Corporate Social Responsibility and Firm Performance

International Journal of Research in Education and Social Sciences

(IJRESS) ISSN: 2617-4804 1 (2) 67-82, October, 2018 www.oircjournals.org

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Wekesa and Kimutai (2018) www.oircjournals.org

Corporate Social Responsibility and Firm Performance; Effect of

Sustainability Management Systems in Selected Kenyan Sugar Companies

Kelvin Mwibanda Wekesa and Geoffrey Kimutai

Jomo Kenyatta University of Agriculture and Technology, Kenya

Type of the Paper: Research Paper.

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Indexed in: worldwide web.

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How to Cite this Paper:

Wekesa, M. K. and Kimutai, G., (2018). Corporate Social Responsibility and Firm Performance; Effect of Sustainability Management Systems in Selected Kenyan Sugar Companies. International Journal of Research in Education and Social Sciences (IJRESS), 1 (2), 67-82.

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Corporate Social Responsibility and Firm Performance; Effect of Sustainability

Management Systems in Selected Kenyan Sugar Companies

Kelvin Mwibanda Wekesa and Geoffrey Kimutai

Jomo Kenyatta University of Agriculture and Technology, Kenya

Abstract

Sugarcane Company’s performance has

remained to be one of the challenging facts in

the growing companies in Kenya today. The

delays in harvesting operations are attributed

to uncoordinated and unpredictable harvesting

and transport schedules; and inefficiencies in

mill operations. Therefore, the main aim of the

study is to determine the influence of

Sustainability Management Systems CSR on

firm performance of selected sugarcane companies in Kenya. The study is guided by Corporate Social

Performance Theory. This study used ex- post facto research design. Ex- post facto research design determines

and reports the way things are. The target population was 528 employees. This study therefore sampled 228

respondents. Purposive sampling technique was used to select 10 managers, 24 supervisors, 38 accountants and

156 clerks from the 7 sugarcane companies because they have specific information concerning the effects of

corporate social responsibility practice on firm performance of selected sugarcane companies in Kenya. Pilot

study was done in order to test for validity and reliability of the research tools. The pilot study was done in Trans-

Mara Sugar Company found in rift Valley region of Kenya. For inferential statistics, correlation and multiple

regression was used for comparative analysis between frequencies of corporate social responsibility practice on

firm performance. The study findings indicated that sustainability management systems have an effect on firm

performance. The government will use this study in establishing policies that would ensure improvement in firm

performance of sugarcane processing firms among other firms in Kenya. The study recommends that the

companies should encourage sustainability management systems since sustainable management systems is an

important mechanism for improving corporate sustainability performance. It can generate business value through

measurement and management of sustainability risks and opportunities. The study recommends further

researchers to study on corporate social responsibility strategy and financial performance of firms in Kenya

which the study didn’t cover.

1.0 Introduction

Firm Performance across the world could be

measured through productivity which is the ratio

between outputs and inputs (Montiel, 2014). Any

action of an entrepreneur should at every time aim at

enhancement of the firm’s value whether in long or

short term. Though arguments for corporate success

are unending, there are innumerable factors that

influence or drive the firm’s success without

consideration of how they are measured (Delgado-

Ceballos, 2014). Consequently, firm’s managers

ought to be aware the relationship of the key drivers

of the firm and how they affect the firm’s

performance (Ngari, 2016).

Firm performance is a broad term and in policy

literature of business, there are two main streams of

research about determinants of firm performance.

The first one is primarily based on economic

tradition while the second one is based on the

behavioral and sociological paradigm (Short, Snow

& Hult, 2016). The first one emphasizes on the

importance of the external factors of the market in

determination of firm’s success. The second one is

in support of firm factors and their fit to the

environment as the main determinants of firm’s

success (McKenny & Ketchen, 2016). Moreover, a

ARTICLE INFO

Received 20th September, 2018

Received in Revised Form 5th October, 2018

Accepted on 15th October, 2018

Published online 19th October, 2018 Key Words: Corporate Social Responsibility, firm performance, Sustainability Management Systems.





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number of implications can be drawn for scholars

with respect to firm’s performance measurement.

Also using multiple firm performance measures is

beneficial (Lindow, 2013).

Shareholders are more interested and willing to

tolerate nonprofit making activities which can

significantly reduce the market performance of the

stock because the factors that contribute to firms’

performance are diverse in terms of definition,

dimensionality and measurement. Despite this, as a

going on concern a firm should always sought to

increase its value in either the short or the long term.

On focus is the firm performance which is

operationalized by key indicators. These include

return of assets, return of investment, profitability,

loan uptake, cash flow and also liquidity (Lindow,

2013).

Globally, in the 21st century larger firms have

experienced changes and challenges including the

corporate social responsibility. It is important to

understand CSR since it impacts the firm’s firm

performance (Kanwal, Khanam, Nasreen, &

Hameed, 2013). Managers believe that CSR has the

potential of improving the firm’s profits. They

believe that CSR can promote respect for the firm in

a market place. This is likely to enhance the firm’s

sales, attract more qualified personal to the firm and

subsequently improve firm performance of their

companies (Robins, 2015).

Firm performance as a concept on Corporate Social

Responsibility (CSR) has gained a substantive focus

in the global economy. The emphasis on the need for

more socially responsible firms has moved from

being the preserve of the developed economies to

being the concern of both the emerging and the

developing nations thanks to globalization. Over

nearly two decades, the relationship between

organizations performance and society has been

subject to much debate, often of a critical nature. The

decades have seen protests concerning the actions of

organizations, exposures of corporate exploitation

and unfolding accounting scandals for example

Lehman Brothers in 2010 which failed to disclose

transactions to investors (Valukas, 2010), Satyam

Computer Services in 2009 which falsified accounts

(Chen, 2009) and Benard Madoff Investment

Securities LLC in 2008 which defrauded investors

through a ponzi scheme (Reid, 2008) and the famous

Enron scandal in 2001 which committed irregular

Accounting procedures (Bryce, 2002). Meanwhile,

ethical behavior and a concern for the environment

have been shown to have a positive correlation with

corporate performance.

Corporate performance strategy is beyond gaining

economic profit, more and more organizations

respect social issues related to the surroundings

where they operate. Environmental protection and

human rights, customer relationship management,

developing the local environment and community,

supporting suppliers and increasing supplier

diversity, improving education and improving

healthcare conditions in developing countries are

among most addressed social issues. Proponents of

CSR claim that organizations need to respect interest

and contribute to social benefits of society while

sustaining operating activities. In contrast,

opponents claim that, organizations do not

necessarily need to consider the interest of wider

society, since the existence of organizations already

provides opportunities for society; organizations

need to focus on their main activities in order to

maximize profit. This is also depicted by Isaksson

and Steimle (2009) who view CSR as the company’s

commitment to behave socially and environmentally

responsible while striving for its economic goals.

Hence, CSR actions ought to be correlated with the

firm performance and outcomes of firms (Simon,

2014).

For better firm performance the company has to

engage in corporate social responsibility (CSR)

which therefore implies extra cost for the company,

the first objective of management is profit

maximization; companies need more certainties

about the increase in value that the introduction of

CSR brings (Ghelli, 2013). Friedman (1970) argues

that there is one and only one social responsibility of

business, which is to use its resources and engage in

activities designed to increase its profits so long as it

stays within the rules of the game, which means to,

engage in open and free competition without

deception or fraud. Reich (2007) contends that, as a

result of high competition in the market, instead of

engaging in CSR projects, which harm themselves,

corporations need to concentrate on activities that

have positive effects and gains. If the aim of

business is to maximize profits, what are the motives

that lead organizations to engage in social projects

yet they are not profit generating (Albus & Ro,

2017).

In Africa, particularly South African on the context

of firm performance has often been centered on

black economic empowerment (BEE). The idea

behind BEE is not a uniquely South African concept,

but one that has been adapted from similar

programmes in other countries (Kabir, 2016). In an

attempt to provide a more holistic view towards CSR

in South Africa, the Johannesburg Stock Exchange

(JSE) established the socially responsible

investment index (SRII) in May 2004. This index

incorporates both BEE and good CSR practices in

relation to the triple bottom line. The establishment

of this index was influenced by the greater role that





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the King reports played in the field of corporate

governance (Chikozho, 2016). The King reports

have evolved over the years and now place a greater

emphasis on not only corporate governance issues,

but also sustainability issues. For a company to be

listed on the local bourse, it must comply with the

King reports thus inadvertently complying with

some of the requirements of the SRII. The advantage

of the SRII is that it goes beyond just the King

reports and attempts to define a CSR culture for

South African businesses (Kloppers, 2018).

Firm performance in Johannesburg Stock Exchange

rating used an independent research organization to

undertake an assessment of the companies listed on

the exchange and determine if they satisfy the

criteria required to be included in the SRII. The

research organization used was the Ethical

Investment Research Service (EIRIS). This is a

global organization that specializes in the research

of environmental, social, governance and ethical

performance of companies. The criteria used to

establish the SRII is based on three categories,

namely: Environment, Society, Governance and

related sustainability concerns (Koffman-Xaba,

2014).

Even in the midst of the IFRS adoption controversies

in developing countries, there is a new move

towards integrated reporting, a more comprehensive

model that encompasses significant elements of

traditional reporting and environmental, social and

governance reporting within a single presentation

(KPMG, 2011); of course, and firms have been put

under increasing pressure from a variety of

stakeholders to integrate social and environmental

considerations into their operations and to ensure

higher standards of governance. Only few countries

have mandated the use of integrated reporting, but,

there have been evidence of voluntary participation

worldwide. The largest companies in Denmark are

now obliged to report on non-financial information

while South Africa has made significant progress in

addressing the challenges of IR by mandating all

listed entities to issue annual integrated reports

instead of annual financial and sustainability reports.

Companies in Kenya pursue CSR as a way of

improving the staff welfare, implementing

community development programmes such as

building schools, dispensaries, drilling bore holes,

funding sporting activities, the establishment of

scholarship funds for needy children rehabilitation

and maintenance of roundabouts within Central

Business District among others. These corporations

are under moral obligation to act in fair, transparent

and accountable manner. Corporate Social

Responsibility among Kenyan firms is a marketing

strategy where businesses ensure that their products

or services are visible and in the process rebrand in

such a way to reposition them in the market. Most

business firms in Kenya engage in CSR only if such

initiatives give them a competitive advantage in

marketing their products. They undertake CSR to

reduce pressure from trade unions, environmental

organizations, consumer watch groups and

positioning themselves as market leaders in the

irrespective fields (Wafula, 2012).

Measuring companies’ performance has been a

subject of discussion pointing out the problem of

measuring firm performance contributed by CSR

and also the unclear relationship between CSR and

firm performance. Wood (2010) measured firm

performance using social reports, environmental

reports, annual reports of social or environmental

disclosures and ethical practices adopted by the

companies. Mahoney and Roberts (2007) calculated

a composite measure of CSR, based on community

relations, diversity, employee relations,

environment, international, product safety, and other

ratings. Soana (2009) pointed out that social

performance is best measured by five different

methods: content analysis, surveys carried out using

questionnaires, reputational measures, one-

dimensional indicators and ethical ratings. While

these measures adopted may be good measures of

CSR, their ratings are subjective and hard to

measure. For this study, CSR was determined

quantitatively by the total amount spent per annum

on CSR.

1.2 Statement Problem

Sugarcane Company’s performance has remained to

be one of the challenging facts in the growing

companies in Kenya today. There has been low

performance in some of the firms in Kenya for

example Chemelil and Muhoroni are still recording

sugar recoveries below the industry standard of

10.1%. The industry’s long-term target is to achieve

recovery levels of 11.5% (Mgenyi, 2012). The

delays in harvesting operations are attributed to

uncoordinated and unpredictable harvesting and

transport schedules; and inefficiencies in mill

operations.

Therefore, performance of sugarcane companies in

Kenya has been declining over time. The decline of

these companies has been caused by problems

arising from the sugarcane processing which is not

limited to poor spending of cess remittance to the

local development programs, poor involvement of

farmers in decision making and regular varying

sugarcane tonnage pricing. Performance of the

sugarcane companies is therefore limited because

corporate management does not utilize the potential

farmers’ contribution in the production unit

(Bottazzi, Crespo, Bangura & Rist, 2017).





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Majority of previous studies have research on

corporate social responsibility. For example a study

done by Eccles and Krzus (2010) indicated that

majority of firms have adopted firm performance

strategy through corporate social responsibility but

majority end up failing to keep up the system due to

internal pressures arising from mismanagement of

the firm resources. It is in this regard that has led

failing attempts by firms to successfully engage non-

profit making activities to the society (Waweru,

2016). Mwangi (2011) study on relationship

between corporate governance and firm

performance of companies quoted at NSE showed

that there was an upward trend in performance of

listed firms on the NSE. Jerotich & Le May, (2016)

studied the relationship between corporate social

responsibility practices and performance of firms in

the manufacturing, construction and allied sector of

the Nairobi Securities Exchange. The study found an

insignificant positive relationship between corporate

social responsibility practice and firm performance.

However, there is lack of enough studies that

investigate the effect of corporate governance in

sugarcane industries on firm performance, which

justifies the purpose of this study. This study

therefore sought to determine the influence of

Corporate Social Responsibility Practice on Firm

Performance of selected Sugarcane Companies in

Kenya.

Purpose of the Study

The study aimed to determine the influence of

Sustainability Management Systems CSR on Firm

Performance of selected Sugarcane Companies in

Kenya

Research Hypothesis

H01There is no significant influence of

Sustainability Management Systems CSR on

firm performance of Sugarcane Processing

companies in Kenya

2.0 Literature Review Theoretical review

Corporate Social Performance Theory

Corporate Social Performance Theory was

developed by Bowen 1973. The theory states that

social responsibility of businessmen alludes to the

commitment of specialists to seek after those

approaches, to settle on choice or to take after those

lines of activity which are attractive to society.

Corporate Social Performance theory assumes that

private sector has a positive impact on communities,

employees and consumers. This is especially so in

geographies where basic governance, the rule of law

and accountability mechanisms are lacking or

limited. Stakeholder engagement team supports

companies to understand and interact with their

stakeholders, including civil society and

government. Managers apply cutting edge

methodologies in stakeholder mapping and

materiality assessments that are tailored to the

complex environments our clients work in.

Caroll (1979) introduced the concept of corporate

social performance, and later in 1985 Wartick and

Cochran extended Caroll’s approach suggesting

corporate social involvement rests on the principles

of social responsibility, proves of social

responsiveness and policy issues of management. In

1991 Wood gave the basic model of corporate social

performance which includes institutional,

organizational and individual CSR, the process of

corporate social responsiveness and outcomes of

corporate behavior. When it applies to the institution

it is known as the principle of legitimacy which

states that society grants legitimacy and power to

business and that those who don’t use it well tend to

lose it. Under the organization CSR, a business

should adhere to the standards of performance, law

and existing public policy. Individual CSR has to do

with the managers exercising discretion in their

decision making to ensure socially responsible

outcomes. Firms therefore need to be more proactive

in publishing reports on their economic, social and

environmental performance for their CSR activities

to be known.

The study is relevant to the study because it state that

the results of increased protests about capitalism and

business growing social concerns led to increased

government regulations, procedures and formal

requirements. One of the requirements was the

adaptation of corporate behavior to social needs and

demands including being proactive.

Conceptual Framework

The study was discussed based on the dependent and

the independent variables as indicated by the

conceptual framework figure illustrated bellow. The

dependent variables was the firm performance

which was measured by the impact on customers’

livelihoods, improved company reputation,

customer satisfaction level and increase level of

local employment. The independent variables of the

study are the Sustainability Management Systems

CSR measured by articulation of policies for CSR,

reputation of the company, rating of the company,

reliability of company’s services and reporting

accurate information. the economic CSR measured

by Government programs on economic

development, participation in community activities,

objectives of CSR, company‘s operations in

community and favorable economic activities and





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Firm Performance

Impact on customers

livelihoods

Improved company

reputation

Customers satisfaction level

Increase locals employment

the Philanthropic CSR measured by response rate,

profitability of the company, environment

conservation, new opportunities to locals and

education of community.

Independent Variables Dependent Variables

Figure 2.1: Conceptual Framework

2.4 Empirical Review

Sustainability Management Systems CSR

Robert, Lyria and Mbogo (2016) covered a study on

the influence of corporate social responsibility on

firm performance of industries listed at Nairobi

securities exchange, Kenya. The study sought to

establish the effect offs practices on firm

performance of listed firms in the Nairobi Securities

Exchange. Firm performance was measured using

the return of assets. Investment in CSR was

measured using articulation of CSR policies and

monetary spending on social activity. Data was

obtained from audited financial statement, websites

publications and annual report. Secondary data was

obtained from the year 2010 to 2014. The study

adopted a descriptive research design to test, for the

linear relationship between firm performance and

CSR. The study applied multiple regression analysis

models to assess the influence of CSR on firm

performance. Firm performance was the dependent

variable while corporate social responsibility,

capital intensity and efficiency were used as the

explanatory variables in the study. Target population

comprised of 66 publicly listed companies of which,

complete and necessary data available was for 14

companies. This data was collected for 5 years for

each firm giving 70 observations. Most companies

analyzed, engaged in CSR but failed to disclose the

actual cost incurred on CSR activities. The study

established that CSR policies had a positive but

insignificant effect on firm performance. The study

concluded further that a positive but insignificant

relation existed between CSR policies and firm

performances. The study recommended that firms

should have policies which encourage socially

responsible so as to enhance the value of the firm for

the shareholders. The study also recommends CSR

not to be viewed as a voluntary undertaking but a

compulsory practice for the firms. Lastly, policies

among firms to ensure that the firm acts in ethical

and socially responsible manner to all stakeholders

should be formulated and implemented.

According to Mio, Venturelli and Leopizzi (2015)

on their title Management by objectives and

corporate social responsibility disclosure found that

different methods have mainly been used by prior

studies for the measurement of CSR (McGuire et al.,

1988). The first method is the expert evaluation of

corporate policies. The accuracy of this method

depends on the access of the investigator to the full

scope of activities of the firm and the expertise of

the investigator (Abbott and Monsen, 1979).Another

method of CSR measurement is content analysis of

annual reports and other corporate documents.

Weber (1990) defines content analysis as “a set of

procedures to make valid inferences from text. This

consists of the evaluation of the area dedicated to

social responsibility in documents published

regarding companies (Cheruiyot, 2010).

Bernal-Conesa, Briones-Penalver, and De Nieves-

Nieto, (2016) did a study on the integration of CSR

management systems and their influence on the

performance of technology companies. The study

found that standardized management systems

facilitate the implementation and integration of CSR

within the technology company, studying which is

the influence of CSR in reputation and improvement

of these companies and whether it has a positive

impact on the economic performance of the

company. The study was conducted in companies

located in Spanish Science and Technology Parks.

On the one hand, model results shows that there is a

positive, direct and statistically significant

relationship between the integration of CSR and

reputation; on the other hand, performance and

internal improvement has also this relationship.

Likewise, the model shows also some indirect

relations between management system before the

implementation of CSR and reputation and internal

improvement.

Sustainability Management Systems

CSR

Articulation of policies for CSR

Reputation of the company

Rating of the company

Reliability of companies services

Reporting accurate information





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Dawkins, Jamali, Karam, Lin and Zhao, (2016) did

a study on corporate social responsibility and job

choice intentions. The study found that the use of

content analysis presupposes the acceptance of the

Hypotheses that social disclosure is a good proxy of

corporate social performance. Another measure of

CSR is the use of reputational measures. These are

ratios worked out by researchers or specialized

journals based on their judgment and definition of

Social performance. Using the information they

calculate a score on the goodwill associated with the

reputation of the company, this is called the fortune

measure (Cheruiyot, 2010).

Ackers and van Heerden (2015) investigated on the

title Can a conceptual framework for corporate

social responsibility (CSR) assurance and reliability

be developed? The study found that in America there

is an annual classification of American companies

based on the corporate reputational index (CRI).

This is not yet the case in Kenya. The use of the CRI

to measure corporate social responsibility

performance assumes that reputation as perceived by

third parties is a good proxy of responsible behavior

by companies. It also assumes that reputational

measures are not influenced by a company’s good

firm performance. Were this not to be the case then

this would not be a good measure of the relationship

between CSR and Firm performance (Cheruiyot,

2010).All of these different measurement methods

and approaches produce different results. The last

important point related to CSR and firm

performance measurement concerns data collection

and reliability of the sample. Mostly CSR data relies

on company reporting activity that can be

manipulated and/or misreported (Aras et al, 2010)

For the purpose of this study content analysis was

used where the rating for the CSR was based on the

number of sentences dedicated to each component of

CSR in the company’s annual report and other

publications including the website.

3.0 Research Methodology

Research Design

This study used ex- post facto research design. Ex-

post facto research design determines and reports the

way things are. The design Ex-post facto research

design is a system of empirical inquiry in which, the

researcher does not have direct control of begins

with notable differences between groups in this case

corporate social responsibility practice adopted by

each sugar company. There are three types of ex-

post facto research design; first type explores the

effects caused by membership in a given group the

second type explores consequences of intervention

and the third type explores causes of group

membership (Fraenkel & Wallen, 2000). For this

study the researcher sought to determine the

influence of corporate social responsibility practice

on firm performance in sugarcane companies of

Kenya.

Target Population

Target population is the entire group a researcher is

wishes to draw conclusions from it (Cooper and

Schindler, 2011). The target population for the study

was all the employees of Sugarcane Companies in

Kenya. The target population was 528 employees

and 512 customers of Sugarcane Companies.

Table 3.1 Target Population

Sugar Companies Managers supervisors Accountants Clerks Customers

Nzoia Sugar Company 4 8 13 53 75

Chemelil Sugar Company 4 8 13 53 73

Mumias Sugar Company 4 8 13 51 73

South Nyanza Sugar Company 3 8 12 51 73

Sony Sugar Company 3 8 12 51 73

Western Kenya Sugar Company 3 8 12 51 73

Kibos Sugar Company 3 8 13 50 72

Total 24 56 88 360 512

Sampling Frame

Sampling frame is a list of all the items in the

population. It’s a complete list of everyone or

everything the researcher wants to study (Mason,

2017). The study focused on 1040 respondents from

all the seven sugarcane companies selected in

western region of Kenya since all the respondents

have the same characteristics and the probability of

being chosen is equal. The study selected a total of

528 employees; managers, supervisors, accountants

and clerks and 512 customers from all sugarcane

companies because they have specific information

concerning the effects of Corporate Social

Responsibility Practice on firm performance in

sugarcane companies of Kenya.





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Sample and Sampling Technique

Sample size refers to the number of observations or

replicates to include in a statistical sample Orodho

(2015). The sample size is an important feature of

any empirical study in which the goal is to make

inferences about a population from a sample.

Sampling technique refers to a procedure of

selecting a part of population on which research can

be conducted, which ensures that conclusions from

the study can be generalized to the entire population.

The researcher obtained sample size using Yamane

formulae (1967).

Where n is the sample size required

N is the population size = 1040

e is the level of precision =0.05

n =1040

1+1040(0.05)2

n =288

This study therefore sampled 288 respondents

The sample size was represented in table 3.2 below:

Table 3.2 Sample Procedure Strata Sampling Sample Size

Managers 24/1040*288 7

Supervisors 56/1040*288 16

Accountants 88/1040*288 24

Clerks 360/1040*288 100

customers 512/1040*288 141

Total 288

Table 3.3 Sample Size from Each Company

Nzoia Sugar Company Sample Size

Managers 1

Supervisors 3

Accountants 6 Clerks 23

Chemelil Sugar Company Sample Size

Managers 1

Supervisors 3

Accountants 5

Clerks 23

Mumias Sugar Company Sample Size

Managers 1

Supervisors 2

Accountants 6

Clerks 22

South Nyanza Sugar Company Sample Size

Managers 1

Supervisors 2

Accountants 5

Clerks 20

Sony Sugar Company Sample Size

Managers 1





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Supervisors 2

Accountants 5

Clerks 22

Western Kenya Sugar Company Sample Size

Managers 1

Supervisors 2

Accountants 5

Clerks 22

Kibos Sugar Company Sample Size

Managers 1

Supervisors 2

Accountants 5

Clerks 22

This study employed stratified random sampling

method as a technique of probability method. First

the researcher stratified sugar companies to get

seven strata; in each stratum researcher further did

stratification to get four stratums (Managers,

Supervisors, Accountants, and Clerks). The first

stratum is made up of the managers. After

stratification purposive sampling technique was

used to select 7 managers, 16 supervisors, 24

accountants and 100 clerks from the 7 sugarcane

companies because they have specific information

concerning the effects of corporate social

responsibility practice on firm performance in

sugarcane companies of Kenya. 141 customers was

selected using simple random sampling technique.

Research Instruments

The study used questionnaires with items in a likert

type with a scale of 1 to 5. The highest degree was

marched with the most positive choice from the

alternatives while the least score was awarded to the

most negative choice. Likert scale for which 5-

Strongly Agree, 4-Agree, 3-Undecided, 2-Disagree

and 1-Strongly Disagree.

Data Collection Procedure

The researcher notified the managers of the sampled

sugarcane companies in advance. The respondents

was issued with the instruments and be given time to

complete answering the items of the instrument

which are immediately collected when the time

frame allocated elapses. The researcher got the

opportunity to explain the goals of the study and

answer the questions that the respondents may have

before they complete filling the instrument.

Pilot Study

Pilot study was done in order to test for validity and

reliability of the research tools. The pilot study was

done among 29 employees of Trans-Mara Sugar

Company found in rift Valley region of Kenya.

These piloted respondents represented 10% of

sample size but was not part of the targeted

population for this study.

Validity

Validity is defined as the degree to which an

instrument measures what it purports to measure

(Borg & Gall, 1989). The construct and face validity

of research instruments’ a team of experts from the

JKUAT went through the tools and gave their views

and advice on the questions on research tools. The

recommendations of the experts were used to

improve the instruments before they are used in the

field.

Reliability

Reliability is the level of internal consistency or the

stability of the measuring instrument (Borg & Gall,

1989). The research tools were piloted using Trans-

Mara Sugar Company which didn’t take part in the

actual study. The study used internal consistency

type of reliability to assess the consistency of results

across items within a test. The reliability coefficients

of the data tools were estimated using the Cronbach

Alpha coefficient. The instruments were considered

reliable if they yield reliability coefficients greater

than 0.7 (Fraenkel &Wallen, 2000).

Data Processing and Analysis

Data collected were cleaned and subsequently

entered into a computer data base using double entry

to ensure accuracy. All companies’ details were kept

confidential and non-coded data were only available

to the researcher. Collected data were tabulated and

processed using SPSS (23) for windows software.

Quantitative data were expressed as frequency,

percentages, mean and standard deviation. In

inferential statistics, correlation and regression

models were used to determine the influence of

corporate social responsibility practice on firm

performance. The study tested the normality,





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multicollinearity and autocorrelation test

assumptions of multiple regression models.

Analyzed data was presented in form of percentages,

frequencies, table and charts.

4.0 Research Findings and Discussion

Response Rate

A total of 288 research questioners were sent out for

data collection and only 280, were returned for

analysis when completely filled. The 280

questionnaires represent a response rate of 97.2%.

According to Mugenda and Mugenda (1999) a

response rate of 70% and above is valid and

therefore, a response rate of 97.2% was valid for data

analysis. Table 4.1 shows the response rate.

Table 4.1 Response Rate

Category Frequency Percentage (%)

Administered 288 100.0 Returned 280 97.2

Validity and Reliability

Data collected from pilot study were used to

ascertain for validity and reliability of research

instruments. The validity of the research instruments

was determined through the content validity and

face validity. The recommendations of the experts

were used to improve the instruments before they

were used in the field. Cronbach’s Alpha was used

to test for reliability where value above 0.7 was

considered acceptable. The internal consistency

method provides a unique estimate of reliability for

the given test administration. The results of the

reliability tests were as shown in the Table 4.2.

The study findings indicated that values of

Cronbach’s Alpha for Sustainability Management

Systems CSR was 0.823, implying research

instruments used for data collection were reliable.

Table 4.2 Reliability Test

Items Cronbach's Alpha N of Items

Sustainability Management Systems CSR .823 5

Firm performance .804 4

Demographic Characteristics of the Respondents

The demographic information were; gender, age,

level of education and service time. Table 4.3 shows

the gender of the respondents.

Table 4.3 shows that majority 143 (51.1%) of the

respondents were female while 137 (48.9%) were

male. An implication that there was no bias since

both gender we were well represented.

Table 4.3 Gender of the Respondents

Gender Frequency Percent

Valid Female 143 51.1

Male 137 48.9

Total 280 100.0

Table 4.4 shows that majority 156 (55.7%) of the

respondents were degree holders, 50 (17.9%) were

diploma holders, 45 (16.1%) of respondents were of

certificate, 17(6.1%) were of secondary level and 12

(4.3%) were of masters level. This implies that most

of the respondents are diploma and degree holders.

Therefore, they were knowledgeable hence it was

easy for them to answer the research questions.

Table 4.4 Level of Education of the Respondents

Level of education Frequency Percent

Valid Secondary 17 6.1

Certificate 45 16.1

Diploma 50 17.9

Graduate 156 55.7

Masters 12 4.3

Total 280 100.0





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Table 4.5 shows that 58(20.7%) of the respondents

were below 30 years, majority 189(67.5%) 31-40

years, 24(8.6%) 41-50 years and 9(3.2%) above 50

years. This implies that majority of respondents are

old enough to give the accurate information.

Table 4.5 Age of the Respondents

Age Frequency Percent

Valid Below 30 years 58 20.7

31-40 years 189 67.5

41-50 years 24 8.6

Above 50 years 9 3.2

Total 280 100.0

Table 4.6 shows that majority 115(41.1%) of the

respondents had worked in the organization for a

period of 6 - 10 years, 82(29.3%) of respondents has

worked for 10 and above years and 45(16.1%) of

respondents had worked for a period of less than 1

year and 38(13.6%) of respondents had worked for

a period of 1 – 5 years. This implies that most of the

respondents had worked for a period of 6-10 years

implying they understood the milestone of the

organization.

Table 4.6 Service Time of the Respondents

Service time Frequency Percent

Valid Below 1 year 45 16.1

1- 5 years 38 13.6

6-10years 115 41.1

Above 10 years 82 29.3

Total 280 100.0

Findings of Descriptive Statistics

The study established the influence of sustainability

management systems CSR, on firm performance of

Sugarcane Processing companies in Kenya.

Therefore, study started with the descriptive

statistics (N, mean, standard deviation, minimum

and maximum). The study determined the

respondents’ level of agreement on a five point

Likert scale. The Likert scale used ranged from

strongly disagree (1) to strongly agree (5).

Effects of Sustainability Management Systems

CSR on Firm Performance

The study established the influence of sustainability

management systems CSR on firm performance.

The study determined the respondents’ level of

agreement on a five point Likert scale of

sustainability management systems CSR on firm

performance as shown in Table 4.7.

The research findings in table 4.7 shows that

respondents agreed (M=3.9429 and Std. Dev.

=1.13764) that the sugarcane company policies

articulate for corporate social responsibility.

Research findings also showed that respondents

agreed (M=4.2357 and Std. Dev. =1.12074) that the

corporate social responsibility adopted by

companies has built good reputation. Respondents

also appeared to agree (M=3.8821 and Std. Dev

=1.23438) that the company rating on its

performance is indicated by the level of

responsibility they offer to the community,

respondents agreed (M=3.9750 and Std. Dev

=0.83564) that the policies within the governing

framework are reliable in enhancing performance of

the company, respondents agreed (M=4.1036 and

Std. Dev =0.92747) that the annual reports of the

company show great participation of the company

on community development projects.

The study findings indicated that sustainability

management systems have an effect on firm

performance. Since majority of respondents agreed

that the sugarcane company policies articulate for

corporate social responsibility. Some indicated that






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companies has built good reputation and that the

company rating on its performance is indicated by

the level of responsibility they offer to the

community. Majority also were of the opinion that

the policies within the governing framework are

reliable in enhancing performance of the company

and finally most of them were in agreement with the

statement that the annual reports of the company

show great participation of the company on

community development projects. This implies that

sustainable management systems are an important

mechanism for improving corporate sustainability

performance. It can generate business value through

measurement and management of sustainability

risks and opportunities.

The study findings comes into agreement with

Schaltegger and Synnestvedt (2002) who argued

that not only the level of sustainability performance,

but also the kind of sustainability management with

which a certain level is achieved, influences the

financial outcome of the organizations.

The study findings also concurs with Figge et al.,

(2002) who found out that sustainability

management with balanced scorecard helps in

integrating the three pillars of sustainability into a

single and overarching strategic management tool

that significantly impact the economic success of a

business.

Table 4.7 Sustainability Management Systems CSR on Firm Performance SD D UD A SA Total Mean Std.

Dev

Min Ma

x

The sugarcane company policies

articulate for corporate social responsibility

F 9 37 24 101 109 280 3.942 1.13

7

1 5

% 3.2 13.2 8.6 36.1 38.9 100

Corporate social responsibility adopted

by companies has built good reputation

F 12 19 21 67 161 280 4.235 1.12

1

1 5 % 4.3 6.8 7.5 23.9 57.5 100

The company rating on its performance

is indicated by the level of responsibility

they offer to the community

F 5 55 36 56 128 280 3.882 1.23

4

1 5

% 1.8 19.6 12.9 20.0 45.7 100 The policies within the governing

framework are reliable in enhancing

performance of the company

F 5 19 14 182 60 280 3.975 0.83

6

1 5

% 1.8 6.8 5.0 65.0 21.4 100

The annual reports of the company

show great participation of the company

on community development projects

F 6 19 14 142 99 280 4.103 0.92

7

1 5

% 2.1 6.8 5.0 50.7 35.4 100

Firm Performance

The study determined firm performance. The study

determined the respondents’ level of agreement on

a five point Likert scale of the effects of corporate

social responsibility practice on firm performance

(Table 4.9).Where; 1=strongly disagree,

2=Disagree, 3=Undecided, 4= Agree and 5=

Strongly Agree.).

The research findings in table 4.10 shows that


=0.92554) that the Sugarcane Processing companies

takes part in raising money for local charities in the

communities. Research findings also showed that



sponsors local events which add to the reputation

and good will of the company. Respondents also

appeared to agree (M=4.2893 and Std. Dev


employs local employees to benefit the community

around them and improve firm performance,

respondents agreed (M=4.093 and Std. Dev =1.099)

that the Sugarcane Processing companies supports

local economic growth through involvement in

various local projects.

The study findings imply that corporate social

responsibility practice has an effect on the overall

performance of the company. This is because the

Sugarcane Processing companies takes part in

raising money for local charities in the communities,

Sponsors local events which add to the reputation

and goodwill of the company, Employs local

employees which benefits the community around

them and improve firm performance and also

supports local economic growth through

involvement in various local projects. This implies

that CSR is a determinant of firm’s profitability.

The study findings are in support with the study of

Wafula (2012) who studied corporate social

responsibility from a Kenyan firm’s perspective.

The study analyzed the activities of selected

companies in Kenya to help understanding the

impact of CSR on their performance. The study

found out that many organizations are recording

both tangible and intangible benefits as a result of

incorporating social responsibilities in their business

strategies.





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The study findings also concur with Okwoma (2012)

who studied the effects of corporate social

responsibility on the financial performance of

commercial banks in Kenya. This study used

longitudinal research design and covered the year

2007 to 2011 both years inclusive. Financial

performance was measured by use of accounting

ratios that included ROA, ROE and data obtained

from supervisory reports compiled by central bank

of Kenya. CSR was measured using financial

spending on CSR activities. The study found out that

CSR had a positive and significant effect on ROA

and ROE. The study further found out that CSR

contributed significantly to the financial

performance of large and medium size commercial

banks but did not have any significant effect on the

ROA of small commercial banks.

Table 4.8 Firm Performance D UD A SA Total Mean Std.

Dev Min

Max

The Sugarcane Processing

companies takes part in raising

money for local charities in the communities

F 0 26 8 75 171 280 4.396 0.925 2 5

% 0 9.3 2.9 26.8 61.1 100


companies sponsors local events which add to the reputation and

good will of the company

F 3 35 34 41 167 280 4.192 1.132 1 5

% 1.1 12.5 12.1 14.6 59.6 100

The Sugarcane Processing companies employs local

employees to benefit the

community around them and improve firm performance

F 1 30 25 55 169 280 4.289 1.036 1 5

% .4 10.7 8.9 19.6 60.4 100


companies supports local economic

growth through involvement in

various local projects

F 9 21 40 75 135 280 4.092 1.099 1 5

% 3.2 7.5 14.3 26.8 48.2 100

Findings of Inferential Statistics

Correlation analysis and multiple regressions were

done to check the influence of independent variables

(Sustainability Management Systems CSR,

Economic CSR and Philanthropic CSR) and

dependent variable (Firm Performance). The study

started with correlation analysis followed by

regression analysis.

Correlation Analysis

Pearson’s product –moment correlation (r) was used

to establish the influence of independent variables

and dependent variable in order to know their

direction and strength. The study findings were

presented in table 4.9.

The study findings established that there was a

weak, positive and statistically significant influence

of Sustainability Management Systems CSR on

Firm Performance (r =0 .156; p .009< 0.05). This

gave an implication that corporate social

responsibility practice variables Sustainability

Management Systems CSR, has a positive influence

on firm performance of selected sugarcane

companies in Kenya.

The study findings agreed with findings of Barnett,

(2016) that firms which engages in CSR activities

has better access to valuable resources, creating

financial returns, corporate citizenship, to increase

trust and reputation, strategic philanthropy, to satisfy

stakeholder expectations, potential to charge a

premium price for products as well as the enhanced

attractiveness to recruit and to retain high-quality

employees.

Table 4.9 Correlation Analysis Sustainability Management

Systems CSR

Firm Performance

Sustainability Management

Systems CSR

Pearson Correlation 1 .156**

Sig. (2-tailed) .009

Firm Performance Pearson Correlation .156* 1





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Sig. (2-tailed) .009

Multiple Regression Analysis

Inferentially the study used multiple regression

model to regress dependent and independent

variables for the study. The relevant results of

analysis were presented in tables 4.10, 4.11 and

4.12.

From table 4.10 R value was 0.380 indicating low

degree of correlation. The R2 value was 0.145

indicating that 14.5% variation in the dependent

variable (firm performance) can be explained by the

independent variables; sustainability management

systems CSR, economic CSR and philanthropic

CSR. However, the typical error when the model is

used to predict research success is 0.57769.

Table 4.10 Multiple Regression Model Summary Model R R Square Adjusted R Square Std. Error of the

Estimate

Durbin-Watson

1 .380a .145 .135 .5777 .786

From table 4.11 F-statistics produced (F = 15.547)

and p<0.05 indicating that the model was significant

thus confirming the fitness of the model. This

implies that there was statistically significant

relationship between corporate social responsibility

practices on firm performance. The regression

model statistically significantly predicts the

outcome variable; it was a good fit for the data.

Table 4.11 Testing the Multiple Regression Model Model Sum of Squares df Mean Square F Sig.

1 Regression 15.566 3 5.189 15.547 .000b

Residual 92.108 276 .334 Total 107.674 279

The results in table 4.12 indicated that sustainability

management systems CSR (β=0.149, p<0.05),

coefficients were all significant to be used for

multiple regression. This give an implication that a

unit increase in sustainability management systems

CSR causes a 0.149 unit increase in firm

performance. Therefore, the multiple regression

model equation was developed as follows;

Y= 1.070 + 0.149 X1 + …………………… Equ.4.1

When the model is translated it forms the following

model;

Firm performance = 1.070 + 0.149 sustainability

management systems …………………….Equ. 4.2

Table 4.12 Evaluating individual Regression Analysis Coefficients

Model Unstandardized Coefficients Standardized

Coefficients

t Sig.

B Std. Error Beta

1 (Constant) 1.070 .511 2.093 .037

Sustainability Management Systems

CSR

.189 .071 .149 2.656 .008

Hypothesis Testing

Hypotheses were tested at 5% alpha level of

significance. The decision rule in hypotheses testing

was that if the p –value was less than conventional

0.05 the null Hypotheses was rejected and when it

was above 0.05 the study fails to reject the null

Hypotheses. The study results were presented in

table 4.12.

The null Hypotheses H01 stated that there is no

significant influence of sustainability management

systems CSR on firm performance of sugarcane

processing companies in Kenya. Hoverer, there was

a statistical significant influence of sustainability

management systems CSR on firm performance of

sugarcane processing companies (t= 2.656;

p=0.008<0.05). Thus, the study findings rejected the

null Hypotheses. This gives an implication that

sustainable management systems adopted by sugar

companies can improve corporate sustainability

performance of the company. This is because

sustainable management systems can generate

business value through measurement and

management of sustainability risks and

opportunities.

The study results concur with study findings by

Schaltegger and Synnestvedt (2002) that the kind of

sustainability management influences the output

performance of the organizations.





81 | P a g e


The study findings also concurs with Figge et al.,

(2002) who found out that sustainability

management with balanced scorecard helps in

integrating the three pillars of sustainability into a

single and overarching strategic management tool

that significantly impact the economic success of a

business.

Summary, Conclusion and Recommendations Summary of the Findings

The findings are summarized based on the specific

objectives as follows;

Effects of sustainability management systems on

firm performance

The study findings indicated that sustainability

management systems have an effect on firm

performance. Since majority of respondents agreed

that the sugarcane company policies articulate for

corporate social responsibility. Some indicated that


companies has built good reputation. Also some of

them indicated that the company rating on its

performance is indicated by the level of

responsibility they offer to the community. Majority

also were of the opinion that the policies within the

governing framework are reliable in enhancing

performance of the company and finally most of

them were in agreement with the statement that The

annual reports of the company show great

participation of the company on community

development projects. This implies that sustainable

management systems are an important mechanism

for improving corporate sustainability performance.

It can generate business value through measurement

and management of sustainability risks and

opportunities.

Conclusions

The study concluded that the sugarcane company

policies articulate for corporate social responsibility.

Some indicated that corporate social responsibility

adopted by companies has built good reputation.

Also some of them indicated that the company rating

on its performance is indicated by the level of

responsibility they offer to the community.

The study concluded that that the sugarcane

company supports the development projects that

benefits the local citizens. It also supports most of

the community activities through funding as one of

its objective to economically empower the

community and ensure that its operations and

processing management are environmentally

friendly. Finally the company has initiated programs

that support the local vulnerable communities.

Recommendations

The study recommends the following;

The study recommends that the companies should

encourage sustainability management systems since

sustainable management systems is an important

mechanism for improving corporate sustainability

performance. It can generate business value through

measurement and management of sustainability

risks and opportunities.

Recommendation of Further Research

The study recommends further researchers to study

on corporate social responsibility strategy and

financial performance of firms in Kenya which the

study didn’t cover.

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Documents

Corporate Social Responsibility and Firm Performance