CSR isn’t short for charity.
Rather, experts say, corporate social responsibility goes well beyond charity, and represents a commitment by a company to contribute to the development of society, care for the environment and respect for employee rights.
While for modern companies CSR policies are viewed as part of a smart business strategy, a lot of businesses in Ukraine have yet to put any such policies in place. And following the economic turbulence produced by revolution, Russia’s 2014 annexation of Crimea and its war in the eastern Donbas, CSR has slipped to the bottom of the agenda for many local companies hoping to survive.
But that could change soon.
Ukraine’s ongoing integration into European markets, which commenced with the full launch of the Ukraine-European Union free trade agreement on Sept. 1, and which involves Ukrainian companies adopting EU standards, could finally bring the concept of CSR to many Ukrainian companies, according to Alla Zinchenko, an expert from the Center of Corporate Social Responsivity.
“There is no other way – we have time-sensitive ecological and economic issues, and Ukraine is moving towards the European Union,” Zinchenko said.
Contributors
Every year, Zinchenko and her team, together with big-four professional services company EY, pick out the companies that have contributed to the society in health care, education, climate change, sustainable consumption, gender equality and many other areas. They are typically big Ukrainian companies, like the Galnaftogaz chain of the gas stations, delivery company Nova Poshta, or the local branch of French retailer Auchan.
“Companies understand that 50-60 percent of their reputations depend on social responsibility,” she said.
One initiative Zinchenko’s team selected in 2016 was a joint project by electronics company Lenovo and Tabletochki, a charity fund for children with blood cancer, who cooperated to supply patients with medications.
Lenovo donated Hr 50 from every laptop, tablet and PC it sold over two months, and thus raised around Hr 1.8 million ($66,670) for medication for kids with cancer. The company also donated two laptops and four tablets for the use of patients in the Okhmatdyt children’s hospital. Using the devices, the young patients have been keeping up with their schoolwork by studying remotely with volunteer teachers, according to Tabletochki co-founder Iryna Lytovchenko.
Though such initiatives might be costly at first, they can be very valuable in boosting a company’s image, Zinchenko said.
Shaping image
Companies also shape their images by issuing non-financial reports on the policies and initiatives they implement to make a positive impact on the community. International and local companies also issue such reports to burnish their images ahead of attracting new investment.
But with the country still struggling against Russia’s war in the east, many Ukrainian companies have little time for CSR, and are simply “fighting for survival,” Zinchenko said.
In fact, in terms of CSR, Ukraine is basically where Western Europe was in the late 1970s, said Henning Drager, the director of the International Integrated Reporting Council, and sustainability and CSR partner at audit firm BDO Ukraine.
He said only around 20-30 Ukrainian companies give any indications on their websites that they give anything back to the community, or pursue any social initiatives.
“It simply not the done thing,” Drager said.
The prevailing perception among Ukrainian companies is that CSR is costly, and is a luxury in a time of financial turbulence and war. But the hidden return, Drager said, “is that it really demonstrates that you are here to make a difference… rather than just here to generate money.”
Apart from BDO Ukraine, Drager has seen only one company integrate non-financial performance reports into its financial statement – state oil and gas company Naftogaz.
In its 2016 report, Naftogas added a chapter on personnel, health and safety, local community development, energy efficiency, and environmental protection. The company says it is implementing the United Nation Global Compact, an initiative that encourages businesses to adopt sustainable policies. The company also allocated Hr 44 million ($1.6 million) to the development of infrastructure, supplied clothing and protective equipment to soldiers, and donated medical equipment.
Optional reports
The European Union, meanwhile, has approved a mandatory directive for companies with over 500 employees to issue a report on their contributions to society. Non-financial statements will have to be included in their annual reports from 2018.
In the reports, businesses will have to publish reports on their policies for environmental protection, social responsibility and treatment of employees, respect for human rights, anti-corruption and bribery, and management diversity. According to the statement from European Commission, the directive will apply to 6,000 large firms across the EU.
“But that is something that we in Ukraine, because of our situation, are far from doing,” Drager said.
However, Drager said he was against following the EU’s lead and making it obligatory for Ukrainian companies to issue similar reports.
Instead, the government should simply encourage Ukrainian businesses to incorporate CSR into their business models, he said.
