Conference: Corporate Social Responsibility and Local Development (Trento – Italy)

Conference: Corporate Social Responsibility and Local Development (Trento - Italy)

In most OECD countries, corporate social responsibility (CSR) is perceived as a new way for businesses to contribute to societal goals. Increasingly, a company’s commitment to sound labour and environmental practices and good community relations plays an important role not only in how it is perceived by the public but also in increasing workers’ satisfaction and sense of belonging to the company. Companies engaged in CSR strategies have also a role in contributing to local development and can become an important stakeholder and partners for local authorities.

In non OECD member countries, the notion and practices of CSR are emerging and developing. In Russia, over the last several years, the concept of corporate social responsibility, first introduced by the Russian affiliates of international corporations, has spread out and is being  adopted by the business community.

the congress of the Russian Union of Industrialists and Entrepreneurs endorsed a Social Charter which defined the social mission of Russian businesses as sustainable development of independent and responsible companies, which meet the long term economic interest of business and that guarantee the social stability, safety and prosperity of citizens, environmental protection and the observance of human rights.  An enterprise adhering to the Charter assumes responsibility for the quality of its services, compliance with labour rights and business ethics values, respecting the tax discipline, and minimizing the adverse environmental impacts.

Evidence shows that, in Russia, so far, there is little public opinion pressure on companies to follow ethical standards. In the same time there are several factors, all related to company’s bottom line, that push companies to pay attention to CSR.  A CSR strategy in place becomes important when Russian companies go international and seek to acquire assets in Western countries or to raise capital on international financial markets which exposes them to international competition and in depth examination. Whether or not a company upholds social and environmental standards can be important criteria in this context and can impact on the cost of capital and the risk premium.  This was primarily the case of Russian companies in the extractive industries, but others follow the same pattern.

The other factor that stimulates companies’ adherence to CSR principles is the on-going decentralisation and municipal government reform in Russia.  the funding of government programmes has been decentralised to regional and local governments. However, the ability of the latter to fund these new obligations through additional taxation has been limited.  In this context, local governments increasingly solicit large companies operating in their localities to compensate for these budget deficits and take over the delivery of some services.  This is particularly the case for companies present in depressed regions where they are often seen as the main resource for funding social and economic development programmes. By clearly and proactively defining company’s responsibility and contribution to local development agenda, a CSR strategy helps streamline the relationship with local administrations and play a positive role while ensuring profitability.