employees, which has been found to be a valuable way to activate employees’ intrinsic motivation and create meaningfulness beyond economic exchange in the workplace [79].
Notably, our results show that the mining industry features strongly in many CSR activities. This industry has been covered in the CSR literature before (e.g., [30]). At the same time, Hamann [30] recognized the shift in preferences of mining firms from philanthropic activities to BEE-type compliance, encouraging targeted efforts to introduce Black people into the mainstream economy. However, the mining industry and its influential mining stakeholders formulated their separate charter. Our results show that two elements from the charter remain influential: (i) mine community and rural development and (ii) housing and living conditions. Notably, our results show that mining companies prefer making charitable donations, providing infrastructure, and supporting arts, culture, and sports activities. All these CSR activities speak to rural and community development. The infrastructure activity also captures efforts at providing housing, roads, and clean water, among others. A reason for these actions in the mining charter is the important stakeholder role of the surrounding mining communities. Thus, we contribute to attempts to delineate influences on CSR preferences according to industry context (e.g., [5,14,15]). This industry context represents an important subnational influence on CSR [14].

8. Conclusions

There is a definite institutional influence on CSR preferences amongst South African firms. This institutional influence arises from the country’s BEE policy, which takes on a regulative posture shifting CSR from a philanthropic voluntary type activity by firms to a prescriptive one. This can be likened to the CSR approach in the coordinated market economies of Europe: state policy steers firms to help the national effort in tackling certain social, environmental, and economic problems. In liberal market economies, such as the U.S.A., the state tends not to coerce firms to practice CSR. Notably, added to the broad institutional influence, micro-institutional influences manifested in specific industry influence lead to certain CSR preferences not being emphasized by national institutions.
These macro and micro-institutional influences possess an embedded stakeholder influence. At a macro-institutional level, the state is a key stakeholder. By promoting sector-specific BEE charters and setting procurement as the leverage of BEE policy, the state has also introduced micro-institutional influences often carried out through stakeholders, such as industry associations and firms with purchasing power. The industry effects we find also reveal that the broad consumer and community stakeholder influence on CSR preferences existing before the advent of BEE policy remains in place up to this day.
The study offers insights to policymakers interested in guiding firms’ CSR efforts. It emphasizes the importance of regulation in directing businesses toward certain CSR activities that the state believes will help the local community. It also enables managers to identify pertinent CSR practices in their respective countries/industries.
Although the findings suggest insights for policymakers and business managers, this study has some limitations indicating avenues for future research. We currently only target the firms listed at the JSE who participate in various CSR activities, and hence only limited data could be operationalized. Since CSR preferences reveal country-specific firm preferences, future studies can be carried out on listed firms across countries to discover differences in their CSR preferences. Moreover, although the distribution of companies represents the whole country, it only captured large companies. Similar studies could be performed through a survey to include other companies not listed at JSE, but who also participate in CSR to obtain a clearer and more representative finding. We also recommend further research on the stakeholder influence on management preference for certain CSR activities. For example, in SA, institutional investors, such as pension funds, tend to influence listed firms significantly: it will be helpful to determine if investor preferences correspond to firm preferences.

Author Contributions

Conceptualization, R.C.-K. and C.D.R.; methodology, R.C.-K.; software, C.D.R.; validation, R.C.-K.; formal analysis, R.C.-K.; investigation, R.C.-K.; resources, R.C.-K.; data curation, R.C.-K.; writing—original draft preparation, R.C.-K.; writing—review and editing, C.D.R.; visualization, R.C.-K.; supervision, C.D.R.; project administration, R.C.-K.; funding acquisition, R.C.-K. All authors have read and agreed to the published version of the manuscript.

Funding

This research received no external funding. The APC was funded by the University of Johannesburg.

Institutional Review Board Statement

Not applicable.

Informed Consent Statement

Not applicable.

Data Availability Statement

The data presented in this study are available in https://www.jse.co.za/services/indices/ftsejse-responsible-investment-index-series. (accessed on 19 January 2021).

Conflicts of Interest

The authors declare no conflict of interest.

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Sustainability 14 03792 g001 550
Figure 1. Sustainable Development Goals Index Scores.
Figure 1. Sustainable Development Goals Index Scores.
Sustainability 14 03792 g001
Table
Table 1. BEE Codes of South Africa.
Table 1. BEE Codes of South Africa.
ElementWeighting
Black ownership25
Management15
Skills development20
Enterprise and supplier development40
Socio economic development5
Table
Table 2. Sample composition by industry.
Table 2. Sample composition by industry.
Type of SectorNumber of FirmsPercentage
Finance3816.45
Real Estate2912.55
Mining2812.12
Manufacturing3716.02
Construction146.06
Communication156.49
Catering and Accommodation104.33
Wholesale and Retail Trade2611.26
Support Services2812.12
Transport and storage41.73
Agriculture10.43
Electricity, Gas and Water10.43
Total231100
Source: Sectors derived from South African National Accounts Classification and number of firms derived from Johannesburg Stock Exchange (JSE) for the 2019 financial year.
Table
Table 3. CSR preferences.
Table 3. CSR preferences.
CSR ActivityDescriptionN *MeanStandard
Deviation		Rank
EducationScholarships; bursaries; in-service training for educators; partner with educational institutions; early childhood development programs.1560.6710.4711
Training and Skills and DevelopmentSponsoring work readiness programs; learnership programs for the unemployed; financial literacy and money management skills; adult literacy and numeracy skills.1300.5630.4972
Charitable DonationsDonate food and clothing; disaster and humanitarian relief funds.1280.5500.4993
Enterprise DevelopmentIncubator programs for small businesses; credit solutions; financial support and coaching small and micro enterprises; partner with existing local suppliers; procure goods and services from local community businesses.910.3900.4894
InfrastructureBuilding and upgrading roads, schools, health facilities; water supply to communities.870.3720.4845
Health and SafetyImprove access to quality and affordable healthcare; assistance with medical equipment; raise awareness on health issues; sponsor vaccinations and medical treatments; managing occupational health risks.800.3560.4776
Youth Development ProgramJob creation for youths; youth sponsorship to develop life skills.530.2390.4217
Employee EngagementEmployees support company outreach programs; employee volunteerism in communities.500.2260.4138
Arts, Culture and SportSponsor sports, cultural and art activities.610.2130.419
Food SecurityProvide nutrition to vulnerable children; sustainable farming; quality seeds; strengthening the food value chain.270.1270.32210
* N indicates the number of firms out of the total sample of 231.
Table
Table 4. Logistic regression results.
Table 4. Logistic regression results.
VariablesEDUTSDHSYDPEMP-ECDENT-DINFRFSACS
Constant15.622 **1.2471.0410.2341.2550.3940.150 **0.5480.1810.348
Finance0.6291.8860.8180.5164.709 **1.3672.6311.1140.8171.156
Real Estate0.6640.7070.4400.4520.4791.0931.4870.6851.1340.251
Mining0.3880.6171.8361.5570.111.0.239 **4.990 **3.859 *0.4370.168 **
Manufacturing0.348.1.1291.4850.317.0.8240.311 *3.507 *0.9561.0640.716
Construction0.198 *2.1660.8121.8350.2930.142 **4.016.8.097 **0.4200.170
Communication0.202 *0.7482.1401.0191.2011.2861.5410.5700.0000.820
Catering and accommodation0.2840.5730.4880.6610.3980.5771.7620.5672.3552.224
Support services0.233 *2.5931.1350.8500.6541.1222.996.1.7150.2030.168 **
Transport0.067 *0.8780.0000.6484.0780.0003.9290.0000.0000.736
Profit1.0001.0001.0010.996.1.0000.9981.0000.998.1.0001.000
Size0.9240.9950.9491.0380.8941.1161.0360.9851.0011.019
No. of observations229229225229229225229225210229
Log pseudo-
Likelihood		−137.023−149.796−138.760−115.577−100.579−137.932−146.123−134.318−76.839−106.477
Wald chi215.14012.84014.46013.14030.890 ***28.870 ***12.19025.010 **6.60019.650 *
Pseudo R20.0590.0440.0490.0670.1630.1120.0420.0970.0460.094
Notes: Each asterisk indicates statistical significance where; ‘***’ 0.001 ‘**’ 0.01 ‘*’ 0.05, respectively, using a two-tail test. EDU is education; TSD is training and skills development; HS is health and safety; YDP is youth development programs; EMP-E is employee engagement; CD is charity donations; ENT-D is enterprise development; INFR is infrastructure; FS is food science; ACS is arts, culture and sports.
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Cheruiyot-Koech, R.; Reddy, C.D. Corporate Social Responsibility Preferences in South Africa. Sustainability 2022, 14, 3792. https://doi.org/10.3390/su14073792

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Cheruiyot-Koech R, Reddy CD. Corporate Social Responsibility Preferences in South Africa. Sustainability. 2022; 14(7):3792. https://doi.org/10.3390/su14073792

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Cheruiyot-Koech, Roselyne, and Colin David Reddy. 2022. "Corporate Social Responsibility Preferences in South Africa" Sustainability 14, no. 7: 3792. https://doi.org/10.3390/su14073792

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