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Article

Towards Strategic Corporate Social Responsibility Approach in International Projects—Review of South-South Cooperation: A Case Study of Chinese Projects in Angola

by
Marko M. Mihić
1,
Svetlana Shevchenko
2,
Ema D. Gligorijević
1,* and
Dejan Č. Petrović
1
1
Faculty of Organizational Sciences, University of Belgrade, 154 Jove Ilića, 11000 Belgrade, Serbia
2
Petroleum Industry of Serbia j.s.c., Narodnog fronta 12, 21102 Novi Sad, Serbia
*
Author to whom correspondence should be addressed.
Sustainability 2019, 11(10), 2784; https://doi.org/10.3390/su11102784
Submission received: 12 March 2019 / Revised: 14 April 2019 / Accepted: 18 April 2019 / Published: 15 May 2019
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Abstract

:
This paper offers a modified theoretical approach towards corporate social responsibility (CSR), adjusted to the specifics of South-South cooperation (SSC). Developing economies are becoming important actors and the number of their companies willing to implement projects in other developing nations is rising. This entrance of developing countries into international projects poses a question whether their companies adhere to basic CSR obligations and their CSR approaches are strategically oriented or if they present an umbrella, covering up their activities. Though the issue of CSR in SSC projects attracts attention, the number of studies on this topic is limited. This paper presents an attempt to work out a theoretical basis to a CSR approach in SSC projects by adjusting a widely accepted CSR model of Carroll (1979, 1991) to the specific conditions of developing economies. For the purpose of this paper, the authors analyzed CSR activities of Chinese companies in Angola. The results lead to the conclusion that governments of countries, participating in SSC projects need a more active approach towards making basic CSR responsibilities (economic, ethical, legal) legally binding. This will allow such international projects to be more beneficial not only for directly interested parties (companies, governments), but also for the local community.

1. Introduction

In international project management, corporate social responsibility (CSR) has recently become key priority. Companies understand the importance of the CSR concept, its implications and positive effect on business, especially in the international context. Current theoretical research and business practice mostly rest on Carroll’s [1,2] pyramidal model of CSR. However, this approach fits in primarily with companies originating from developed economies with a rather mature notion of CSR. When it comes to businesses from developing countries, which are aggressively struggling for their place on the international market, their CSR concept is largely underdeveloped and lacks strategic orientation [3]. This issue has been recently gaining in importance. Nevertheless, research on this subject is still limited. The current state of CSR related research, when it comes to developed countries is quite far advanced, especially due to the fact that it started in the 1980s [4]. However, the same topic in the developing countries is far from as adequately researched and researchers have started analyzing the topic in the late 1990s [5].
Considering the existing gap in research, the objective of this paper is to identify the role of corporate social responsibility (CSR) in investment projects in the context of South-South cooperation (SSC), to explore key problematic issues in these projects and to present possible suggestions on how to make such projects more viable and strategically beneficial. We adopted an interpretive content analysis approach to explore academic resources, as well as sources such as reports from United Nations Development Programme (UNDP), World Bank and world renown consultant companies such as PwC, regarding the role of CSR in investment projects in the context of SSC, when projects are carried out by companies from developing economies in other developing countries. Knowledge generated during the research is aimed at providing a deeper understanding of CSR as an important part of SSC and give a basis for further theoretical and practical research. The interpretive content analysis was enhanced by specifically analysing the case study of Chinese construction projects in Angola. The principal scientific question that this paper addresses is whether the current theoretical models of CSR in use in developed countries could be applied to CSR projects in developing countries or it needs to be modified, thus aiming to contribute to the theoretical dimension of the CSR concept. Darigan and Post [6] have concluded that all developing countries face a challenge when it comes to the key role which their governments play in identifying responsibilities of companies which implement business projects in their countries. The reasons why we have chosen to observe China as one of the two actors of the Case study are numerous. Firstly, after decades of rapid growth, China has positioned itself as one of the most significant and largest world economies [6]. The changes in the political and economic aspects, such as slowing of the GDP growth, rising unemployment and linked social aspects have pushed forward a new approach which integrates CSR into the nation’s growth model. Angola, specifically it’s construction sector was chosen for case study as the second actor due to the state of its infrastructure after the civil war which ended in 2002 [7]. Additionally, intentionally, a non-BRICS country like Angola was chosen since BRICS are the driving force of the SSC, and it was important to observe the activities of these countries within other countries in the SSC [8].
The research shows that both China and Angola are still at the initial stage of elaboration and implementation of certain CSR approaches. Evidence from this collaboration gives necessary data for re-thinking and re-shaping Carroll’s [1,2] CSR model. The research illustrates that the Western approach towards CSR needs to be adjusted to the realities of developing countries and their international projects. An important issue emerging from these findings is that governments of developing economies represent an important channel for creating long-term CSR strategy and practice.
The outlay of the paper is as follows. It first explains the basic characteristics of SSC, including the Sino-African collaboration. This is important to better understand the reasons that lead to a tighter cooperation among developing nations in recent years. Next, it illustrates the development of the CSR concept both in China and Angola, two countries actively engaged in SSC. Finally, for the purpose of this research, the paper gives a closer analysis through the case study of Chinese CSR activities in the Angolan construction sector in comparison with the policy that is in use in the Angolan petroleum industry. The results of the interpretive analysis of the source materials for this case study has been provided through synthesis and this research is then used to suggest theoretical modifications to the CSR model, which is being widely used in many businesses today, in order to adjust it to the realities of developing countries.

2. Research Methodology

The scientific question that this paper aims to answer is whether the current Carrol’s [1] model used to address CSR projects in developed countries is applicable in the context of CSR projects which occur during the cooperation between developing countries. Matten and Moon argue CSR approach can vary vastly and those variations depend on the place or national business system [9]. In order to tackle this question, an interpretive content analysis of secondary sources stated in the bibliography section of this paper has been performed. The sources include research papers from top tier journals, reports from relevant public institutions such as UNDP, World Bank, UN-OHRLLS, ECOSOC and a number of media sources which have reported on the Chinese and Angolan relationship. Interpretive studies such as this one have the purpose to obtain greater understanding of the context and understanding what is being stated [10]. Interpretive studies are driven by the qualitative aspect of the narrative and seek to obtain the meaning and motivation that is behind the source material [11]. The key to creating connections between different sources is found in the interpretive method approach needed to answer the posed scientific question thus such approaches should be held to their own standards [12]. The sources have been verified through other papers and cross referenced for verification. In addition, since when using interpretive content analysis, the approach is not restricted by coding rules of traditional content analysis, it is possible to have the flexibility to analyze the context in a wholesome manner [13]. Through the synthesis of relevant information from the source material it was possible to understand the interdependencies between the initiatives of governments of countries representing the SSC and the activities of major corporations within these countries concerning CSR projects. A deeper insight into the topic was gained through deduction using information about the problems faced by CSR projects in the specific case study of Sino-African project cooperation, further narrowed down to the collaboration of China and Angola as well as the consequences of these problems. The findings are given within the discussion part of this paper and have been used in order to argument the suggested modification to the Carrol’s CSR model.
As is the case with all approaches which adopt an interpretive content analysis and a case study approach, it is inherently narrative and generalization is limited [14] specifically since the chosen case study is concerned with the cooperation of only two countries engaged in SSC. Thus, the results must be regarded in this light and these limitations are outlined in the conclusion as well as some suggestions for further research.

3. South—South Cooperation

3.1. Basic Characteristics of South-South Cooperation

Until recently, a business corporation could be successful by producing and selling goods within its national boundaries, without giving much attention to international cooperation [15]. Yet due to internationalization and globalization processes, the levels of trade, capital flows and migration have increased [16,17], allowing developed countries to intensify their linkages with developing nations by bringing capital and technology, while importing natural resources and goods.
Apart from a well-established concept of North-South cooperation, when the North encompasses developed countries for example North America, Japan, Australia, Europe, and the South is consisted of countries with significantly lower GDP per capita such as Latin America, Africa and Asia, a rather new concept of South-South collaboration is emerging in recent years [18]. In a broader sense, SSC is a reciprocal transaction between countries and businesses, as well as individuals of developing countries. These can be transfers of experiences and knowledge, of money and goods and can be done between industries, government institutions, educational and social institutions or within the cultural or environmental domain [19].
In the last decade of the twentieth century and in the early 2000s there has been a major shift in respect of the status of countries representing the South. Countries such as Brazil, Russia, India and China, among others, have become a competitive force on the global market in the fields of manufacturing, services and particularly with the rise of agricultural production. This rise can be observed as a significant change within the economies of these countries which have diversified significantly [20]. Table 1 shows the rise of direct foreign investment from developing countries in the last forty years. According to the data, there is a constant rise in direct investment abroad by developing countries between 1991–2012. This proves developing countries are becoming strong players in the international investment market, while their companies gain access to a variety of international projects.
Certain analysts have suggested that since the late 1990s, from the total amount of foreign direct investment (FDI) in developing countries of the world, more than one third of it has originated not from the developed world but from other developing countries. In addition to these findings, what is significant is that the rate at which South-South FDI flows have grown is higher than the rate of FDI which can be observed within the North-South cooperation [22,23].
Several long-term forecasts of UN-OHRLLS [20] suggest that developing and emerging countries will comprise to more than half of the amount of world GDP by 2030. Likewise, the rate of growth of the Chinese economy might cause the fact that it will overcome the United States economy by 2027. According to Bergmann’s [24] projections, in 2002, China held sixth place, while in 2019, it will overhaul Japan, Germany, the United Kingdom, and France, taking the second position after the United States. Other countries from BRICs (Brazil, Russia, India, China) may grow as big as the economies of the G7 countries by 2032.

3.2. Sino-African Cooperation

In today’s boom in South-South trade and investment deals, China stands out as an important player. Its economic strength can particularly be observed in Chinese trade with African countries which has reached a record high since the 1990s with figures of over $200 billion in 2011. Compared to the $10.5 billion in 2000, it is easy to see why China has succeeded in overtaking the United States by becoming the biggest trade partner of Africa [25]. The Chinese government plans to reach China-Africa trade volume of $400 billion and China’s direct investment in Africa of $100 billion by 2020 [26].
Levesque [27] underlines that China’s investment in Africa is linked both to specific policies, as well as market drivers, especially in securing access to strategic resources. The Chinese government’s strategy towards Africa is based on the so-called ‘going out’ policy, which has become a key driver of Chinese state-owned enterprises (SOEs) investment in Africa. Although private Chinese firms are increasing their activities worldwide, still the SOEs are those which contribute with the most significant share to the Chinese FDI in Africa [28]. These state-owned firms are numerous; however the most prominent ones are the three from the oil and petroleum industry CNOOC - China National Offshore Oil Company), followed by CNPC - China National Petroleum Corporation and Sinopec, which is also known as China Petroleum & Chemical Corporation. The one that is not directly connected to the oil and petroleum industry is Sinomach - China National Machinery Industry Corp. The stated ‘going-out’ policy has been enacted to stimulate Chinese firms to expand their businesses outside of Chinese borders and to gain additional competitive edge by performing acquisitions of assets of strategic importance as well as securing sources of natural resources. All of these activities have an additional goal which is to also enable the creation of new markets for Chinese exports.
The increase of Chinese engagement in Africa is driven by several factors [7,28], the first being China’s need for natural resources. China is currently experiencing a rapid growth of its ‘thirst’ for resources that are needed to power its expanding economy (oil & gas, precious metals, aluminum, copper, iron ore, etc.). Secondly, the vast population of Africa is seen as a huge potential market for Chinese products. In addition to these factors, the privatization of publicly owned enterprises in China is leading to a growing need for new investment opportunities outside China. Currently the Chinese government is providing incentives to its enterprises in order to lift the burden of their cost effectiveness by providing them with subsidies and beneficial loans intended for them to be able to undergo ventures in strategic locations.
The Chinese government has published a White Paper on the economic and trade cooperation between China and Africa in which it has given an analysis of the activities between the two, as well as observable trends. Within this document six strategic priorities are outlined [29]. The first priority is the promotion of sustainable development of trade. This is to be supported by the advancement of investment levels and financing cooperation in the fields of agriculture and food production. Likewise, a major role in the priorities is given to the construction of African infrastructure, stressing the livelihoods of African nations.
This new strategy promotes not only trade and investment relations, but also Chinese involvement in addressing social issues, such as capacity building and attention to quality of life and standard of living.
According to Sun [30], there is a number of financial incentives such as concessional and commercial loans, as well as regular and preferential export buyer’s credit through which the Chinese government is trying to drive projects in Africa. These types of instruments have seen a rapid increase in recent years. For instance, in 2007 the cumulative value of China Exim Bank’s concessional loans to Africa reached US$ 1.5 billion. In addition to that, between 2007 and 2009 the bank provided US$ 2 billion and US$ 3 billion with the former being in n concessional loans and the later in preferential export credits, and consequently another US$ 10 billion in 2012 [31].
Sun [30] states that such Chinese policy leads to confusion. What is meant is that government agencies and commercial entities are encouraged to combine their efforts when it comes to foreign direct investment, as well as foreign aid, all of which is performed under service contracts, cooperation in labor, trade, and export [32]. Such cooperation between government agencies and commercial entities blurs the distinction between aid and investment. Corkin [33] makes a similar point, saying that it is difficult to give an exact label to Chinese loans. For instance, China Exim Bank’s credit lines can’t be clearly categorized as trade, aid or investment. In her opinion, they display characteristic of all three. Thus, for the purpose of this paper we will further use the term ‘investment project’ for such Chinese projects, including those that cannot be put into a classical model of FDI.
One type of such ‘tied aid’ is a deal structure named the ‘Angolan mode’, or ‘resources for infrastructure’, when repayment of the loan for infrastructure projects is made in natural resources, in oil, for instance [30,34].
According to Bass [35], in the first decade of the twenty first century China has initiated more than 1700 projects in African countries. These projects comprise of construction of power utilities such as hydroelectric power plants, of infrastructure particularly in the domain of rail transport (construction and rehabilitation), road transport, educational institutions, and sanitation infrastructure with emphasis on the water supply. Countries like Angola, Nigeria, and Sudan are the top states with the heaviest Chinese investment.
The model of Chinese economic cooperation with African countries described above, brings mutual benefits for both sides, resulting in a so-called ‘win-win’ collaboration. Its success is proved by the further increase of Chinese involvement in the African continent, which is at present among the top priorities of the Chinese government. At the same time, China’s rise in Sino-African collaboration relies heavily on investing in high-risk and post-conflict countries (Burundi, Sierra Leone, Angola, etc.).
On the other hand, Chinese greater engagement in Africa encounters growing anti-Chinese sentiment, which can undermine its long-term ability to operate in Africa. Until now, there have been multiple cases of this sentiment. For instance, among recent situations are protests in Malawi and Kenya which were aimed against Chinese businesses. Additionally, incidents such as the arrests of Chinese mine workers, accused if illegal labor, in Ghana, as well as the unrest of workers in Zambia [36] contribute to this undermining of Chinese efforts. In Zambia, the unrest even resulted in the revocation of mining licenses.
Of the various reasons for the anti-Chinese sentiment the most commonly presented concern is that Chinese firms make little use of local labor [37]. Additionally, multiple cases of low treatment of local workers and exploitation of labor have been expressed alongside the dissatisfaction with the low quality of work and services provided and presented ignorance of or indifference to ‘local sensitivities’. Boulton also states that the lack of local community participation and the tendency of Chinese activities to undercut local business as important concerns.
All these issues raise the question of compliance of Chinese companies, whether SOEs or private firms, with CSR standards and abidance by the CSR concept, on the whole [36,37].

4. CSR Policy

4.1. The CSR Concept

The definition of corporate social responsibility is still vastly discussed and still there is no agreement on its definition [38]. Nor is there a unified stance on what, actually, companies should be responsible for and how [39]. It is possible to observe CSR as the responsibility of companies to protect the interests of their stakeholders, which then includes employees, customers, roles from the supply chain, and wider communities [40]. Consequently, the term ‘CSR’ is rather used as an ‘umbrella’ term, allowing scholars, companies, and practitioners to adjust it to their needs. At the same time, previous studies suggest that activities within CSR are effective for ‘some firms, in some places, in tackling some issues, some of the time’ [41] (p. 674). Thus, there cannot be a unique, precise definition of CSR. It will differ from one country to another and will not be the same among companies [42].
There are two opposing classical views on CSR. The first one is represented by Milton Friedman, who argued that companies do not have any additional responsibility apart from increasing profits and engaging in free competition [43]. The second, which gained widespread acceptance, is the stance of Carroll [1,2]. He designed his CSR model in 1979, but revised it in 1991.
Carroll’s model [2] of CSR consists of four responsibilities: Economic, legal, ethical, and discretionary. Economic responsibilities support the claim that the main goal of any business is to be profitable, which is also the only way to sustain the business in the long run. Furthermore, legal responsibilities refer to the rules and regulations of the business. Next, the ethical responsibilities encourage the company to act morally and ethically, and finally discretionary responsibilities contribute to the community and help companies improve the overall quality of life in the community. Often Economic and Legal responsibilities are regarded as the basic level of CSR which is inherently performed by organizations, and existing studies observe the other two as higher levels of CSR practice [44]. Caroll underlines that all these responsibilities always exist to some extent, but when depicted as a pyramid, they represent a continuum.
Though the CSR concept is actively used by many companies, predominantly in developed countries and their subsidiaries abroad, it is often not incorporated into companies’ long-term strategies. Porter and Kramer [45] point out the most common corporate response is neither strategic nor operational, but cosmetic. According to their observations, businesses tend to use their ‘good deeds’ for public relations and media campaigns, failing to create a coherent CSR framework that can lead to a long-term CSR strategy.
Yet critics of CSR appeal to increased reports on corporate scandals and organizational misconducts. This has given rise to so-called corporate social irresponsibility (CSiR), the reverse side of CSR. Some typical examples of CSiR include deceptive accounting practices, abusing employees and polluting the environment, while the company at the same time promotes its CSR activities that often involve donations, community support, and environmental protection initiatives [46].

4.2. CSR Policy in China

CSR has become a broadly discussed issue in China since 2004 [47]. There has been a rise in public and private CSR initiatives. One of the key players that supports this rise is in fact the Chinese government. Lin [47] provides a detailed breakdown of the most recent activities of the government towards these initiatives, putting in the foreground the main legislation change, which is seen as an ‘upgrade’. The most recent activities encompass corporate law, followed by guidelines for implementing CSR standards, the need for information disclosure regarding social and environmental regulations, as well as regulations concerning market capital with respect to environmental performance, responsible production, etc. The general concept of CSR was explicitly articulated in 2006 Company Law. In 2008, the so-called “Guide Opinion on Social Responsibility Implementation for State-Owned Enterprises Controlled by the Central Government” (“Guide Opinion”) explained the central government’s attitude towards CSR. Currently there are about 150 SOEs which are in direct connection to the Chinese government, thus being subject to the Guide Opinion.
The Guide Opinion sets out four reasons for CSR necessity in the following manner: The number one reason is that CSR should be seen as way for promoting social harmony; the second implies that meeting public expectations in CSR is very important, taking in account that SOEs are the basis of China’s economy and security; the third is that CSR is unavoidable when sustainable development is concerned; and the fourth states that CSR is necessary for the SOEs to participate in the international market and society.
As Lin [47] further explains, there are several fundamental principles of CSR for Chinese SOEs. The first one being their need to comply with the law and honestly conduct their business. Additionally, they should be focused on increasing profitability and improving innovation and technology as well as product and service quality. They should strive to achieve these improvements by constantly upgrading their resource efficiency and assuring product safety. These fundamental principles are followed with three principles which are somewhat less directly related to their products and services and are the protection of the environment and their employee’s legal rights, as well as active engagement in charity initiatives.
Apart from that, the disclosure of information relating to the corporate social and environmental initiatives is a paramount component of the steps which are concerned with the implementation of CSR. Following this trend that emerged in developed countries, the Chinese government has launched several Chinese CSR disclosure initiatives. For instance, the 2007 Regulation on Environmental Information Disclosure commands that environmental agencies and companies which are considered as heavy-polluters need to disclose particular information regarding the environment to the general public, and provide the public with the right to request government environmental information [48,49].
Nonetheless, Tan [50] challenges the relationship between transparency and accountability in the Chinese context. He explains that, contrary to some expectations, increased transparency has not led to improved accountability. In addition to this, it can also be argued that the quality of these reports needs to be improved, since merely 17 percent of companies provide more than just descriptions of their CSR activities by including statistical data [51].
Thus, there is still a long way to go. Graafland and Zhang [52] show that an audit of 890 businesses in China has provided the insight that a significant number of these companies associates CSR with charity. It can be argued that this can be seen as an insufficient amount of understanding and consistency when it comes to CSR strategies. Even though such altruistic initiatives gain the attention of the media and are, thus, attractive for generating positive brand reputation, they add little to the dimensions of CSR regarding worker and environmental concerns.
In short, the Chinese government, following established CSR trends in developed countries, has made its first steps towards elaboration and implementation of key CSR dimensions, which should be employed by Chinese SOEs in the first place. One of the reasons, beside the need for a higher value of employees’ rights and better working conditions, is the ‘go abroad’ policy of the Chinese government, which requires its SOEs to be competitive in the international arena. In this respect a greater devotion to CSR policies is of key importance. Yet, the Chinese concept of CSR as a long-term strategy is still basic, in some terms even rudimentary, a conclusion discussed by Cheng & Liang in their analysis of the strategic importance of CSR in headquarters of Chinese companies, as well as in their subsidiaries abroad [53].

4.3. CSR Policy in Angola

The understanding of the environment is one of the most important processes when assessing potential success of an international project [54,55]. When addressing the issue of CSR projects in Angola, it is crucial to understand the overall country’s political and socio-economic environments. By doing so, the potential investor/partner identifies key stakeholders in the country, most important stakeholder dependency ties, as well as CSR issues that need to be tackled.
It is important to observe the fact that Angola finished a 27-year long civil war at the start of the 2000s. This conflict culminated in up to 1.5 million dead and ravaged most of the infrastructure [7]. Even after this conflict ended in 2002, Angola is still only behind Nigeria in sub-Saharan Africa when it comes to oil production. Angola experienced an expansion in oil production in the years which followed the end of the civil war, when production commenced at several oil fields located in deep water. Additionally, the timing was right and the steep oil prices in the international market have additionally supported the high growth rate of Angola. [7,56]. Despite its oil reserves and comparably high income level of individual people, more than 54 percent of the Angola’s population lives on less than $1.25 per day [7]. This phenomenon is known as the ‘resource curse’ [57,58], meaning that countries which are rich in natural resources often develop at a slower rate than those countries which are not. In Angola, the petroleum and oil industry is still the main engine behind the economy. At the moment it stands for almost 46 percent of the country’s GDP and comprises almost 96 percent of Angola’s exports [59].
In Angola, probably as in any other developing country, which is recovering from a long period of instability and/or military dispute, the post-conflict process is characterized by intensive development of state institutions, new legislation adoption, and other regulatory processes in such sectors as resource extraction, agricultural cultivation, infrastructure renovation and construction, and so on. Only 13 years have passed since the end of the civil war in Angola. This time is definitely not sufficient for a country to develop its comprehensive approach to CSR issues. During the research performed for this paper no significant legislation and/or strategic government documents, devoted to CSR issues, in particular (similar to Chinese Company Law and Guide opinion), have been found by the authors. Nevertheless, in 2012, Law Nº 8/12 was adopted, which introduces a so-called Patronage law, as an important instrument of support, through which the Angolan government is seeking to find a way which to provide liberation from its obligation to provide funding in the areas which can be done by the private sector. Using this law, the government provides various incentives and tax benefits for charity activities and donations in social, cultural, sports, educational, youth and technological sectors, as well as in healthcare [60].
Angola witnesses significant disparities in different sectors of its industries in terms of CSR. In oil and gas, a more mature CSR management can be observed [61]. One of the reasons is the presence of leading world petroleum companies, such as Total, ENI, Chevron, ExxonMobil, with their well elaborated and applied CSR approaches. Not all of these show the same degree of involvement and maturity in their CSR practices and initiatives, in general, a positive evolution of social responsibility paradigm is evident, even though findings suggest that CSR initiatives are usually deemed not very important when evaluating applications for licenses and contracts with main differentiating factors in regards to technology and pricing strategies [62].
The UNDP study [61] further shows that rather than supporting donations or construction of infrastructure as charity, companies are increasingly focused on elaborating and implementing integrated projects that stress people development and economic growth, through higher education programs and vocational training of people. This is considered to be one of the means of supporting poverty reduction [63]. Total, for instance, reports that in each project in Angola stakeholders expect the company to contribute to employment and development. The company achieves its CSR aims through engaging local staff, which is observed on Total’s projects where 70% of affiliates’ workforce is local and on fostering economic diversifications of host communities and countries by supporting local initiatives [64]. According to the results of the UNDP study [61], most of the entities, which were analyzed, still do not have a strategic framework in relation to initiatives of social responsibility, reflected in the percentage of companies in this sector which declare not yet to have a CSR strategy.
When analyzing CSR issues in Angola, it is important to underline that the active development of Angola’s petroleum industry is accompanied by additional legislation in this sector, though, as we have mentioned, no comprehensive CSR strategy/document on this matter has been adopted so far. There are three different channels that are used for contribution to social activities, two of which are required by law, and one is voluntary [65].
The first channel, the Petroleum Law [66] requires companies to perform activities in coordination with the respective government representatives and organizations towards the goal of further development and promotion of both social and economic advancement of Angola, to give preference to national products and services and the recruitment, integration and training of Angolan personnel. This law also requires that part of the signature bonus that is paid to the National Concessionaire (state-owned company Sonangol) has to be put forward into initiatives and projects intended for the advancement and promotion of Angolan private sector on the local and regional level under the terms which are supervised by the government. On the other hand, there is little information on how these funds are used [61].
The second channel are the Production Sharing Agreements [67], which require companies to support CSR projects. At the same time, no specific and exact explanations are given, neither how they are evaluated. For the purpose of this analysis, we will use a Model Production Sharing Agreements (PSA) that serves as a model agreement between Sonangol and another partner on exploration and production of hydrocarbons in Angola. Article 22 [67] stipulates an obligation of the Contractor Group to pay to Sonangol certain bonuses and contributions for social projects. The scope of this obligation differs from PSA to PSA. The document also envisages an obligation to improve knowledge and professional qualification of Angolan personnel, including knowledge of petroleum technology, ‘know-how’ and necessary management practices, and so on. All the expenses of training activities are born by the Contractor Group and are a subject to scrutiny of the Angolan authorities on the basis of three-year plans, which are to be submitted by the Contractor Group.
The third and final channel are projects funded by post-tax voluntary contributions. These projects are widely promoted by multinationals. They are managed by oil companies themselves or, for instance, in cooperation with NGOs or churches.
The oil and gas sector, hence, is one of the most efficient in CSR activities in Angola. Other areas are still in the process of shaping their understanding of what CSR is and what actions need to be taken. According to UNDP findings [61], the construction sector shows less maturity than the oil and gas sector. Most construction companies still do not have a strategic approach to CSR. Similarly, to the oil and gas industry, CSR issues are still associated with communication and marketing. Therefore, they are less integrated into management and business practices. Identical situations can be observed in the banking sector, while in transportation the understanding of CSR is to a greater extent rudimentary.
As can be seen from this overview, the Angolan approach to CSR is based on the notion that international companies are to partly take upon themselves the burden of supporting and financing multiple social programs and initiatives in the country. On the other hand, the State has embarked on elaborating legislature that envisages certain CSR activities, making them obligatory. This is needed to prevent multinationals from using Angola for generating profits without providing support to the country’s reconstruction and development.

5. Discussion and Case Study

5.1. Case Study of CSR in Chinese Construction Projects in Angola

When observing the case study research, it is important to understand the context of the case [68]. Angola, as a country that a rich in oil and gas, has largely relied on resource extraction, which made its economy absolutely dependent on revenues from the extracting industry. Yet, Angola has recently embarked on the path of diversifying its economy. In 2008, the share of oil and gas in Angola’s GDP accounted for 58%, by 2012, it declined to 46%, allowing the construction sector, among others, to rise from 5% to 8% [69].
In recent years, Angola’s construction industry has shown significant growth, and government officials hope, it is going to keep up with this rising trend. The process of reconstruction after an almost 30-year civil war (1975–2002) began in 2004.
Before Chinese construction companies entered in 2004, Angola’s construction sector was dominated by Portuguese corporations, such as Texeira Duartes, Mota Engil, Soares da Costa, or Brazilian ones, such as Oderbrecht, which were long-term players in the Angolan construction market [70]. Chinese favorable oil-backed loans created a formidable platform for a Chinese leading role in this sector. At the same time, while China is seen as a much desirable partner to the Angolan government, its practices are widely criticized by Angolans. Their main concerns can be attributed to low CSR practices, which need to be discussed in detail.
In 2004, China lent the first credit line in the amount of US$ 2 billion intended for projects focused on the rehabilitation of the Angola’s transport infrastructure. Exim Bank (Export-Import Bank of China), the financial institution which administered this agreement, is state-owned by China. This credit line was followed by a number of other credit lines from China. A large number of Chinese companies, mainly SOEs, entered the Angolan market. Among those Duarte, Santos and Tjonneland [71] list the following companies: China Road and Bridge Corporation, followed by China State Construction Engineering Corporation, as well as Guangxi International Construction and Jiangsu Company.
Chinese companies are now involved in all levels of construction, from repairing roads, railways and airports, building football stadiums, schools, hospitals, condominiums, housing units in Luanda and 17 other provinces [70,71,72]. Chinese firms are competitive in the construction sector partly due to the fact that their business construction practices keep construction prices low, including long work days. At the same time, their cost of moving materials and equipment to new project sites may be lower compared to other firms [7]. Another reason lies in the direct support of the Chinese government of its SOEs that are engaged in construction projects, including certain preferential terms.
Corkin [73] draws one important distinction between private and SOEs investment regime in Angola. Private investments up to US$ 5 million fall within a special contractual regime supervised by the National Agency for Private Investment (ANIP) and there is no longer an obligation under Angolan law for foreign investors to set up partnerships with local companies. Investments above US$ 5 million need an approval of the Council of Ministers. However, projects that are funded by China Exim Bank credit lines (bilateral government agreements) do not fall within the authority of ANIP. Such agreements do not require the use of 70 per cent of local labor as opposed to the private investment regime secured in the Basic Private Investment Law. Thus, such preferential regime, which is mainly attributed to SOES, does not encourage Chinese companies to employ local labor force.
Chinese involvement in Angola distinctly shows the existence of multiple and multidimensional problems in overseas projects. These can vary between project management, control and maintenance, to the failure to recognize, as Jovanovic et al. [74] state, the importance of a specific cross-cultural approach in project management, social integration, and cooperation with the local community. The latter is an important aspect that should be an integral part of a well-elaborated CSR strategy.
Major CSR problems in investment projects in Angola have been compiled [73,75,76,77] and are presented in this paper in a ‘problem-consequence relation’ (see Table 2).
What needs to be particularly mentioned is a growing concern of Angolans with the number of Chinese people coming to Angola. There is no exact data, only estimations. Some sources mention more than 200,000 [78] Chinese living in Angola while many Angolans presume that their number is much higher. This ‘labor export’ strategy of Chinese SOEs leads to the further growth of this trend. Together with the unwillingness of Chinese SOEs to employ the Angolan population, this results in rising resentment toward the Chinese.

5.2. CSR Strategy as a Possible Solution

The question of a CSR model in developing countries has become one of the acute topics of recent research, but the number of studies is still very low. Visser [79,80] underlined the need for a new approach to CSR principles and presented a revised Carroll’s pyramid [81], where economic responsibilities are followed by ethical, and then legal and discretionary ones.
This model seems to be more appropriate for entities from developed countries which undertake activities in developing nations. By looking back at the material presented in this paper, a different approach can be elaborated, which seems to be more appropriate for SSC (Figure 1).
In the model presented in Figure 1, the foundation of the pyramid is comprised of three responsibilities (economic, legal and ethical). These represent the role of the state in making economic and ethical responsibilities legally binding [6] as part of the long term CSR strategy in the context of SSC. This means that they form the basis for undertaking additional discretionary responsibilities, which are voluntary. Under economic responsibilities we understand the needs to be profitable, create jobs and pay taxes. Legal responsibilities include obeying the law, the rules of the game, and improvement of accountability and transparency. As for ethical responsibilities, these lie in the drive to go beyond profits, to invest into personnel and build networks with the local community. Lastly, discretionary responsibilities can be upheld through contributing funds and resources to community projects (cultural, health, etc.).
Figure 1 shows that economic, legal and ethical responsibilities have to be undertaken at the same time as the basis of the CSR strategy. Economic and ethical steps need to be taken in the continuum, when they become legally binding, provided the State undertakes the necessary action for that.
This approach gives special attention to the state as a channel for creating long-term CSR, the same way as it is regulated in the Angolan oil and gas sector, where part of CSR responsibilities has become binding for all participants.

6. Conclusions and Implications for Further Research

The study of CSR practices in the context of SSC highlights several important issues. The role of CSR in SSC is not as significant as it could be. Certain practices are still emerging, with many problems along the process. There are areas that need substantial improvement both by local governments, foreign enterprises and/or their governments, local communities and NGOs, and so on. This will allow to elaborate a viable CSR strategy, which can lower the risk of projects’ failure, raise their success, and give companies the necessary image of reliable partners.
As mentioned before, CSR has no unified definition. Hence, it can be adjusted to the needs of developing countries, which are being increasingly engaged in SSC. In order to understand CSR in terms of SSC it is important to consider the following issues: The current economic power of certain developing countries and the degree of their participation in international investment projects in other developing economies; the present state of CSR legislation and its implementation in countries which are participating in SSC; company adherence to CSR legislation and their willingness to go beyond legally binding obligations and supplement them with voluntary CSR activities; and so on.
The study provided the basis for theoretical rethinking of the generally accepted Carroll’s [2] CSR pyramid. The emphasis in our alternative CSR model (Figure 1) is laid on the importance of economic and ethical responsibilities of enterprises from developing countries to be transformed into legally binding obligations. This approach requires the active participation of the government of a country where the project is being implemented. By adopting the necessary legislation and providing further control, the state can ensure that international projects adhere not only to basic CSR requirements (economic and legal), but also encourage foreign companies from developing economies to fulfill ethical responsibilities. This triple basis (economic, ethical, and legal responsibilities) creates a foundation for further voluntary (discretionary) activities of companies on developing markets.
The result of this paper must be seen in the light of its limitations. The sample size of the problems and the consequences which occur during CSR projects in the case study is very small and limits generalization. Additionally, as it is the case with all approached which adopt the interpretive content analysis, all the data is intrinsically narrative and it may be the case that even more relative sources have not been considered for this paper. Thus, we invite further research on the proposed topic which can be multifaceted, starting from field studies all the way through to the comparative analysis of CSR practices of various SSC actors in different developing countries. Although a similar analysis of relevant sources can be performed for different countries which represent the SSC, in order to observe whether the issues which are faced by CSR projects in Angola and China appear in other countries as well, it is safe to state that the proposed approach to CSR strategy in this paper can be applied in general to CSR projects in different countries which are involved in SSC.

Author Contributions

All authors contributed equally to this work and have approved the submitted manuscript.

Funding

This research received no external funding.

Acknowledgments

This paper is a result of project No. 179081 funded by the Ministry of Education and Science of the Republic of Serbia: Researching contemporary tendencies of strategic management using specialized management disciplines in function of competitiveness of Serbian economy.

Conflicts of Interest

The authors declare no conflict of interest.

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Figure 1. Alternative approach to CSR in the context of SSC.
Figure 1. Alternative approach to CSR in the context of SSC.
Sustainability 11 02784 g001
Table
Table 1. Foreign Direct Investment (FDI) outflows from developing countries, by region, the annual average in billions of dollars1.
Table 1. Foreign Direct Investment (FDI) outflows from developing countries, by region, the annual average in billions of dollars1.
Year1970–19791980–19891990–19941995–19992000–20082009–20122012–2017
South Africa0.070.220.741.850.601.303.98
Argentina−0.01−0.010.592.160.951.069.51
Brazil0.090.220.591.267.87−0.5964.67
China0.000.362.432.2214.9571.05129.85
Hong Kong, China0.001.1710.5422.9540.2884.06108.93
Taiwan, China0.001.212.904.077.1910.814.08
Korea, Republic of0.010.401.504.148.9226.9310.79
India0.000.000.020.127.0313.2535.90
Singapore0.070.222.128.0812.7224.6865.49
1 Source: UNCTAD (www.unctad.org/fdistatistics) [21].
Table
Table 2. CSR problems in Chinese investment projects in Angola and their consequences1.
Table 2. CSR problems in Chinese investment projects in Angola and their consequences1.
ProblemsConsequences
1. Weak integration into the local context, lack of knowledge of cultural context- misunderstandings with local community, possible clashes, racial abuse
2. Heavy relation on high-level bilateral relations that provide market space for SOEs- weak network relations outside high-level governmental contacts
3. Reliance on imported labor and material- higher expat and import costs, growing resentment from the local population, no raise in local employment, growing enmity towards the Chinese, growing assaults
4. No investment into education of present/future Angolan workers - lack of local expertise, lack of acceptance of Chinese companies among population
5. No transfer of technology- lack of local workers who know how to use technology appropriately and responsibly
6. Low adherence to labor conditions, labor laws, and labor rights- growing concern. about ‘exporting weaknesses’ of the Chinese system, meaning labor rights abuse, low occupational health and safety standards and conditions
7. CSR is mainly seen as donations that can mitigate negative effects- local managers recognize donations as an outdated concept, pointing to the need for better local advantage
8. Lack of accountability and transparency- growing allegations of corruption, misappropriation, and fraud
9. Policy of faster and cheaper construction- lack of control in all stages of the project, labor rights abuse, a considerable number of construction defects
10. Little consultation with the Angolan community about construction projects- Chinese construction models are being applied to Angola without proper adaptation to local needs and traditions
11. Low-risk analysis and research- the wrong decision making, damaged reputation, higher costs
1 Source: [73,75,76,77].

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Mihić, M.M.; Shevchenko, S.; Gligorijević, E.D.; Petrović, D.Č. Towards Strategic Corporate Social Responsibility Approach in International Projects—Review of South-South Cooperation: A Case Study of Chinese Projects in Angola. Sustainability 2019, 11, 2784. https://doi.org/10.3390/su11102784

AMA Style

Mihić MM, Shevchenko S, Gligorijević ED, Petrović DČ. Towards Strategic Corporate Social Responsibility Approach in International Projects—Review of South-South Cooperation: A Case Study of Chinese Projects in Angola. Sustainability. 2019; 11(10):2784. https://doi.org/10.3390/su11102784

Chicago/Turabian Style

Mihić, Marko M., Svetlana Shevchenko, Ema D. Gligorijević, and Dejan Č. Petrović. 2019. "Towards Strategic Corporate Social Responsibility Approach in International Projects—Review of South-South Cooperation: A Case Study of Chinese Projects in Angola" Sustainability 11, no. 10: 2784. https://doi.org/10.3390/su11102784

APA Style

Mihić, M. M., Shevchenko, S., Gligorijević, E. D., & Petrović, D. Č. (2019). Towards Strategic Corporate Social Responsibility Approach in International Projects—Review of South-South Cooperation: A Case Study of Chinese Projects in Angola. Sustainability, 11(10), 2784. https://doi.org/10.3390/su11102784

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