CSR Can Bring Profit, Reduce Risks and Enlarge the Market

By Nana Mghebrishvili, The FINANCIAL

“It’s evident that CSR isn’t very developed in Georgian companies, but the sector has experienced progress during the last five to ten years,” said Keti Vashakidze, Director of the Eurasia Partnership Foundation.

“Businesses interpret social responsibility in two directions. The first is how they treat their staff and the second, what they do for the environment. Both directions of CSR are starting up nowadays in comparison with other, especially Western, countries. Caring for staff is one main principle of operating for western companies. This is determined at the time when businesses start. But such an attitude is reached through the time and effort of special unions and organizations. A similar attitude for socially responsible companies doesn’t exist in Georgia. There are several big companies including banks that are socially responsible regarding their staff. This means that companies have adequate working hours, involve their staff and employees’ family members in different programmes including insurance programmes.

Q. How can companies in Georgia benefit from social responsibility projects?

A. Through strategic social investments. Eurasia Partnership Foundation is oriented exactly on the development of such investments. This significantly differs from charity. Businesses often give to charity and this is included in companies’ marketing plans. Charity makes companies more popular and attracts more customers. But this is short-term and the results don’t last for long. More developed countries and companies tend to do strategic social investments more than charity. ‘Strategic’ means that the investments are long-term. They help society with their knowledge and experience. They try to increase community involvement in their activities. This is an investment for the company and not charity. Businesses help the community and as a result the community helps the business.

There is one good article in the Georgian legislation in terms of social activities and charity. After paying all taxes, if the company spends eight percent of the whole profit on social projects and charity, this eight percent isn’t taxed.

Q. Do you think that companies in the same sector (law, consultancy, mining etc) which compete in the marketplace should cooperate together more in matters of social and environmental need?

A. Of course, this would be very good and this is the way that western companies act, but in Georgia the reality is different. The legislation and labour rights don’t support CSR development in this direction. The law somehow limits companies to unite to lobby one idea. The EU is always urging Georgia to do this. On the other hand, Georgian society historically isn’t used to working together for one objective.

Q. How does CSR affect companies’ financial success and in general can responsible business prevent recession?

A. There is a financial crisis in the world and it is thought that less social investments should be implemented. Some entrepreneurs think that the market is shrinking and they have to spend money wiser. But big businesses are not reducing social investments. Vice versa, social projects prevent entrepreneurs from experiencing the financial crisis. Stopping the market from shrinking isn’t a major factor against the crisis. Raising risks are dangerous as well and social projects help them to decrease the rate of risk.

I can give an example of this. A company wants to build a hotel in a mountainous region of Georgia, which is a very prospective place but the population of the region isn’t sociable. So the company has to win over the loyalty of the people. They will definitely have to employ some people, so increasing their knowledge will be a strategic step from the company. Tourists would like to buy traditional handicrafts. Investing in the production of handicrafts will be profitable both for the company and the community as well. Such factors importantly reduce risk factors including financial ones.

Q. Do you think that companies should invite representatives of international NGOs to provide a more informed understanding of corporate responsibility?

A. Demand for trainings isn’t high. We started conducting trainings four years ago and tried to create demand for training. We wanted to make people involved in such activities. As there won’t be demand until there is no knowledge. Representatives of international NGOs would be great, of course.

For the first time, we invited successful businessmen from international companies to share their experience with Georgian companies. Later we invited consultants to conduct trainings for the CEOs and managers of companies. These activities caused huge interest and the situation somehow started improving. But then the Georgian-Russian war happened and the priorities of companies and the Government totally changed.

Q. What actions should companies take to protect the environment, reduce climate change and prepare for a low carbon economy?

A. Environment protecting problems are very active nowadays. But this results from the hard work and efforts of environment protecting NGOs. They started operating in their home countries and later became international ones. Their intensive lobbying of protecting the environment has resulted in agreements and responsibilities taken by the states. This means that some regulations will start operating in the country. So business has to obey these regulations.

The situation is very poor in terms of regulations in Georgia as well. Regulations are very few and weak, therefore almost no one implements environment protecting projects. There are several quite strong NGOs operating in this field, but they aren’t strong enough to give some directions to entrepreneurs in terms of protecting the environment. In such situations businesses are thinking only about themselves.

Q. Reporting is one of the main principles of socially responsible business. Though very few companies in Georgia make public their financial information. In your view what can encourage companies to start making pubic reports?

A. As far as we know there is only one company, BP, which annually reports their financial data. This is a really important part of being socially responsible. We conducted training on how to prepare a report. We invited representatives from the company which established international standards on how to prepare the report. But interest was very low.

Q. Do you think the CSR message is only being heard and acted upon by large companies? Why should small and medium businesses implement CSR activities?

A. Small and medium companies are more socially responsible than big ones. Comersant has prepared a list of the top companies in terms of CSR activities and small companies led the list.

Social entrepreneurship is the best developed social business. Such companies are established on the idea of being socially responsible, they have a big profit and then reinvest the money in the social mission. In general such entrepreneurships are small or medium sized ones.

Social businesses hold quite a large share in the whole economy of countries. As far as I know socially responsible businesses bring two percent to the economy of the UK and seven percent to that of Spain.

In general all businesses regardless of their size have to be socially responsible. They have to look at social responsibility as an investment and not a waste. This is long-term, reduces the risks and broadens the market.

(The FINANCIAL report)



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