In order to survive, companies need to remain responsible
Deepening financial crisis should not derail corporate social responsibility
News this week remains gloomy as the global economy heads toward a protracted recession. Just as corporate social responsibility was making strong headway in Ukraine, corporations and non-profit organizations alike are asking the same question: How can companies continue to embrace a strategy of giving back and being responsible while the economy tumbles?Indeed, when the dot.com sector collapsed earlier this decade, corporations and foundations had to tighten their belts. This earlier economic downturn badly affected non-governmental organizations across the U.S. and Europe, even though the corporate social responsibility movement there was more advanced than in emerging economies like Ukraine.If the Ukrainian economy falters, how will foundations and non-governmental organizations survive? How will they sustain their missions, especially considering that private donations and contributions from businesses account for more than 70 percent of NGO income in Ukraine?This figure, according to the Ukrainian Independent Center for Political Research, is more than six times higher than the share of private contributions to NGOs in the United Kingdom and more than twice as large as the seven other European countries examined in the study. At a time when international aid agencies are shifting their priorities from Eastern Europe to the Middle East, Africa and economic bailouts at home, how will Ukraine’s budding NGO sector survive the pending economic downturn?In response to these questions, I would like to offer a few thoughts. First of all, companies and NGOs must understand that corporate social responsibility is no longer a luxury; it is an essential component of a thoughtful business strategy. At a time when customers and investors will be demanding increasing transparency and responsibility from corporations, it would be a critical mistake for corporations to eliminate their corporate social responsibility programs.
On the contrary, in order to survive an economic downturn, I would argue that corporations will need to sustain their efforts to ensure social responsibility. These efforts must include a commitment to good governance and financial transparency, a commitment to protect and educate their work forces, a commitment to protect the environment, and a commitment to strengthen the communities in which they work.It goes without saying that an economic downturn will mean tighter budgets and fewer resources for corporate social responsibility activities. However, non-monetary community engagement, such as volunteer programs, board participation and education partnerships can make a modest corporate social responsibility budget go even further. And by engaging staff, businesses can ensure that corporate social responsibility becomes a part of their corporate culture, rather than just a token gesture.
The bottom line is that we are entering a critical time in Ukraine, and corporations, governments and communities need to find ways to continue supporting each other, working together to solve local challenges, and jointly investing in a stable society. If business and communities abandon these efforts, recent momentum will be lost, NGOs will fail, and the economic strain will be exacerbated for everyone. Secondly, it will be increasingly important for the national government to play a bigger role in supporting the non-profit sector. The corollary to the data I mention above is that, of 10 countries studied, the governments of Ukraine and Russia allocate far less funding to the NGO sector as a percentage of total NGO income (2 percent and 1 percent respectively).No other country in the study contributed less than 20 percent of total allocations to the NGO sector.This policy seems shortsighted, considering how important the NGO sector is to the economies of developed countries. In the U.S. in recent years, the non-profit sector, including NGOs, has accounted for about 10 percent of all economic activity – nearly $1 trillion per year – and has been responsible for growing employment and growing wages.
The non-profit sector, which receives funding support from the government, corporations, foundations and individual donors, provides critical programs, including environmental, education, health, culture and other community services that the government either cannot provide or cannot efficiently deliver. This suggests that by joining the corporate sector in supporting NGO-provided services, the government could actually stimulate communities, create jobs and provide services more cost-effectively than it is able to do on its own.
In order to survive a sustained recession, companies, communities and the government must work together. Although companies may not be able to sustain the same levels of corporate social responsibility spending in an economic downturn, it is critical for them to retain a healthy commitment to a corporate social responsibility strategy that includes community engagement. At the same time, NGOs, companies and communities must work together to continue building models of effective community service – the same kinds of models so many NGOs across the country have been building during the past 15 years.
And finally, the national government must pass legislation and establish a commitment and transparent mechanism for contracting social and community services to the NGOs of Ukraine.
Andrew Wilson is president of the East Europe Foundation, a Kyiv-based international charitable foundation that runs social, community and economic development programs. East Europe Foundation is a member of the Eurasia Foundation Network.
