The FINANCIAL — CSR, also known as Corporate Social Responsibility is one of the most popular terms in modern business. Georgia is not an exception. Local companies are now using CSR as an integrated part of their brand, but few of them know what CSR really achieves. From 38 participant Georgian companies listed in the United Nations Global Compact, 15 companies are “Non-communicating” for failing to make an annual report by the relevant deadline.
R. Michael Cowgill, President of Georgian American University, Vice-president of AmCham and member of the Global Compact Steering Committee in Georgia says it is very difficult (think his actual quote was “like pulling teeth”) to get some companies do this voluntary reporting. In his interview with The FINANCIAL, Cowgill explains what the role of CSR is in businesses’ development and sustainability.
“CSR or Corporate Social Responsibility is made up of four levels – Economic, Legal, Ethical and Philanthropic,” said R. Michael Cowgill.
“The first part of being socially responsible is to be economic – be profitable. If you go out of business it hurts everybody: the owners, staff, people that supply you, and the clients. The next level is about being legal, being totally white. Then comes ethical, as what’s legal is not always the same as what’s ethical. And then when you master those, finally CSR is about being philanthropic, making charitable contributions,” Cowgill declared.
“I think you are right when you say that there is a complete lack of education in CSR, not necessarily for companies but for the general population. Most people think that CSR is just about what is given to charity. In that regard there are many companies which are doing a lot of charitable work. We do have a charitable, giving mentality here and this is ingrained in the culture, helping other people. But at Global Compact we are launching a new manual on CSR to help companies understand how they can participate in CSR aspects not just through charity,” said Cowgill.
ISO 26000 is the recognized international standard for CSR (currently a Draft International Standard). Public sector organizations (the United Nations for example) adhere to the triple bottom line (TBL). This international standard is not a management system standard. It is not intended or appropriate for certification purposes or regulatory or contractual use. As a guidance document the ISO 26000 is an offer, voluntary in use, and encourages organizations to discuss their social responsibility issues and possible actions with relevant stakeholders.
Q. How do CSR activities support and contribute to the business activities of companies?
A. The key issue that comes from within the company is that companies have these bottom line perspectives, so the companies that look at the CSR activities that can better enhance their brand, do it in a way that is PR and Marketing oriented. So a lot of activities come into the marketing and PR department.
It used to be thought that companies that were green, environmentally conscious, companies that were known for CSR did better than companies that were not. The good news is that they perform the same profitability wise as those companies that do not do it. So, if this does not hurt you in the bottom line and gives more back to society, then you should be doing it rather than not doing it. So I think that companies do understand that there are some potential advantages that come with it.
However, one of the difficulties from a PR and Marketing point of view is sometimes helping the disadvantaged without making the disadvantaged part of the campaign. Do not try to benefit from somebody else’s dire situation. That’s a difficult balance to keep. We are a very sceptical society on the whole; we assume that companies do things to get something back in return. So you have got to be very careful to not advertise someone’s disadvantaged situation. Make sure you help in a way that is discreet and that does not highlight or exploit the problems faced by for example IDPs, vulnerable children or orphans.
Q. How would you evaluate Georgian companies' attitude towards CSR activities in Georgia?
A. I think that nowadays Georgian companies consider economic profitability as well as legal operations. Since the Rose Revolution large focus has been put on how companies record and report their financial situation and anybody who starts a business now does it in a totally legal way.
The difficulty sometimes occurs with ethical aspects, doing what is right. There is a management triangle– with clients, staff and owners at the 3 points of the triangle. And in regards to this, what’s right and ethical is that companies (although not always as the same time) give equal priorities to staff, clients and owners. However in the past as even now, the bigger emphasis is put on owners, in making sure they get a return on their investment. Clients come second and staff way after that. So the companies have to start learning to make equal priorities of each, which will make the company more successful and better on the whole.
Q. Human rights, labor standards, environment and anti-corruption are outlined as the main issues of CSR by Global Compact. Could you kindly state and explain what the aims and directions are, and what these four principals involve?
A. Environmental issues often come way down on the list of priorities. The Ministry of Environment has a very difficult job to do not only here in Georgia but also in more developed countries. There are very few effective environmental programs supported by businesses. The environment is an area that as we cover more of the other priorities, it will finally start to become one. But it’s hard to say “I want to put more CSR efforts towards forests and trees” when there are still people going hungry.
Anti-corruption is a major campaign of the government at the moment whose results have been internationally recognized.
The labor standards are a very complex issue. When you step back and look, those standards can benefit both staff and owners. There should be a balance between them. Labor Code is an issue that businesses sometimes do not want to address as it always seems that more workers’ rights may result in decreased profit for the company. However, that’s not always the case. When staff members are happy they are more productive, so where is the balance? It’s not easy and it’s an issue that is still being addressed by AmCham and other business associations. Sometimes compromise is needed and that will happen only when the time is right.
Protection of Human Rights encompasses gender equality issues, abuse issues for women and children, poverty, and even education.. Although we are improving, gender equality is still an issue as there are very few companies which are run by women. Luckily child labor and abuse issues are very infrequent. However, the poverty issue is quite large and thankfully many donors are also helping in this area.
Q. Please list the activities the company should do within the framework of CSR? What are the main outlines of CSR?
A. If you are a public or private company with multiple owners, you still have to answer to the shareholders. In this context, it is difficult to determine which amount of the budget you should allocate to CSR activities.
One of the activities within the Global Compact was to evaluate the tax advantages of a company giving to charity and we feel that tax legislation is generally favorable in terms of that. We even went to the next level to find out the ways companies give to charity. We now have a full list of companies who are eligible (tax wise) to receive charitable contributions. Companies are allowed to allocate up to 8% of income (after deductible expenses) for charitable activities.
Q. How do CSR activities support in developing companies’ business objectives in Georgia?
A. One of the problems is that companies do not in general address CSR as a budget item. Now many have managed to put some of the budget toward charity. However, all of those things such as staff training, upgrade to legal software, etc are part of CSR. So, how would we address where and how directors should look at it in terms of budget standards?.
It probably needs to be institutionalized within the company, however, then the question arises – who will be in charge of this duty in the company? Is this an HR issue, PR and Marketing or a CEO issue? In reality in needs to go to the highest levels within the company so that it comes back down with the full weight and support of senior management. The problem is that it means relying on busy executives to be intimately involved with all this work.
Q. In your opinion, what are the expectations of the community regarding businesses as CSR companies?
A. Even 5 years ago businesses were largely distrusted. People believed that to have a successful business you had to have links with someone in the government and that you were only interested in making money and did not care about anything else. I believe this has gradually changed and there is an expectation from the community that we (the business community) should be doing things which are legal, right, ethical and if we make profit, to give some of the profit back. So, the expectations from the community have become more correctly aligned with this concept of CSR.
Q. Does CSR develop business or increase the number of a company’s customers?
A. As I mentioned earlier, generally companies that are known for CSR do not do any worse or better, so why not do it if you make the same profit but can help society at the same time. I think if it’s done correctly in a way that enhances your brand, enhances what people believe and how they trust you as a company, make them realize you are doing right the right things, then it will help your bottom line and attract customers. You will find many companies in Georgia which do that. However, remember you should be careful not to publicize other people’s misfortune.
Q. What is the main goal and mission of Global Compact Georgia? How does Global Compact and members of the organization contribute to CSR in their organizations?
A. In Global Compact we have 25 companies plus 10 NGO’s and associations.. Moreover, with the Secretariat role for Global Compact now part of AmCham, we are planning to actively expand the membership – and hopefully assist with the reporting function!. Just recently, Global Compact Georgia became a member of the entire European Global Compact Network which will increase our visibility and provide new and relevant ideas for improving our program.
There is a Steering Committee for Global Compact determines the priorities and activities on an annual basis – which is then is approved by the entire network at the Annual Meeting. Last year we focused on the tax advantages for contributions, and a manual on CSR (which will be launched very soon. The Steering Committee is meeting next week in advance of the Annual Meeting to determine the recommended priorities for 2011. Global Compact is at a very critical stage as the operations is now being moved from UNDP to AmCham and we must ensure that we keep up the the momentum that was generated last year and ensure not just the sustainability but the growth of this most important program.
Q. Give us your evaluation of the environment in Georgia? Are you satisfied with the condition of parks, roads, etc. What can be done in this regard?
A. The move by the Government to stop people from littering is fantastic. Similar programs have been very effective in other programs. It’s very important as people need to understand that they should not litter and must show more respect for their country
The country has some great parks. At Tbilisi Sea though I still see a lot of trash along the beaches, it will take a while before people really start to realize the harm they are causing stop doing it. Do I want clean air, water, and a trash free country? Absolutely! But we also have to understand the social needs and priorities facing us in Georgia. I think that as more of these other needs are met, there will be more of an emphasis on the environment.
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