Corporate Social Responsibility (CSR) recently become a buzzword among Ukraine's business community. While CSR-related activities in Ukraine can be traced back several decades, the terminology and systemisation of the process is relatively new in the country.
A study undertaken by the United Nations in 2005 on CSR in Ukraine as a precursor to the launch of the Global Compact (see page 15 for more details) was one of the first
comprehensive studies of the status of CSR in Ukraine.
Conducted throughout the country with a sample group of businesses ranging from the large to the small, the study revealed that 78.1% of respondent companies had heard of CSR. The geographical location of companies had a significant impact awareness levels - in Kyiv 90.7% of companies had heard of CSR, while in Donetsk and Lviv the figure was just over 60%.
UN study reveals employers’ views
The research also revealed how CSR was understood in Ukraine from the employer's perspective. Some 65.5% of companies polled believed CSR meant taking measures to improve the working conditions of employees, 63.2% believed it was about staff development and training, 56% said CSR was about charitable contributions to the community and 49.5% believed CSR meant the ethical treatment of customers.
"The accent on social programmes directed on employees can be considered a peculiarity of CSR involvement in Ukraine," the UN’s report on the study said.
According to the UN’s research, Ukrainian companies are more inclined to hold the view that social problems are the responsibility of the state. 48.8% of companies agreed that "solving social problems is a state function and businesses only have to provide stakeholders with profits and pay taxes." Also notable was that these views were held by many companies regardless of size.
While 32.7% of firms questioned believed to a certain extent that businesses should play a part in solving social and ecological problems, of those only 11.8% strongly agreed.
A more recent survey, this time of the general population, was undertaken by the major telecoms provider Ukraine Mobile Communication (UMC). Also covering a wide sample of the population from around the country, the results were very different to the perceptions of businesses two years ago.
Asked what they defined as aspects of CSR, 83.5% of respondents said it was "the responsibility of companies to society and consumers in social, economical and ecological spheres." Some 78.7% said CSR included the responsibility of companies towards their employees, 61.9% believed it involved following state legislation and 48.7% thought the responsibility of employees to offer quality and conscientious work was also an aspect
of CSR.
On which activities were considered as CSR, 47.7% of respondents cited charity, 32.1% said social programmes, 29.6% chose the provision of decent working conditions for staff, 18.4% the sponsorship of major events and TV programmes and 12.9% caring for the environment.
More than just charity
Although the UMC study showed that many perceived CSR to be first and foremost about charitable giving, it encapsulates a lot more. Rather than just acts of generosity, both the UN and the companies which practise CSR see it as encompassing their overall behaviour towards employees, customers, government and society as a whole.
Companies engaged in CSR say it also makes good business sense. Viktor Voronenko of the Russian-British oil firm TNK BP, says the pursuit of profit and benefiting the public at large are not mutually exclusive. "Good marketing is one thing, but we are also interested in doing good. Helping [the public] also helps business. When people live well it is an opportunity for us to develop."
CSR as a sound investment
Zhanna Revnova, Head of Corporate Affairs at leading mobile telecoms provider Kyivstar says: "For any business as well as any individual, there are both emotional and rational arguments over whether or not to do something. Emotionally, we are focused on CSR because we are a national operator and this is our home. But there is also a rational side, which is the stability and confidence of our business. The more people there are living in a civilised and harmonic environment, the better it is for our business. The future for us isn’t just 10 or 20 years ahead but 100 years. We want a stable business in a stable country, so CSR is an investment."
Alina Sigda, Project Coordinator at cable internet provider VOLIA, says CSR is at the core of the company's strategy. "To follow these principles means stability and reliability for the company. It also shows to our customers that we have long-term prospects and plans, not just for one day," she says.
Martin Nunn, Managing Director of the Ukrainian office of PR company White’s International and an active member of the worldwide charitable network the Lions Club, says that CSR activities are set to grow even further. "Companies are realising that old PR techniques are not working and they now want to demonstrate to their staff and shareholders that they are good corporate citizens and that they are nice people. Competition is growing, companies want to differentiate themselves and they are fighting to gain trust and credibility."
Indeed, there is evidence that CSR activities have a connection to competition. According to the UMC survey, the three companies most associated with CSR in Ukraine are UMC itself and its two main competitors, Kyivstar and the other leading mobile operator Astelit.
All three companies are engaged heavily in CSR activities which some believe reflects on their battle for market share. "The mobile operators are competing to be leaders in CSR," says Larysa Magduk, former coordinator of the Canadian Fund for Local Initiatives at the Canadian Embassy.
Kyivstar’s Revnova however says this view is overly cynical. "I don’t think competition in CSR really exists because Ukraine is young and developing and there are so many other issues large companies have to pay attention to."
Marina Starodubska, Chairman of the European Business Association’s CSR committee, offers a more balanced view. "The interest in CSR is driven by economic growth. Many businesses are evolving from small to medium, others from medium to large and larger ones are restructuring their assets. Many companies are looking for international investors and international standards demand CSR as an aspect of corporate governance."
The challenges for CSR in Ukraine
One brake on the development of CSR in Ukraine cited by the business community is the lack of government support such as tax incentives for CSR activities and charitable donations. Sigda at VOLIA says companies in Ukraine don’t feel rewarded or stimulated by the government when they implement CSR principles. "No government programmes have been developed in this direction and tax conditions have to be improved as well. Today, business can use only 5% of their income for charity or social activities without paying VAT. For most businesses this law completely impedes the development of social projects."
Another major challenge is the need to spread more understanding of CSR. Sigda says: "Attitudes range from scepticism to indifference. For the businesses that understand why they are doing it, CSR today is about building trusting relationship between business and community. People have to understand what it brings to the community and how it can influence their lives."
