“Open Kyrgyzstan” interview with Asel Arstanbekova, Director of CSR Business Network

During recent years many people have been talking about corporate social responsibility, philanthropy and the role of business in solving a country’s domestic social problems. What is CSR? What price has to be paid for this concept and does Kyrgyzstan need this?

АА: Not only in Kyrgyzstan but also in the global world society people are holding discussions on corporate social responsibility, that is policies for involving business structures into society and solving social-orientated problems. In developed countries the corporate social responsibility concept has been actively applied since long ago.  As for us we are only now taking our first steps in its direction. This was influenced in many ways by the events currently happening in the country. The CSR process has been running for about 20 years in the world, and today there are many versions of what exactly corporate social responsibility (CSR) is. The term CSR is unique because it holds a certain meaning although its understanding in not always identical throughout various regions in the world.

For example in the USA and Canada, CSR is often narrowed to corporate philanthropy and social marketing; in Cambodia CSR is understood as a partnership between a business and the International Labor Organization (ILO) in order to improve working conditions; in Australia CSR is projects run by corporations but enforced by local authorities; this pressure which bottom line is to determine ecological and organizations occupied in protecting human rights; in India CSR is seen as charity and minimizing the consequences of poorly developed social infrastructure; in China CSR is businesses taking on health care and safety of employees as a priority.

Against this background CSR in the European Union (EU) is positively outlined by persity and good development. From the western point of view CSR in the majority of cases shall be considered through the concept of sustainable development. The European Commission, in its official documents, gives a wide definition: “Corporate social responsibility in its essence is a conception which reflects a voluntary decision made by companies to take part in improving the life of society and environmental protection”.

In Russia, according to the definition given by the Association of Russia’s Managers, CSR is defined as the voluntary contribution of businesses towards the development of society in social, economic and ecological areas, directly related to the company’s basic activity and going beyond the limits of the minimum required by law.

How shall corporate social responsibility be interpreted in Kyrgyzstan and what model will be applicable here – this is yet to be assessed and will be in the future when the business community determines the basic priority directions, taking into account the current situation in the country, as well as future development tendencies. This is a positive moment as the issue becomes a question under discussion in business groups.

In discussions we often hear criticism of CSR. Some believe that the development of CSR is not timely as a result of the events currently happening in the country and that businesses operating in the country (especially after the April unrest) are indifferent to partnership in the social area. Are there any prospects of developing corporate social responsibility in Kyrgyzstan?

АА: Absolutely, nobody cancels the major objective for business – gaining profit and achieving commercial success. And maybe in certain cases criticism is appropriate. Especially for example in situations when companies use CSR as a tool for “hiding” some areas of their commercial activity or use CSR as PR tool to promote their brand, commodities and services. However at the same time, a number of companies which perceive observance of certain principles of “social welfare” as a norm of conduct are growing. In general we should stop using stereotypes that businesses make money taking advantage of communities’ poverty, as a matter of fact business is the basis for prosperity. Everybody knows that the same businesses provide jobs, being guarantors for their staff to have income and supporting the social welfare of communities.

The CSR timeliness issue may also be discussed. From one hand the current environment for welcoming business is not favorable enough; unrests in the country in 2010 entirely discouraged any entrepreneurship potential. On the other hand, this economic and political crisis existing in the country has triggered powerful flow of business involvement in coping with the country’s challenges. For example, in the given case the amount of investments granted by businesses for supporting the country, their staff and dependants is estimated at being millions. Clearly the CSR development process in one form or another has started in the country. And this is just the beginning of a long difficult road in the area of improving business quality and its operational environment.

What do you mean by CSR definition? By what characteristics was the whole CSR process built to begin with? For example, CSR and philanthropy (charity), how are these two important ideas connected to one another?

Absolutely philanthropy (we are now talking about only corporate charity, not private charity) is one of the most important points in the entire CSR system. After the events happened in our country, business participation is a good example of redirecting corporate resources to charitable actions for supporting the injured people. But on the other hand emotional charity is wasteful and unforgivable for business. The majority of our domestic companies show such activity only “from time to time”, supporting actions which are of emergency aid nature that is on demand if needed.

Here it’s worth explaining that CSR has a broader term definition, whereas corporate philanthropy is a part of the CSR general conception which includes responsibility of business in several directions:

Firstly, taking responsibility as an employer with regards its employees (observing human rights, labor protection and safety, social security and personnel development).

Secondly, taking responsibility for future generations with regards environment preservation. Practically any production has an inevitable impact on the environment to a certain degree, so corporate social business shall carry out comprehensive initiatives intended for reducing harmful impact on our environment.

Thirdly, taking responsibility towards the local community in the territories within which the business is operating (philanthropy, sponsorship and improvement of the adjacent areas).

Fourthly, ethical business practice (operation transparency, observance of legal and normative legislation).

Lastly, taking responsibility for consumers of goods and services – manufacturing high quality products, which do not cause harm to the consumer’s health, providing honest information in labels on products, compositions of the item and so on.

As you can see philanthropy of business is a part of external CSR. And here opinions of experts in the CSR area are identical and categorical. If a company shows its active support for the society through philanthropic programs but at the same time ignores for instance ecological standards or uses child’s labor in its production and doesn’t obey norms for protection and safety of the personnel labor, then such a company IS NOT socially-orientated.

A lot of responsibility! Why do businesses need this CSR? As you know adequate investments are required for initiating CSR principles, and with limited resources this is practically impossible to do?

I agree, as the research conducted abroad shows, introduction of social responsibility to companies during the initial stage causes business expenses to increase, but these investments are prospective and will be paid back not only in the form of a good reputation but also with real profit. And if you add all the other advantages then benefits for businesses become obvious. This is, for instance, growth of trust credited by consumers, increasing demand for the product, increasing earnings. This is especially important for companies whose operational activity evokes criticism in public, for example, a subsoil use company, or a company occupied in manufacturing the products which have direct or indirect influence on society, such as tobacco companies, pharmaceutical companies, as well as public companies such as mobile phone companies and companies operating in the financial area.

Not long ago at a philanthropy conference I heard accusations about the social activity of a few gold-mining companies. They pointed out that the gold-mining companies are causing harm to the country’s environment and their social responsibility in no way compensates the damage from their activities, therefore they may not be deemed CSR-wise companies. Unfortunately, extraction of commercial minerals has been and will be carried out for decades to come. Yes, it is harmful for the environment to a certain extent. But, extraction of commercial minerals was approved in the Country’s Development Strategy as one of the priorities for driving the national economy for upcoming decades. If Kyrgyzstan can’t see its future development without inevitable extraction of commercial minerals (there are many countries in similar positions), business companies that run subsoil mining are not at fault in the fact that they happen to be here. It’s another problem: we need to create conditions where mining operations would be run at minimum harm for the environment so that these companies could be able to reveal their social responsibility allocating funds for supporting the areas where they operate, restoring the environment, caring about their personnel, observing tax legislation and so on.

I’d also like to warn you against the thoughtless superficial application of CSR which may lead to serious consequences; instead of expanding public dialogue and strengthening reputation of socially responsible companies  you may create precedents for undermining the companies’ sustainable growth and this is undesirable for state budget and the country on the whole.

What companies here in Kyrgyzstan can you call socially responsible? Are there any such companies?

There is a banal view that CSR is an advantage for “rich and successful people”, and as a rule, large scale business, whereas middle and small scale businesses by their nature are not able to fulfill CSR. And such trends still exist. As a matter of fact nowadays social responsibility in Kyrgyzstan in more full value of its showing is found in self-sustained, financially stable companies, more often in large scale companies and companies that have foreign capital which already include standards and provisions for regulating CSR according to international norms and standards. These are groups which include companies operating in the gold mining sector, cell and mobile phone companies and financial companies. There are only a couple dozen such companies operating in the country. Social responsibility can be traced in them at both systemic level and from the point of covering internal and external CSR. Obtaining more accurate figures is a target for the forthcoming year.

During recent years a tendency for transparency and accountability in some large scale companies has occurred. Thus in recent years the number of mining companies disclosing their financial statements has increased according to information of the Initiative for Transparency of Mining Industries (ITMI) in Kyrgyzstan. In past this was done only by two gold mining companies – “Kyrgyzaltyn” and “Kumtor”, whereas today it’s being done by 27 companies occupied in developing subsoil resources. It’s high time for public disclosure of statements describing all payments and incomes received by the state from oil, gas, gold and coal mining companies in order to make such transparency commonplace in the country’s economic routine.

As to the middle and small scale domestic businesses, we should note that their social responsibility content is completely insufficient. First of all, this business group is not well informed about the CSR concept. Secondly, it’s more oriented on gaining profit no matter what. This includes a desire to hide taxes and allocations to social and pension funds, saving expenses on the account of salaries to be paid to personnel, avoiding ensuring payment for parental leave, minimizing costs for providing appropriate work environment and work safe conditions, as well as reducing production cost with sacrifice in quality and human health safety. Referring to having no free financial assets the companies included in this group tend to participate rarely in humanitarian and charitable actions. They work under the principle that the “state does practically nothing for me and doesn’t help me, so I in my turn have no desire to and will not help it”. In such enterprises in most cases internal CSR is carried out, whereas external CSR is absolutely absent.

But as the practical activity of the organization CSR Business Network in KR showed, informing middle and small scale businesses about the principles of corporate social responsibility, the importance of environment preservation, and presenting information about the direct and indirect benefits to businesses from participating in social projects lead to a noticeable growth of social activity in the companies’ leadership, including an awareness of pride for their company’s brand.

What are the major problems and difficulties with developing the concept of social responsibility in Kyrgyzstan?

The caution of businesses introducing CSR principles (especially external CSR) is connected with the obsolete legal framework, which practically discourages businessmen from financing social programs within the companies, implementing social projects and increasing their partnership in charitable activities. It should be noted that the last half year period (the period after the April events) showed that so far there is no demonstration of business recognition and encouragement in the area of corporate social responsibility at the country’s governmental level.

Talking about participants of the CSR process in Kyrgyzstan I should note a weak role of the state authorities in promoting CSR movement. This is a serious problem we encounter within the course of activating corporate social responsibility in the country. In spite of this the state authorities are trying to attract funds from international organizations and foreign countries for running social projects, and they underestimate the most important financial source – the businesses operating within the country’s territory. As of today there is no strong state policy intended for CSR of business.

We can’t ignore the source for ensuring the process of promoting CSR ideas – Non-Commercial Organizations. NCOs mainly financed by international organizations realize the lion’s share of social projects aimed at protecting rights of women and children, environment preservation, protecting human rights and so on. However at present although there are singular examples, we lack explicit partnerships between the NCO and business sector. The NCO sector will have to develop new approaches in dealing with business society, learn about its demands, and recognize in the local businessman a customer for implemented projects.

Mass media is another important member of the CSR movement which has its own specific problems. First of all it has a poorly developed legislation which fails to strongly motivate the preferential placement of social information.

On the whole the problems of developing the concept of CSR may include poor CSR awareness, lack of procedural designs, absence of large national and industrial research in this area. The CSR movement in Kyrgyzstan is in the beginning of its establishment. But we shouldn’t force all business companies to introduce the CSR principles within their structure because firstly this process should be carried out on a voluntary basis. Secondly as of today, at least in Kyrgyzstan, the mission of introducing all CRS principles cannot be practically set. We will work hard over step-by-step introduction of the CSR principles – going from the specific to the general and from small to large.

What do companies need to do in order to become socially responsible?

For a better understanding of its corporate social responsibility, expert associations recommend companies look at themselves through the roles they play:

•    Company – employer: creates attractive jobs, provides “white” salaries;

•    Company – manufacturer of goods and services: manufactures high quality goods and renders qualitative services;

•    Company – tax payer: pays all taxes (avoiding grey schemes) observing laws;

•    Company – capital borrower: reimburses loans on time, comes on to international stock markets;  •    Company – business-partner: demonstrates honest business practice, establishes reliable relations with suppliers and distributors;  •    Company – corporate citizen (neighbor): prevents any potential negative effects of its activity (for example in the environment protection area), improves the territory, supports social prosperity.

The way a particular company understands its social role and its contribution to society development apart from the mandatory minimum package required by the laws is the basic information needed to begin dialogue with public. The dialogue which at the same time may be carried out through the instrument of social accountability.

So what exactly is CSR – a reality for today’s Kyrgyzstan?

Helping the injured during the April and June unrests has shown the big potential of business and society in facing social challenges in the country. The institutionalization process is currently under way. Here and there some organizations appear which commit to resolve the problems of promoting social responsibility in the country. Corporate social responsibility in Kyrgyzstan is already a reality today. Now it is nonetheless hard to talk about a CSR model, we will have to work for a few years yet to create a social responsibility model in our country.

To effectively introduce corporate social responsibility the active involvement of all parities is required: business, state, mass media, and society. As for the practice of holding this dialogue, it is just at the very beginning. Here it’s worth mentioning that it is necessary to hold dialogue with authorities, and it’s important to understand that any effort to “negotiate with authorities” is not the best way to provide your own safety. Officials are replaced with newcomers and everything should be started from the very beginning. There is another option: to build a new relation pattern between society, authorities and business – the relations which arise not from property redistribution but from revising responsibility parameters.

Expanding responsibility is as natural as extending the range of influence. The more responsibility we take for something the more powerful we are at influencing on that thing. When you are getting involved in social programs at the local level, you are building equitable partnership with local authorities.

Historical Background

The issue of social responsibility was discussed for the first time in the USA. In 1905 there appeared a movement called the Rotary, the essence of which was that wealthy people should make their own contributions for improvements in the professional sphere and society on the whole. 90 years later in 1995 leading companies of the European Union created the Corporate Social Responsibility-Europe initiative, which nowadays unites about 50 large scale corporations. In 1999 in Great Britain the international standard called AccountАbility 1000 was developed which was intended for measuring companies’ operating results from ethical points of view, essentially a social audit.  In 2000 by the initiative of UN General Secretary Kofi Annan the Global Compact was founded calling for uniting business and civic society efforts in support of nine principles in the areas of human rights, labor relations and the environment. Several hundred companies throughout the world have already joined this initiative. For the first time in history projects for social accountability were being introduced in the early nineties by a whole bunch of companies such as the English company The Body Shop, the American company Ben & Jerry's and the Canadian company Van City. Foreign experience shows that such innovative approaches will provide any company with the opportunity to listen and respond to the expectations of its consumers.

Source: http://open.kg/ru/analytics/?id=225