Why should business care about people and society? Why is corporate social responsibility (CSR) an important part of business strategy in Europe and America, while we here see it as an annoyance when communities ask for money for new windows in a hospital or for sweets for a children's holiday?
CSR and Ukraine
In the Ukrainian society of the early 90's, it was considered normal for business to maximize short-term profits, even to the detriment of customers. Since then, the situation has been slowly but surely changing. For corporations to realize the need for CSR, all participants of this process must first grow up value-wise, including society, business and the government. There are already CSR pioneers in our country with dozens of successful projects in this area under their belt.
These are the companies that understand that this practice can help them significantly reduce risks and increase their influence. Business always behaves rationally. However, while some expect profit in one or two years, those who choose CSR think decades ahead. Social responsibility is a necessary foundation for any company’s future success.
At first glance, CSR looks like charity, but it is also a contribution to the development of communities where the company's employees live. For example, when a city-forming enterprise helps renovate a kindergarten, it’s charity. Yet, if there were no kindergarten, then the company’s employees would start leaving or taking sick leave to watch after their children; many would try moving somewhere else, while the new and young would hardly want to come here. From this point of view, renovating the kindergarten provides real benefits.
Nowadays, when the lack of competent employees is becoming a real problem, it is important for business to attract enough professionals into their communities. Since achieving this just by offering high salaries is getting difficult, business might consider investing in long-term projects aimed at optimizing local infrastructure – roads, kindergartens and hospitals.
If we were to talk about business in the European sense – not oligarchic one, but rather small and medium business – it has never had sufficient influence in Ukraine before the events of the Maidan. The decentralization reform has partially addressed this situation, creating a powerful incentive for communities to engage in more open and pragmatic relations with business. Decentralization allows regions to retain greater amounts of taxes, which provides opportunities for creating more favorable conditions for business.
And yet, the impact of business on society in our country today is insignificant. For any positive progress in this issue, we need a proper environment of values. The more influence business has, the more people born of and supported by small and medium-sized companies will be going into politics, those who share its values and know how it works institutionally. After all, in order for CSR to become the norm, there must be a market, with both the demand and supply. Indicative in this regard is the example of Anna Gerashchenko, a businesswoman who came into the position of chairperson of an ordinary village in Kharkiv Oblast. Her initiatives aimed at improving the life of her community, optimizing expenses and protecting the environment were met with resistance on the part of the locals. Of course, this is not exactly CSR, but the situation shows the maturity of our society.
Experience of developed countries
In American and European societies, CSR is both a part of the culture and that of the normative field. CSR-minded business there receives investment support, tax breaks and loyalty of customers. Ignoring the need to be socially responsible in developed countries is a sure way to damage one’s reputation and lose your company.
Abroad, CSR is a fairly broad concept – a company's responsibility before employees, local community and society as a whole. Companies that implement CSR are clearly ahead of their competitors; their customers prefer their products, even if they are more expensive.
By and large, by introducing CSR, companies strive to achieve two goals: increase their influence and reduce risks. By helping with their community’s problems, they get the necessary number of employees and clients, as well as a positive reputation. At first glance, this sounds rather pragmatic, but in practice everybody wins.
Countries have also seen new opportunities here and are now doing everything in their power to encourage the adoption of CSR by companies. For instance, Germany’s Ministry of Labor and Social Policy keeps a list of leading CSR companies. Dropping off that list affects one’s reputation and, consequently, the income of one’s business. In addition, many European countries offer tax incentives for socially responsible businesses. Companies are sometimes able to decide whether to pay taxes or support a certain foundation. A good example of European CSR is the creative hub set up on the territory of the former Zollverein mine in Essen. At the entrance, you will see a nameplate with the names of various companies that provide support to this project.
This synergy between society, business and the state delivers excellent results. Thus, CSR in developed countries has long since become the norm, providing steady benefits to all involved.
Who has already embraced CSR in Ukraine
CSR pioneers in Ukraine are larger companies, often those with foreign capital.
Most active in this area is the agrofood business. It seeks to create attractive jobs as well as support cultural and social projects started by local authorities. For instance, the Astarta company relies on the development of education in rural areas. They invest in career guidance, ensuring the inflow of new employees into their enterprises.
The Auchan supermarket chain creates jobs for people with disabilities. Society sees this as a very positive thing and eagerly shares information about them on social networks.
Many companies implement social projects that, one way or another, affect their potential clients: AVON works with projects aimed at combating breast cancer in women, LIFECELL provides support to people with hearing problems, EVA purchases equipment for perinatal centers, etc. Dozens of other companies focus on various CSR projects, from promoting healthy lifestyles to fighting discrimination of various groups.
An unusual form of CSR for Ukraine is the project Urban Space 100. One hundred businessmen combined investments and started a restaurant business in the form of social entrepreneurship. 80% of the proceeds go to city development projects. As a result, those businessmen have created an opportunity for themselves to influence the environment where they live and develop their companies.
The medical reform provides new opportunities for CSR
Investment in medicine is a new form of CSR. Thanks to the healthcare reform, companies are already able to open or renovate hospitals, whose services for patients will be financed from the state budget. Representatives of business can monitor their investments by sitting on a hospital’s supervisory board. This model of CSR attracts enterprises operating in depressed regions, which often lack proper medical care, schools, roads – infrastructure as a whole. Because of this, people don’t want to work in these companies, even for a high salary. By solving the problems of small localities, companies reduce the risks of staff shortages, negative attitude of the community, etc.
How the government influences the development of CSR
As long as the state stays away from these matters, the result is demotivating. If a company wishes to finance some project of a charitable foundation or NGO, only a part of this sum can be attributed to its expenses for taxation purposes.
While there are no direct incentives for CSR development at the moment, prerequisites for CSR culture already exist. The decentralization reform has positively affected the balance of interests of business and government. Communities should now pay more attention to education, while opinion leaders and companies need to study the experience of other countries and learn more about the advantages of cooperation between business and community, implementing this form of cooperation in practice.
The most useful thing the government can do right now for the development of CSR is to launch a full-fledged and functional anti-corruption system. Now, in the absence of effective anti-corruption mechanisms, any tax benefits or other regulation methods will only serve to increase corruption.
Ukraine already has experience with introducing bonuses and privileges for IT people. However, instead of benefits, they would prefer the government not to interfere in the natural development of the industry. By and large, CSR constitutes natural development of the value business. The events of 2014 launched the value-based maturation of the nation. Every year more and more companies introduce CSR: they occupy themselves with the problems of communities and cultural issues, improve the quality of education, etc. This allows them not just to retain the best employees and attract new ones, but also to increase the number of loyal customers, establish their brand and influence their community, or sometimes the whole country.
