Connect Learn Finance

MANAGEMENT

CSR, have we learned anything?

The practices of social corporate responsibility in the region are moving toward an integrated model of sustainability and viability. What corporations should do, and what they should not do, to design successful programs.

Share this article

Published by Latin Trade

The application of this broad concept has emerged not only through the imitation of practices in developed countries and imported by multinationals, but also because there is a greater entrepreneurial and social awareness on the importance and meaning of CSR. However, those consulted agreed that there is still much to do, mainly in terms of spreading current knowledge, coordinating efforts and measuring results.

From theory …

Academics and business people agree that the concept of CSR is tied to the achievement of corporate objectives, i.e., establishing good practices in economic, environmental, labor and human rights situations. Taken together, a common definition of CSR is one that covers all those issues pertinent for responsible business.

According to Luis Ulla, executive director of the Argentine Institute of Corporate Social Responsibility, CSR in the region is changing the attitudes of large corporations. They are not only adopting the new concepts of sustainability, but also forcing their suppliers, and in many cases their customers, to do the same. Ulla argues that the trend is partly a response to state regulations which are ever more demanding (for example, with respect to environmental stewardship), and also to the growing interest of consumers in acquiring goods and services provided by socially responsible companies.

Such is the level of awareness of the relevance of CSR that at Cemex the issue permeates the entire value chain, from the chief executive to the shop-floor worker. As Daniel Suárez, vice president of corporate relations of Cemex-Colombia, says: “CSR is ingrained in the DNA of the company.”

Orencio Vásquez, coordinator of the Spain-based Observatory of Corporate Social Responsibility, maintains that execution of the most comprehensive CSR policies arises equally from the need to adhere to the governing principles of the Oedc and the United Nations, and to their own agreements at the regional level, especially in Europe. In addition, execution is subject to the increasing scrutiny of multilateral money-lending agencies and credit rating institutions.

… to practice

Multilateral entities are not simply demanding more CSR policies, but assisting in the financing of new practices. Estrella Peinado-Vara, senior specialist at the Multilateral Investment Fund of the Inter-American Development Bank, explains that her group assures the compling with three basic criteria before granting financing to projects with a CSR impact: first, that they be environmentallycompatible; second, that they promote equality of income linked to the base of the pyramid; and third, that positively impact labor conditions.

As an example, Peinado-Vara mentions the regional initiative for comprehensive recycling that the agency is co-financing in five countries and today is benefiting the base of the industry’s social pyramid. The industry is comprised of small recycling companies that involve some 4 million people in the region. The project has the support of private enterprise as well as local governments and communities. The IDB’s fund is also supporting projects in Central America aimed at improving labor conditions in the sugar mills of Guatemala and El Salvador.

In general, the most successful cases with the most CSR impact are ones that integrate the largest number of people in the community in the companies’ operational areas of influence. In the case of Colombia, Margarita Salazar, assistant director of sustainable development for EPM, the municipal utilities of Medellín, notes that the company’s policy is based on productive chains and takes full account of its basis in the community.

Salazar highlights the work of sustainability and viability of the company on two fronts. On one hand, the company is providing universal services, facilitating the minimum consumption of electricity and water in the poorest communities, whether it be through prepaid cards or establishing consumption caps. On the other hand, EPM works in programs in which the community itself trains and, working as a contractor of EPM, installs the water and energy meters that the company uses.

In addition, EPM promotes a project with its suppliers, who face difficulties from linieros, the go-betweens in charge of the installation and extension of electricity lines. In this program, the company trains people from special interest groups who later contract with the suppliers. The training provided by the company ends with the delivery of a certificate that also is recognized by the Sena, the government office of labor training and learning. In some cases the certified linieros have joined together to provide their services to third parties.

In Colombia, too, Cemex has several CSR programs in place, oriented to compensate for the housing shortage in the poorest areas. One of them delivers materials in order to build, extend or improve the homes. They also provide training on how to do it. In another high-impact Cemex project, the company trains the communities in the manufacture of concrete blocks for construction of houses. The blocks may be used to build their homes or they can be sold, so that the resulting resources may be recycled into similar programs. Cemex also contracts technical staff from the regions in which it does business to provide engineering or architectural services for the company.

Because of the impact of its operations on the environment, the mining industry’s policies of sustainability are a constant focus of attention by authorities, academics and the general public. Chile is in the vanguard not only of the industry but also of the concept of CSR in the sector. One especially interesting perspective is that of Grupo Antofagasta Minerals, which manages some of the country’s largest mines of copper and other metals. Rafael Quiroga, manager of external affairs and previously general manager of Acción CSR, the main non-governmental organization of this type in Chile, confirms that the Chilean vision of CSR has generally evolved from the philanthropic to the sustainable and viable. The companies themselves operate and develop the projects.

While Antofagasta is said to be the leader in the use of environmentally friendly techniques for the use of water and energy, the company is implementing its CSR programs throughout the value chain of its operations. In general it seeks to benefit the suppliers, customers and communities, but it is also tackling the integration of women into the labor force. The company has proposed to increase the quota of women in its direct operations to more than 10 percent of the total number of employees. This represents a proportion of more than double the industry average.

Future challenges

Experts and entrepreneurs agree that Brazil is the region’s leader in terms of high-impact CSR practices. The Ethos institute is recognized as a pioneer on issues of sustainability and viability. In addition, Brazil has moved further into the vanguard with the Novo Mercado initiative, which is similar to the Dow Jones Sustainability Index in the United States.

Latin Trade spoke with a prominent executive of a multinational with operations in Brazil about the main challenges and obstacles that must be overcome to implement CSR. One of these challenges is to improve the suitability of many NGOs because they have a poor operational structure and make inefficient use of the resources received for developing projects. Similarly, the executive noted that while there is a growing awareness in the importance of the issue of corporate sustainability and viability, some companies still invest in projects that have nothing to do with their main business.

They only do so to take advantage of financial or reputational incentives, or simply because they feel obligated to do so if, for example, the law orders the relocation of houses in the face of construction of some megaproject. From this perspective, a primary exercise by the companies would be to undertake CSR practices that are directly related to their main business.

The Brazilian executive added that the other major challenge to achieving the highest impact is increased cooperation among businesses. Many companies currently adopt isolated programs to the benefit of just one community, missing out on synergies. The big challenge in this becomes choosing who will coordinate the actions of the different companies. The catalyst will probably come in the form of government action or independent companies such as consulting firms or NGOs that already have the required infrastructure.

However, in addition to company-to-company dialog, there needs to be improved communication among companies, governments and communities, for example in coordinating the development plans for local and regional development. These kinds of collective initiatives have barely begun. Among those that should be highlighted is Rio Sustentável, which involves more than a dozen influential Brazilian companies in the city of Rio de Janeiro. Another is “Creo Antofagasta,” which was planned to benefit the sub-region of the same name in Chile.

Quiroga notes that the Antofagasa initiative, as well as the nascent cooperation among companies to coordinate, for example, the dates on which they hold cultural programs in the mining regions, is a clear example of the advantages of and the need for listening to all the stakeholders, instead of making CSR decisions from behind desks.

Quiroga adds that another challenge that must be overcome is the elimination of fiscal obstacles to CSR investments. Chile has already done so, but the principle could be extended to other countries. In Chile these initiatives are considered to be expenses unrelated to business. That squares with the overall vision of the theme as a concept and in practice.

Peinado-Vara says that the government’s role in promoting CSR should be broad. It needs to construct the framework within which companies can do business. For Suárez, the issue is not standards, but rather what the companies can achieve on their own, knowing that the issue is crucial to their very survival. Ulla thinks it is difficult for a government to punish or reward the behavior of companies if the State itself does not follow responsible and measurable practices in sustainability and viability.

Most of those consulted by Latin Trade mentioned another key challenge — the need to publicize the scope of high-impact CSR programs. They add that they are not talking about corporate secrets, but policies of common benefit.

Certainly, for Vásquez the important issue is not to publicize what has been achieved, but how. Ulla invites companies to spend less in communication campaigns publicizing what they are doing in CSR, but to share with their peers what they have learned throughout the process. In addition, experts add that their efforts to inform people about CSR issues must be far-reaching enough that they can resist times of companies’ financial weakness or cycles of economic recession during which companies might choose to cut back their publicity programs.

Although there are initiatives to establish common management indicators, most of those interviewed agree on the need to define acceptable parameters for the measurement and verification of the achievements reported by companies in terms of CSR.

For the Brazilian executive, who preferred to speak on condition of anonymity, it is not only about proving the achievements, because what is lacking is an evaluation among shareholders and beneficiaries, if in reality the former agree to implement them and the latter to acknowledge the value of their scope.

Vásquez insists strongly on verifying the achievements, though taking into account that there are barriers that make access to information difficult or do not permit outsiders to verify the truth. Vásquez also emphasizes as a recent milestone in terms of measurement the existence of the ISO 26000 Standard, which clarifies the contents of CSR policies, although he underlines that this is not yet a certifiable standard, which limits its scope.

Finally, another challenge no less important is that of how to face the competition of businesses that come from countries such as China, which make products based on CSR practices different from those of Europe and the Americas, primarily in terms of labor rights. On this issue, Vásquez recalls that the first forum of human rights and the corporation, held in Geneva last December, emphasized the importance of taking into account human rights, not only for labor but also for economic, social and cultural issues. The important issue important received the attention of an audience of 900 from 85 countries. Are new changes about to emerge?

David Ramírez reported from Miami.

Share this article

{{'LOADING_COMMENTS' | translate}}...
{{'NO_COMMENTS_YET' | translate}}
{{'TO_POST_A_COMMENT' | translate}}

Other users also viewed


Loading...
Sign In to ConnectAmericas
Forgot your password?
Don't have an account? Register here
Enter the e-mail you used when you registered
for ConnectAmericas to create
a new password