Philanthropy, donations, voluntary programs, sponsorships for recitals and fundraising events, aid to slums, scholarships for poor students — these are some of the thousands of developments that illustrate the growing interest of companies in Corporate Social Responsibility (CSR). The reasons for this growing phenomenon are rooted in the needs that companies have for improving their ties with various stakeholders. CSR initiatives are a way to advertise to the community; meet the demands of their investors, and respond to the need for greater media exposure. Although this trend is taking place around the entire world, there is much room for improvement in the way it has progressed in Latin America.
“It is a process that has been continuously taking place over the last 10 years or so,” explains Gabriel Berger, director of the Social Responsibility Program at the University of San Andres in Argentina. This process, says Berger, “has its roots in the decisions of companies to improve their social role and gain greater media exposure now that the NGOs [non-governmental organizations] have improved their ability to form alliances with companies. While it is a phenomenon that takes place on a regional and international level, it also has an impact on the local level.”
Patricia Debeljuh, a research professor at the Center of Advanced Studies at UADE, the Argentine business school, believes that the importance of social responsibility has grown because “in one way or another, companies are more and more aware of the close relationship they have with society. Governmental paternalism has failed, and the business sector plays a central role in the expectations of civil society, which has started to demand greater participation and social commitment from companies. The company is no longer a closed system preoccupied only with generating profits. It has become an open system, much more influenced by social needs and requirements.”
According to Debeljuh, when a company is truly socially responsible, it carries out a profitable business while also addressing the various ways in which it has an environmental, social and economic impact.
For Berger, a company that is committed to social responsibility also tries to satisfy all of the demands of its stakeholders — every party involved with the company, including shareholders, customers, employees, government, unions, suppliers and so forth. Natalia Zimmermann, who is responsible for institutional relations at TUV Rhineland Argentina, an internationally certified international management firm, argues that “When behavior is responsive to the various sectors that are related to management, that leads to added value that increases productivity, improves customer retention, reduces the risk of lawsuits, and offers bigger and better opportunities to operate in any market.”
Alan Gegenschatz, president and general manager of TNT Express, says that “because of the growing demands in the markets in which they operate, and the demands of their shareholders, multinationals face more and more pressure to be responsible for their operations in the various countries where they operate. While Latin America has most of the environmental resources on this planet, it suffers from great inequality in the distribution of wealth, leading to significantly high rates of poverty and unemployment. As a result, the companies that we operate on this continent must adapt their CSR policies to the prevailing needs of these countries.” TNT Express employs more than 160,000 people in 200 different countries.
Under a Magnifying Glass
According to the Survey of Corporate Social Responsibility carried out in 2005 by UDESA among the 153 largest firms in Argentina, most of those companies have contributed either cash or kind to NGOs. Meanwhile, 25% of those companies have established corporate foundations (up from 20% of companies in 1997). When it comes to initiatives carried out by companies, the main activities are basic education (78%), social action and poverty programs (62%), healthcare (56%), and childhood development (51%).
Berger notes that “CSR has been growing not only in Argentina, but also in Brazil, Chile, Mexico and Colombia. Unlike Argentina, in the rest of the region important corporate organizations have been created. In Argentina, there are no business organizations that work exclusively in CSR; there are only non-profit organizations. On the international level, the phenomenon has grown under the leadership of multinational corporations, which are responding to consumers’ expectations, to pressure by NGOs that monitor those companies and to moves made by investors.”
In Brazil, for example, the Ethos Institute has played an active role in promoting CSR ever since 1998. One of its most recent initiatives has been the establishment of the Index of Business Responsibility at the Stock Market in São Paulo. Shares of 28 companies serve as a benchmark for socially responsible investments.
Berger believes that this is not an area where Argentine executives have taken a leading role. That’s because of their more limited vision about their role as business and social leaders. “Business leaders do not assume a leadership role in social responsibility or in the involvement of companies in committing to promote something at a sectoral level,” says Berger.
In other continents, notes Debeljuh, a commitment to CSR “is more deeply rooted among all stakeholders in the organization. There is more awareness that you have to adapt all your CSR moves to the core business of the company. This is the way to involve all your employees, customers and suppliers. In Europe, for example, a logo identifies the products of companies that are committed to this approach. When it comes time for consumers to choose a product, they can identify those companies that are truly committed, and support them, starting with their purchasing decision.
Brazil, an Outstanding Place for Certification
SA 8000 is currently the only global standard for “measuring” or “regulating” the degree to which a company meets CSR norms. This standard was created by Social Accountability International (SAI), a non-profit organization based on the Universal Declaration of Human Rights, on the United Nations Convention on the Rights of the Child, and on 11 conventions of the International Labor Organization.
Brazil ranks fourth in the world when it comes to the number of SA 8000 certificates; it has a total of about 100 certified companies. Nevertheless, notes Zimmerman, “the rest of the countries in our region are still far behind when it comes to quantity. Argentina ranks 18th among the 33 countries registered with SAI, with only five certified companies. Bolivia is the third and last South American country where there are any registrations; it occupies the 22nd position, with only four certified companies.”
With its broad definition of CSR, SA 8000 takes into account relationships between the organization, the workers and the community, as well as the way the company manages the environment.
TNT has obtained the Investors in People certificate on a local and global level, one of the most prestigious certificates when it comes to Human Resources. TNT’s Gegenschatz says that “In Latin America, the idea of social responsibility is here to stay. What remains ahead is the difficult task of growing, and fixing specific goals for the short, medium and long term, so that we can put into practice the ideas and theoretical concepts that already exist. One of the great challenges and opportunities ahead will be to educate the consumer so that he will use his purchasing power to demand that companies make commitments to CSR. On the regional level, Brazil has a considerable advantage because its companies are better organized and more articulate, which enables them to do a better job of focusing their programs.”
The Role of Large and Small Companies
Berger is confident that in Argentina and the rest of the region, “there will be progress incorporating CSR in corporate board rooms, and making it a management model. Companies will also increase their social reporting as part of their efforts at public commitment. All of these advances can be applied to any sort of company, including small and midsize companies that are closer to the communities in which they work.”
Debeljuh believes that “there is more and more awareness of the role that managers play in this process. In fact, IDEA’s [the Argentine Institute for Corporate Development] annual meeting, which recently brought together thousands of managers in Argentina, notes that social responsibility is on the agenda of every company, even though it practically did not exist 10 years ago. Seventy-three percent of executives surveyed confirmed that their companies have CSR policies.”
According to Zimmerman, “While it’s been the biggest companies that have been most interested in CSR until now, all companies will need to engage in socially responsible behavior in the near future. The SA 8000 norm will become an indispensable means for demonstrating that. There are a lot of advantages to this norm. Among them, we can mention improved relations with the community, which demonstrate commitment to sustainable development, as well as improved competitiveness and image.”
In an effort to strengthen future corporate initiatives, non-governmental organizations will also play an extremely important role when it comes to reaching out to people. “Through these organizations, we can articulate different programs, and produce a valuable exchange between the corporation and society. Alliances and networks are especially relevant because they are strengthened by the contributions that other people make. They lay the foundations of a society that is more equitable and caring for everyone,” says Debeljuh.
In fact, according to UDESA’s 2005 survey, NGOs have been the favorites when it comes to corporate collaboration. Some 93% of all companies have made donations in cash or kind to an NGO in 2004.
Nevertheless, the UDESA research project confirms “that social responsibility initiatives are becoming part of the corporate agenda, either as a topic of discussion, a challenge for management, or a component of the company’s business model. This fact creates a sustainable, permanent dialogue with related sectors and with sectors that are potentially affected by corporate behavior. At the same time, the data also shows that an enormous challenge lies ahead for Argentine business when it comes to making CSR a central component of corporate identity and a key to competitive strategy.”
Summing up, Debeljuh notes that “CSR programs become truly valuable when the commitment is internalized throughout the company and is sustained by specific long-term initiatives. There is no room for CSR programs if you look at a company as merely a business whose only goal is to optimize profits.”
Gegenschatz notes that his company, TNT, supports the United Nations’ World Food Programme through a long walk that it organizes, known as “Walk the World, Fight Hunger.” Gegenschatz concludes, “Like Stefan Schmidheiny [founder of the World Business Council for Sustainable Development, a proactive, industry-led environmental NGO] said, ‘There are no successful companies in failed societies.’ A company must be a participant in efforts to improve society, even if it is unable to replace the government, which has the role of being responsible for health, education, justice, security, and the environment.”