Corporate Social Responsibility (CSR) Implementation In Lebanon: A Causal Recursive System Abdulrazzak Charbaji, Ph.D Professor of Applied Statistics and Research Methods www.charbaji.com

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Corporate Social Responsibility
(CSR)Implementation In Lebanon A Causal
Recursive SystemAbdulrazzak Charbaji,
Ph.DProfessor of Applied Statistics and Research
Methodswww.charbaji.com
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Lebanon Area 10,400 sq km about 0.7
times the size of Connecticutland 10,230 sq km
water 170 sq km border countries Israel 79
km, Syria 375 km Population 3,727,703 (July
2003 est.)
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http//www.heritage.org/research/features/index/do
wnloads.html
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http//www.chaostan.com/legal.html Lebanon.
Mixture of French Civil Law and Ottoman Civil
Law. 2.95. America and Switzerland both score
1.9. Russia and Albania are both 3.65, and Cuba,
Laos and North Korea are the worst in the world,
with 5.0.
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http//www.ciesin.columbia.edu/indicators/ESI/rank
.htmlEnvironmental Sustainability Index2002
Rankings

• Rank Country ESI
• 1  Finland  73
•  106  Lebanon  43.8 
• 142  Kuwait  23.9 

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The purpose of this paper is To look closely
at the CSR  issue and to check if  Lebanese
firms are  involved in corporate social
responsibility
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DEFINING CORPORATE SOCIAL RESPONSIBILITY A
review of related literature reveals that the
definition of CSR remains a problematic issue
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At one extreme Frankental believes  that CSR
is ambiguous and indefinable term., which can
mean any thing to anybody (Frankental, 2001).
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At the other extreme   We find  a motivational
definition that argues that CSR  is the
fulfillment of a firm's self-actualization needs
 (Tuzzolino and Armandi , 1981)
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The legitimacy of CSR relates to fundamental and
crucial questions as to why do corporations exist?
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• Should corporations be concerned
• with social performance
• as well as economic results? If so,
• what is meant to be socially responsible?
• Should economic performance
• be sacrificed for social performance?
• To whom does business owe responsibilities?
• What kinds of activities
• and programs should CSR include?
• And to what extent should social responsibility
• activities consume the companys resources?

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• Carroll (1979) suggested that corporations
• have four responsibilities to fulfill
• Economic,
• Legal,
• Ethical, and
• Philanthropic

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Ethical responsibilities derive their source of
authority from religious convictions, moral
traditions, and human rights commitments.
Business social responsibility was to maximize
profits, subject to the constraints of the law.
(Carroll, 2001)
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• Novak (1996) defined seven responsibilities.
• These are to
• Satisfy customers
• Earn a fair return on the funds
• entrusted to the corporation by its investors
• 3. Create new wealth,
• 4. Create and maintain new jobs
• 5. Giving people the sense
• that their economic conditions can improve
• 6. Promote innovation and
• 7. Diversify the economic interest of citizens
• so to prevent the domination of the majority.

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The Effect of CSR on Firm's Performance
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previous empirical research has produced varied
results

• Some studies have argued for a positive relation
  (Moskowitz, 1972 Parket Eibert, 1975).  
• Whereas others have concluded that CSR has
  negative effects
• (Aupperle, Carroll, Hatfield, 1985  Vance,
  1975)

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REVIEW OF BASIC CSR THEORIES IN FINANCIAL
ECONOMICS
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The Property Rights Theory Rule

• Business only has an economic responsibility to
  make a profit while obeying the law.

It implies that devotion of corporate resources
to social causes is contrary to an implied
contract with investors to maximize their profits.
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The Social Institution Theory

• Public welfare is the primary concern
• Firms should provide employment opportunities
  for everyone, improve the environment, and
  promote worldwide justice even if it comes at
  the expense of profits

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The Contractual Theory of the Firm

• A moderate and relatively recent view
• which now dominates
• the thinking in financial economics
• and that of public law

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Companys assets are provided by many groups
including shareholders, such as employees,
customers, suppliers, and the like, and so the
company arises from the property rights and the
right of contract of every corporate
constituency, not just stockholders
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Corporate Social Responsibility in Lebanon CSR
is in its infancy stage in Lebanon There is a
scarcity of applied  research into CSR  in
Lebanon
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Lebanons Prime Minister Rafik Hariri wrote an
article in which he notes that taking
environmental issues seriously means that
people are striving for a better quality of
life
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• The Lebanese government
• Tackled environmetal issues
• such as
• Establishing an Environment Ministry,
• Passing a clean air Act,
• Adopting a nation wild reforestation scheme, and
  
• Including integrated environmental management in
  its policy statement.

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A study prepared by the Mediterranean
Environmental Technical Assistance Program
(METAP) and the UNDP estimated the cost of
environmental deterioration in Lebanon at US
565 million per year, that is around 3.9 of
GDP. It is the most among other Arab
countries covered by the assessment
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Today, Sukleen , has 384 committed
institutions that are enrolled in environmental
campaign for resources and energy preservation
This initiative is undertaken to provide an
outlet to the recycling community
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HSBC is funding teacher training seminars
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IDAL launched a new service on its website, the
Investors Matching Service, which aims at
facilitating the creation of strategic
international local partnership One of the
main criteria used in the evaluation include
employment effort, environmental soundness and
social liability
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The project aims to promote enhanced the active
participation of UN volunteers business
and local communities. The project is composed
of two phases, an action research phase and a
partnership promotion and building phase
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Action Research

• The action research phase includes
• A qualitative research study aimed at businesses
  to investigate why and how they become involved
  in development initiatives.

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Partnership promotion and building

• The project offer individual companies
  tailor-made strategies that benefit both their
  firm and local communities. Various activities
  under the project include
• Awareness through written, audio visual, and
  virtual media (web-site and e-mail list).
  Identification and formation of partnerships
  between various stakeholders including UNDP,
  other lead UN agencies, civil society, local
  community-based associations and NGOs,
  businesses, associations, chambers of commerce,
  universities, etc. Organisation of a national
  workshop to bring together businesses and
  development actors together for brainstorming,
  dialogue and joint action. Publications
  including reports, brochures, newsletters, case
  studies, and a guidebook on business-community
  relations. Formulation of Project Document/Joint
  Project Proposals with UNV/UNDP/UN Agencies/ New
  Academy of Business.

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This year Go Green in Lebanon is supported by
UNDP and its projects at the Ministries of
Environment and Agriculture along with the
private sector
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Schtroumpfa local restaurant chain

• Is the initiator and co-manager of the Go Green
  project. Its practices include partnering with
  educational institutes to raise environmental
  awareness continuously recycling and using
  recyclable products and organizing a wide range
  of activities mainly targeting youth including
  environmental contests, forums, seminars, etc

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FTML- Cellis a subsidiary of France Telecom
worldwide group/Orange

• The company applies strict rules and policies,
  which prevent pollution and degradation of the
  landscape in setting up their network.
• in August 2000, the company launched a Childhood
  Protection support programs for children who are
  rejected, abused, exploited in their work
  environment, for whom education is not provided
  or who are at risk of delinquency.

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Coca-Cola

• The company has supported the Lebanese community
  in various causes including the environment.
  Recently the company launched the Cedar Roots
  project, which included building the first cedar
  forest in the South of Lebanon (Jezzine).

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Tetra Pak East Med

• Tetra Pak takes active measures to ensure that
  its activities and products are environmentally
  friendly

Tetra Pak supports health and education through
the development of the Captain Mike
school-feeding program that aims at providing
better nourishment for children
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To sum up, Even though CSR is becoming a
corporate goal in Lebanon

• the international indices about Lebanon reveal
  that an imperative need exists for a project to
  identify
• gaps and opportunities
• in the provision
• of sustainable development

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• The Research Questions are
• What are the major characteristics
• of the selected sample for the study?
• 2. How many dimensions
• underline the measuring instrument?
• 3. What are the direct and indirect effects of
  the explanatory variables
• to the explained variation in the dependent
  variable?

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The present study involved   a sample of 406
including managers, assistant managers,
directors, assistant directors
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Findings of the Study Factor Analysis was
ran on 217 valid cases without missing values
out of 406 cases
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KMO and Bartlett's Test

• KMO measure of sampling adequacy (KMO 0.650)
• and the Bartlett test
• of sphericity (B 3608.464, p .000) suggest
  that the data is suitable for factor analysis

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Factor extraction using oblique rotation

• Returned a four-factor solution accounting for
  81.906 of variance among the original twelve
  variables
• two criteria were used
• Factor loading greater than 0.70,
• Eigenvalues greater than 1.0

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Factor 1 accounts for 30.5 of the variance

• (Z4) could be called Environmental Management.
  It includes high positive loadings for My
  organization issue CSR report that include
  performance against benchmarks My company
  adopted CSR environmental impact policy and My
  company has environmental mission statement

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Factor 2 accounts for 25.28 of the variance

• (Z3) could be called TQM practices. It is a
  bipolar factor which includes negative high
  loading for My company regularly track the
  satisfaction and/or complaints of customers and
  high positive loadings for My organization is
  involved in minority and women employment

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Factor 3 accounts for 15.2 of the variance

• (Z1) could be called Corporate Governance
  Organizational Policy.
• It includes high positive loadings for My
  company issue CSR Environmental report My
  organization issue CSR economic performance
  report environmental guidelines for selecting
  suppliers. And My company uses employee
  performance appraisal systems that integrates
  compliance with code of conduct

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Factor 4 accounts for 10.89 of the variance

• (Z2) could be called code of conduct.
• It is a bipolar factor which includes high
  negative loading for My company has code of
  ethics high negative loading for our
  company has a system in place to handle employees
  grievances and high positive loading for My
  company implement code of ethics.

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Using factor scores and the dependent variable
Indicate the percentage of your companys total
shares held by ethical, sustainable, or socially
responsible investors. , multiple regression
analysis is conducted
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The results of the regression analysis is
highly significant (p .000) R2 0.948,
indicates that almost all of the
variance in the data is accounted for by the
model
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Path Analysis
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Decomposing the Correlation Coefficients
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Z3 P31 Z1 P32 Z2 Ru Z4 P41 Z1 P42 Z2
P43 Z3 Rw Z5 P51 Z1 P52 Z2 P53 Z3 P54
Z4 Rv r51 P51 P52P21 P53P31 P53P32P21
P54P41 P54P42P21 P54P43P31 P54P43P32P21
r52 P51P21 P52 P53P31P21 P53P32
P54P41P21 P54P42 P54P43P31P21
P54P43P32 r53 P51P31 P51P32P21 P52P31P21
P52P32 P53 P54P41 P31 P54P41P32P21
P54P42P331 P21 P54P42P332 P54P43 r54
P51P41 P51P42P21 P51P43P31 P51P43 P32 P21
P52P41 P21 P52P42 P52P43P31P21 P52P43P32
P53P41 P31 P53P41P32P21 P53P42P31 P21 P53P42
P32 P53P43 P54
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Conclusion
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The true direct effect of Corporate Governance
Organizational Policy on the percentage of
companys total shares held by ethical,
sustainable, or socially responsible investors
is almost four times the simple relation but
the relation is decreased because of the
indirect negative effects implying a more
environmental concern
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Suggested methodology to construct CSR Index
that aids in ranking countries on CSR scale
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• Construct a valid instrument
• that can be used in measuring CSR
• Use factor analysis to obtain
• factor scores for different
• dimensions underlying the CSR
• Obtain a grand total CSR score
• for each country
• in standardized score
• Use median standardized
• as an index to rank
• countries on CSR scale