Approaches to Regulating Corporate Social Responsibility in Ethiopia: the Case of Manufacturing Companies
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Date
2021-05
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Addis Ababa University,
Abstract
Though the notion corporate social responsibility existed for long, it is undeveloped with respect
to its precise meaning. The vagueness of the concept created confusion in determining to whom
businesses should be responsible, who should take CSR initiatives, and who should regulate
CSR. Scholars developed various theories to clear-up these uncertainties. Of which, some say
firms are responsible only to shareholders and CSR is a voluntary action, so that, it should be
regulated by the firms themselves. Whereas, others say businesses should be responsible both to
the shareholders and other stakeholders, CSR should not be anchored only with voluntarism,
and state also should have a role in regulating CSR. As the latter view is getting more
prominence, state regulation of CSR is becoming important, especially in middle and low income
countries like Ethiopia, which is one of the least developed countries where a significant number
of its population lives below the poverty line. On the other hand, Ethiopia is a place where both
local and foreign private investments are flourishing compared with many African countries. The
prevailing absolute poverty in one hand and the expansion of business firms on the other hand
demand, among others, the proper execution and regulation of CSR. Recognizing this, the study
tried to examine the existing status of CSR and its regulation in Ethiopia and identified potential
approaches to regulate the same. Qualitative data are gathered both from primary and
secondary sources. Primary data are collected from manufacturing companies, government
offices, employees, and community members using interviews and purposive sampling technique.
Secondary data are collected from various literatures, domestic policy documents and laws, and
foreign statutes. Findings from primary and secondary sources are analyzed using inductive and
deductive reasoning approaches respectively. The findings revealed the following five key points.
One: Ethiopia has no a self-contained CSR policy and law which defines and regulates the entire
aspects of CSR. Two: though there is no such policy and law, there are scattered laws which give
legal basis, especially for economic, social, and environmental responsibilities. Three: although
some firms better understood the notion CSR, still some others regard CSR as synonymous with
philanthropy, a voluntary action, and cost to companies. Four: the execution of CSR is still at its
infancy stage as well as CSR is essentially unregulated or at least under regulated. Five: it is
identified that state regulation should not be limited to regulating only legal responsibilities, but
also other aspects of CSR. Finally, it is concluded that having a self-contained CSR policy and
law is critical precondition to effectively and efficiently regulate CSR, both self-regulation and
state regulation can co-exist covering one another's weaknesses, and direct state regulation
should be applied only in cases of strict necessity.