CSR-corporate-social-responsibility-in-Russia

Corporate Social Responsibility

Underlying the idea of CSR is the belief that business is an integral part of society and that it should show solidarity with society’s needs and interests. The core dilemma for responsible business corporations is how to consider profit in relation to people and planet and to implement the sense of social responsibility in the structure of their business plans.

The field of CSR is expanding, with Europe leading the pack. Many companies start to realize, however, that their CSR policy exceeds being a mere PR instrument or a vague moral imperative, as they discover business substance behind it. KPMG claims that CR reporting enhances financial value through direct cost savings, insights into innovation opportunities and improved reputation in the market (KPMG 2011: 2-3).

We suggest to consider the hot topic of CSR from a new perspective:

Corporate Social Responsibility and trust
The growing demand for accountability and stakeholder dialog
Post-crisis revision of CSR activity

Corporate Social Responsibility and trust

However, the true reward for responsible business practices is public trust. The dividends of trust are real, measurable and quantifiable (Covey 2006: 19). Business and society are involved not in a relationship of mutual opposition but in one of dynamic reciprocal influence. Such values as public accountability, trust and ethics of responsibility give impetus to the renewed interactions between business corporations, civil society organizations and governmental institutions. These values prevent the crisis of corporate and political legitimacy because they build on broad public support and provide space for participation, mobility and sustainable growth.

To win and keep public trust, a company needs a strong ethical profile, which is obvious from the company’s intrinsic moral motivation and its solid CSR policy. CSR is a universal corporate value: it moves top-down starting from leaders’ ethical reasoning in decision-making and it grows bottom-up creating the corporate culture of accountability and integrity. CSR includes many aspects - such as responsible investment, business-NGOs engagement, stakeholder dialog - which all contribute to the company’s moral commitment and strategy.

CSR in Russia

CSR is becoming a hot topic in contemporary Russia, with its rapidly developing market and nascent civil society. Russia’s progressing integration into the global economy signals the need for adopting international standards of CR reporting. An increasing number of Russian companies are producing CR reports (Davis 2008). In 2011, 58% of Russian companies reported on their corporate responsibility; in the Netherlands, 82% produced their CR reports compared to 63% in 2008 (KPMG 2011: 10-11). Nowadays, Russian businesses are among the largest investors in the global economy, while Russian government welcomes foreign investors in the Russian market (Streeter 2011b). Becoming world players, Russian companies participate in the international arena where CSR norms and practices are required. Russian government can contribute by improving its policy in the field of CSR and designing interventions, civil society should explicitate public requirements and expectations, and corporations should discover new sources of integrating CSR into their internal corporate culture. A new wave of CSR awareness is needed. Read more about CSR in Russia.

The history of free market economy and modern CSR is shorter in Russia than in the Netherlands. Before the perestrojka, the Soviet system of state-owned enterprises had its own understanding of CSR. During the decades of communist rule, state companies played a pivotal role in providing social services but often neglected environmental and economic concerns. State paternalistic control ‘freed’ companies from their internal need to develop a competitive CSR policy. State companies automatically supported local cities and communities. Now, with the establishment of free market, corporations are challenged to develop a new understanding and implementation of CSR policy independent from the state and, at the same time, to stand market competition by employing environmental innovation techniques (Streeter 2011a).

The growing demand for accountability and stakeholder dialog

A new societal trend is a close correlation between the level of societal differentiation and the development of CSR. Modern societies continue to diversify and emancipate. More interest groups arise and more public concerns are represented by these groups. Accordingly, more citizens become better informed about their rights and responsibilities. This modern civic activism and awareness are the signs of an inexorable demand for horizontal accessibility and accountability - a social structure that requires transparency of the involved parties and represents interests of all stakeholders instead of maintaining some minimal improvements from the top down. For business companies, societal differentiation means a higher demand for accountability and stakeholder dialog.

Business corporations can profit from this changing societal landscape by anticipating and integrating major political, societal and cultural developments into their business strategy. Understanding changes in public morality can also provide an important clue to construing plausible future scenarios. Presumably, a future CSR strategy agenda will be dominated by such dilemma’s as:

How to integrate private consumers’ concerns into a greater public demand for corporate accountability and responsibility?
How to employ the mechanisms of societal differentiation (i.e. growing diversification of stakeholders) for further developing of CSR?
What kind of CSR conceptual and operational framework can be offered in order to manage social risks that arise from the diversification of stakeholders and globalization of business environment?

The current tendency towards accessibility and accountability prompts new developments in reputation management. An open differentiated society presumes free communication between citizens on matters of public concern. This matrix of free-floating communication engages topics that are also important for business corporations. External PR controversies, human rights, environmental issues, integrity and other issues of business ethics do not escape the attention of critical stakeholders and can inflate public debate. Business corporations need to find a new way of communicating with this complex, pluralized and multi-contextual society, which social scientists describe as a ’differentiated society’ (for instance, Niklas Luhmann, see Olga’s doctoral thesis).

Post-crisis revision of CSR activity

The recent crisis has prompted many companies, in the West as well as in the East, to ‘separate the wheat from the chaff’ in their CSR activities. Reduction of the budget has led to selectivity about the costs and efficacy of CSR projects. Specifically in Russia, the financial crisis had a similar effect to that of the political crisis during the nascent years of Russian democracy. Then, in the early 1990s, the crisis of democratic legitimacy revealed that a mere constitutional recognition of human rights and civil society by the state is insufficient if the democratic state does not have a continuous feedback from society. Nowadays, the financial crisis exposed the deficiencies of the bond between business and society: a non-obligatory and declarative character of CSR, its inflated PR effect, non-transparency, superficiality and ad hoc strategy (CSR Trend Review 2009: 11).

The crisis has required a qualitative revision of CSR policy and implementation. It became obvious that long-term strategy should prevail over short-term reputation and PR glamour. A realistic and pragmatic approach, which testifies to the company’s business rationality and ethical maturity, should replace formerly popular unworkable exaggerated promises in the field of CSR. Quality of CSR activities should be measured by workability of the launched projects as well as by real value added to society. In this sense, stakeholder dialog can serve as a good instrument to realistically assess the company’s promises and to become a trustworthy partner in social engagements (Towards Sustainable Growth Business Models 2012).

How is it possible to revise CSR strategy and implementation in the future? Innovations are possible in the three main spheres of CSR activities (as suggested in Kourula & Halme 2008: 559-60).

1. Philanthropy projects

It is wiser to sponsor those projects that have the potential to develop in the future without the company’s support. Besides, the company can stimulate employee voluntarism. By involving employees in various voluntary projects, where they can share their expertise with NGOs or socially disadvantaged groups, the company enhances employees’ self-esteem and thereby makes best use of the available intellectual and moral capital of the HR.

2. CSR integration

Companies should strive to integrate CSR aspects into their core business strategy and operations. KPMG suggested a new concept of ‘integrated thinking’ as a spin-off of integrated reporting. Integrating CSR into the core of business requires taking into account various responsibility considerations: responsibility towards customers (expressed in striving for high quality and transparency of products and for responsible investments), responsibility toward employees (balancing financial rewards among employees and top-management, paying just wages and promulgating diversity policy in HR), responsibility toward suppliers (monitoring supply chain) and responsibility toward the local community (applying environmentally benign practices and policies).

3. CSR innovation

Companies that are aware of the emerging environmental and social problems can timely respond to these problems by developing adequate products and thus providing apt solutions. This approach offers new profitable business opportunities that would alleviate a particular environmental or social problem or benefit an underdeveloped market segment. In result, an innovative CSR business model leads to a win-win situation.

Bibliography

Covey, Stephen M.R. (2006). The Speed of Trust (New York [etc.]: Simon & Schuster).
CSR Trend Review in Russia (2009, Moscow: csrforum.ru).
Davis, Peter (2008). ‘Central and Eastern Europe: Russia - Springtime for responsible business,’ in Ethical Corporation, Apr 10, 2008.
Kourula, Arno & Minna Halme (2008). ‘Types of Corporate Responsibility and Engagement with NGOs: An Exploration of Business and Societal Outcomes,’ in Corporate Governance, Vol. 8 No. 4, 2008, 557-570.
KPMG International Survey of Corporate responsibility Reporting 2011 (KPMG International Cooperative).
Streeter, April (2011a). 'Russia Briefing Part 1: Overview - Trouble at mill,' in Ethical Corporation, Dec 12, 2011.
Streeter, April (2011b). 'Russia Briefing Part 2: Russian corporate leaders - Battling with the basics,' in Ethical Corporation, Dec 11, 2011.
Towards Sustainable Growth Business Models (2012). Published by Dutch Sustainable Growth Coalition, authors: Nancy Kamp-Roelands, Jan Peter Balkenende & Paulette van Ommen.