MASTER’S DEGREE IN STATE MANAGEMENT AND
HUMANITARIAN AFFAIRS
University of Sarajevo – University of Belgrade – La Sapienza University of
Rome
CORPORATE SOCIAL RESPONSIBILITY:
- Leading aspects of CSR concept in Bosnia and Herzegovina -
BY
EMIRA MEŠANOVIĆ
SUPERVISOR: Prof. Dr. MURIS ČIČIĆ
SARAJEVO, BOSNIA AND HERZEGOVINA
September 15th, 2005
82 pages
TABLE OF CONTENTS
1
INTRODUCTION
5
2
CORPORATE SOCIAL RESPONSIBILITY
8
2.1
2.2
2.3
3
PRACTICAL ASPECTS OF CSR
CURRENT TRENDS AND DEBATES ON CSR
FACTS AND HIGHLIGHTS
CORPORATE SOCIAL RESPONSIBILITY IN BOSNIA AND HERZEGOVINA
4.1
4.2
4.3
5
8
10
15
CONTEMPORARY VIEW ON CORPORATE SOCIAL RESPONSIBILITY
3.1
3.2
3.3
4
CSR DEFINITION
CSR ORIGIN AND DEVELOPMENT
CSR INITIATIVES AND INSTITUTIONS
CSR OVERVIEW
CSR INITIATIVES
POLICIES AND LEGISLATION
20
25
30
32
32
40
48
EMPIRICAL ANALYSIS
5.1
5.2
20
51
CASE STUDY
BASIC CUSTOMER ATTITUDE SURVEY
51
56
6
CONCLUSION
66
7
BIBLIOGRAPHY
72
8
ANNEXES
79
2
“I believe that every right implies a responsibility; every opportunity an obligation;
every possession a duty” (John D Rockefeller)
Acknowledgments
I would like to express gratitude and appreciation to Prof. Dr. Muris Čičić for
enormous help and support, and to Ms. Nejra Čengić for technical and organizational lead.
3
Abbreviations
CEO - chief executive officer
CPCD - Centre for Promotion of Civil Society
CSO - civil society organizations
CSR - corporate social responsibility
EC - European Commission
EU - European Union
GC - Global Compact
GEMI - Global Environmental Management Initiative
GMO - genetically modified organism
IBEI - The International Business Ethics Institute
ILO - International Labor Organization
IRC - International Rescue Committee
ISEAL - Environmental Accreditation and Labeling
ISO - International Standard Organization
NGO - nongovernmental organization
OECD - Organization of Economic Cooperation and Development
SAI - Social Accountability International
SMEs - small and medium enterprises
UNDP - United Nations Development Program
WBI - The World Bank Institute
4
1
Introduction
This paper is founded on two objectives. The first one is an applied aim that is trying to
find a solution for development of corporate social responsibility framework in BiH. The
second objective is theoretical. It focuses on the concept of CSR in general, its impact and
meaning for society.
The companies' increased power also leads to increased responsibility and higher
demands from the society. According to the Hilton and Gibbons, there are established myths
about companies that they are no longer presented as opinions but assumed to be fact 1. Those
myths are related to: poverty and equality, human rights, sweatshops and child labor, cultural
imperialism, and two misconceptions like “profit is bad” and “every company wants to rule
the world”. Two mentioned authors attempt to highlight positive features of companies’
mentality, in general referring to capitalism as something “good”, and to provide arguments to
oppose 6 myths to be violated or performed by companies. Even with that, it is more likely to
find arguments supporting correlation between corporate business’ performance and
mentioned myths. For instance, there is a whole doctrine in “When Corporations Rule the
World”2 unfolding companies’ effect on poverty fortification, violation of human rights, badmannered exploitation of work force, negative economic growth and trade expansion, and
many other features of “globalization” or “illness of modern society”. Moreover, the book
portrays corporations’ intentions to misuse positive causes with aim to masquerade their true
purpose.
In today’s society it is very trendy to speak of non-governmental organizations
[NGOs] as being more businesslike and of private business as being more NGO/socially
oriented. There are thousands of trainings and programs, both for NGOs and private
businesses, which are dedicated to enforcement of different management practices aimed at
making these two sectors more publicly acceptable and socially sustainable3.
Corporate Social Responsibility is a new term, recently well-explored and differently
described by different groups of authors, or practitioners. In brief, corporate social
responsibility consists of ethical investment, community development, labor and environment
protection, and company’s internal ethical code. “Corporate social responsibility is a
1
Hilton, Steve and Giles Gibbons. Good Business: Your world needs you. London: TEXERE Publishing
Limited. 2002.
2
Korten C. David. When Corporations Rule the World. USA: Kumarian Press, Inc., 1995.
3
NGOs have to learn how to make income and insure sustainable activities, but corporations have to become
more sensitive to social problems. Not only external consultants play important role but also many companies
like NIKE, Coca-Cola, have their own, full-time employed, CSR manager or spokesperson etc.
5
commitment to improve community well-being through discretionary, business practices and
contribution of corporate resources. Corporate social initiatives are major activities
undertaken by a corporation to support social causes and to fulfill commitments to corporate
social responsibility”4. Quoting Hilton and Gibbons, they argue that “social responsibility will
become what fancy consultants sometimes describe as hygiene factor, a sine qua non, and a
basic requirement of doing business”5. Accordingly, CSR is added value to any company that
primarily contributes to performance management, and it should not be considered as luxury
that exclusively belongs to strong and multinational corporations.
In line with previous definitions, it is important to mention significant role of
government in fostering social justice and ensuring social development. Hence, we have to
avoid tendency to replace role of government with role of corporations. CSR is seen as extra
niche for companies in competitive market but also companies can incontestably complement
and supplement the efforts of governments at social development.
The overall goal of this paper is to asses the nature of Corporate Social Responsibility
(CSR), and in BiH context taking into account both customer and companies’ perspectives.
Research will explicitly relate to the meaning of CSR for customers when they take
decisions about specific products, and companies when they create their business performance
practices. In many ways it will be important to mention whether conditions for such concept
exist in BiH. Thus, the research will focus on the existing programs and initiatives that
support CSR by being implemented by different governmental, nongovernmental or
intergovernmental organizations.
Based on the available information of the situation in BiH related to CSR, the following
problems are defined to be addressed in this research:
A) Problem 1
Relationship between CSR activities in BiH and contemporary approach to CSR
Times gone by beginning of war in BiH illustrated that individual and corporate
donations and sponsorships by firms to sport clubs, cultural events, the disabled, and children
were common in BiH pre-war society. At present, it is difficult to find publicly released
record on companies’ community related activities including adequate information on
achievements and benefits. CSR stands for concept reaching far beyond sponsorship or
donation. It reflects upon performance management and stakeholders’ satisfaction. It will be
4
Kotler, Philip and Nancy Lee. Corporate Social Responsibility: Doing the most good for your business. New
Jersey: John Wiley & Sons, Inc. 2005.
5 Ibid, Hilton and Gibbons, p. 53 - 104
6
significant to asses whether companies in BiH perform activities linked to community
development by following modern CSR theory and whether such activities can be considered
as CSR in contemporary perspective. In addition, it will be beneficial to investigate on how
companies create positive relationship between CSR activities and their business.
B) Problem 2
Relationship between customers ‘purchasing habits and company’s CSR activities
Customers are perpetum mobile of CSR development and certain knowledgebase exist
in societies in which CSR is regularly performed. It will be significant to asses if there is
awareness or general knowledge on CSR amongst BiH customers. Consequently, it will be
interesting to asses whether mentioned knowledge influence customer’s behavior. The
question is whether customers build their purchasing habits based on company’s CSR
activities. Hence, analysis will dig deep into customers’ perception related to the fact that
CSR is concept driven by many different motives.
In line with previously defined problems two hypothesizes are set up:
A) Hypothesis 1
Taking into consideration problem 1 we hypothesize that companies in BiH are not
performing CSR strategies in advanced fashion. The reason can be the ignorance of
possibilities and benefits that CSR generates for business or lack of resources and knowledge
to implement such demanding strategies.
B) Hypothesis 2
Taking into consideration problem 2 we hypothesize that customers in BiH do not make
their choices when buying a product/service based on companies CSR record/strategy.
Methodology applied in this research includes Case Study Analysis and Basic Customer
Attitude Survey. Case study consists of selected company analysis. Selection of company has
been done based on public records on companies’ activities. Case study is formulated in a
way to asses company’ CSR strategy in terms of created benefits for society and for the
company itself. It put emphasis on CEO perception of benefits resulted from CSR activities.
Kotler’s and Lee’s of CSR efforts will be used as criteria for company’s’ preferences: cause
promotion, cause related marketing, corporate social marketing, corporate philanthropy,
community volunteering, and socially responsible business practices.
Basic Customer Attitude Survey focuses on measuring customer’s perception of CSR and
how important for customers is if company delivers in this manner. Questions will be
specifically targeting customers’ opinion on CSR meaning and to what extent it influences
their purchasing habits.
7
2
Corporate Social Responsibility
This chapter is devoted to the description of CSR history. It will touch upon the scope of
advocacy activities undertaken by different actors who contributed to CSR development.
Accordingly, it will comment on supremacy of employees’ or customers’ associations in the
process of making corporations more socially responsible. Different initiatives will be
portrayed based on their roles and responsibilities. The aim of this chapter is also to set
necessary terminology including CSR evolving definition with respect to cultural and societal
boundaries and specificities.
Key words related to this chapter are: CSR origin, social activism, CSR definition, CSR
initiatives, stakeholder vs. shareholder, CSR report.
2.1
CSR definition
Prior to the focus on CSR initiatives and its origin, it is important to recount CSR
definition. Definition has evolved through history. Used connotation mostly remained the
same, but different theorists try to re-formulate it in a way to follow theory, practice but also
sensitive cultural context. There is a wide-variety of definitions considering corporate social
responsibility which are dependent on perception of CSR in different societies across the
world. For instance, in Ghana CSR is defined as „capacity building for sustainable livelihoods
which respects cultural differences and finds business opportunities in building skills of
employees, the community and government“ and definition from Philippines „CSR is about
business giving back to society“.6 It is expecting that values and priorities for businesses are
vary from country to country. “Traditionally in the United States, CSR has been defined much
more in terms of a philanthropic model. Companies make profits, unhindered except by
fulfilling their duty to pay taxes. Then they donate a certain share of the profits to charitable
causes. It is seen as tainting the act for the company to receive any benefit from the giving.
The European model is much more focused on operating the core business in a socially
responsible way, complemented by investment in communities for solid business case
reasons”7. Therefore, some authors argue that society shape CSR definition and not
companies.
6
Holme, Richard and Phil Watts. "Making Good Business Sense" The World Business Council for Sustainable
Development. 2000, January. 2005. < www.wbcsd.org/includes/>
7 Ibid.
8
Definition set by the European Commission:
„CSR is a concept whereby companies integrate social and environmental concerns in
their business operations and in their interaction with their stakeholders on a voluntary basis”
(European Commission 2002: 7)
Already mentioned definition set by Kotler and Lee:
“Corporate social responsibility is a commitment to improve community well-being
through discretionary, business practices and contribution of corporate resources. Corporate
social initiatives are major activities undertaken by a corporation to support social causes and
to fulfill commitments to corporate social responsibility”
Most of the definitions relate to community development, improved business practices,
stakeholders. Stakeholders in Europe are strongly interconnected to CSR. In USA
shareholders play significant role as well. “David Norton, company group chairman of
Johnson & Johnson, claimed that his firm had been following CSR practices for the last 25
years and that shareholders had earned a great return over that time”. 8 In the last ten years this
company has received more then 50 of different awards and recognitions for its business
practices9. On their web-site the section dedicated to shareholder service is well-developed
and very informative in terms of CSR. On the contrary, strictly following shareholder values
would not be appropriate when discuss small and medium enterprises which far and wide are
European reality.
A variety of polices also shape CSR definitions and practices. Many corporations go by
official rules and policies and make decision based on how polices are defined. Danone is
used as good example. Danone has decided not to use GMO in its products in Europe but in
USA they continue using it as it is generally accepted10.
Various terms and concepts are closely related to CSR such as business ethics, triple
bottom line, corporate citizenship, socially responsible investment, social impact investment,
social accountability, corporate social rectitude, corporate philanthropy, sustainable business
etc. In some cases, there is variance only in used terminology but in the others there is more
evident difference in terms of measuring it by simple criteria: extent of responsibility, relation
to stakeholders and community, issue tackled, For instance: “ CSR approach typically defines
stakeholders more broadly and is more concerned with the company’s responsibility to the
community. Most business ethics programs are focused internally by making employees
“Shareholders vs. stakeholders”. FT Mandate. 2005. <www.ftmandate.com>
. “Investor relations”. Johnson & Johnson. 2005. <www.investor.jnj.com/services.cfm?textOnly=false>
10
European Social Investment Forum. Multi stakeholder forum on CSR. 2005. <www.eurosif.org/pu>
8
9
9
responsible for their behavior with regard to other employees, in other words, only primary
stakeholders”.11
The conclusion would be that there is no one single definition of CSR. Each society has
to define what CSR means for its specific cultural, historical and economic framework. What
surely has to be taken into account is that CSR has to involve wider community interest and to
reflect country priorities and needs.
2.2
CSR origin and development
“CSR has its origin in the social activism of the 1960s and 1970s. Awareness of issues
such as equal opportunities, racial equality and workplace safety, and health first galvanized
the public into scrutinizing business practices more closely than before. Then lead to this
obligations being enshrined in law”12. In different literature it is easy to find an example of a
woman named Elisabeth Hayrick from England who initiated protest against capitalist
exploitation in 1970. “She distributed leaflets outside local shops proudly announcing that
‘we, the people, can overthrow slavery’”13. The reason for this boycott was sugar production
and sugar import into the Great Britain as sugar was produced by low-wages labor in
Caribbean. As by the literature, a few years later she succeeded to tile the way for abolition of
mistreatment of low-wages labor that she called slavery. Indisputably, similar examples can
be found all over the world throughout the past 30 years in particular related to apartheid
Africa. Examples are mainly connected to American companies, thus many argue that CSR
originated in USA. Power-domination upshots spread out as disease to the rest of the world
as North American companies have somewhat overriding role in global sense. Providentially,
CSR materialized as necessary and broadly acknowledged medicine. What does this mean for
the business? It means that “business could no longer justify their existence by the economic
success alone; neither could their responsibility be regarded as being only to their
shareholders as espoused by Friedman (1970). They have to be responsive to a wider range of
public”14.Media also played increasingly discernible role in the field of raising social
awareness. Their mission was dedicated to dispute different companies’ decision or to
Altham, J., “Business Ethics versus Corporate Social Responsibility: Competing or Complimentary
Approaches?” International Business Ethics Institute. Washington. 2005.
<www.business-ethics.org/documents/JulietAlthamUpload.doc>
12 Vlakovic - Tafra, Majda and Anne Gregory. “CSR: New Context, New approaches and New Applications: A
Comparative Study of CSR in a Croatian and UK Company”. 12th Symposium BledCom. 2005.
<www.bledcom.com/history/11th_international_public_relations_research_symposium/proceedings_2004>
13 The case of Elisabeth Hayrick is described in detail at
http://www.suite101.com/article.cfm/leicestershire/26248
14 Ibid, Vlakovic - Tafra and Gregory
11
10
challenge companies by writing stories/reportage about their businesses. The B&Q marketing
director was challenged by one journalist at the press conference with questions on the subject
of very specific detail considering amount of tropical hardwood B&Q stocked. “When he
confessed that he did not know, the journalist replied ‘well, if you do not know, you don’t
care’”15. The marketing manager immediately has decided to find out this information by
hiring the best experts. Ten years after, B&Q grew to be popular by valuable expertise in the
field of tropical rainforest, they have supported Forest Stewardship Council16 created in 1992,
they established “project based attitude”17 in improving working and safety conditions in
factory etc. B&Q became, as we called, socially responsible company with ethical investment
practices.
“The term CSR was in common use in the early 1970s (although seldom abbreviated),
and the term "stakeholders" was used to describe corporate owners beyond shareholders at
least as long ago as 1989”18. „The history of social and environmental concern about business
is as old as trade and business itself. Commercial logging operations for example, together
with laws to protect forests, can both be traced back almost 5,000 years. In ancient
Mesopotamia around 1700 BC, King Hammurabi introduced a code in which builders,
innkeepers or farmers were put to death if their negligence caused the deaths of others, or
major inconvenience to local citizens. In ancient Rome senators grumbled about the failure of
businesses to contribute sufficient taxes to fund their military campaigns, while in 1622
disgruntled shareholders in the Dutch East India Company started issuing pamphlets
complaining about management secrecy and “self enrichment”. With industrialization, the
impacts of business on society and the environment assumed an entirely new dimension. The
“corporate paternalists” of the late nineteenth and early twentieth centuries used some of their
wealth to support philanthropic ventures. By the 1920s discussions about the social
responsibilities of business had evolved into what we can recognize as the beginnings of the
“modern” CSR movement“19
If we examine different literature it is obvious that, beside liberated citizens’ influence,
CSR was instigated from the pressure of strong and committed employees’ and consumers’
associations. None can better review company’s behavior then the group which represent
15
Ibid, Hilton and Gibbons, pp. 56
NGO that developed a credible system of independent certification and timber labeling.
17
They do not go against internationally agreed codes but use project approach to test the best options and asses
how they work in practice.
18
Marlin, J.T., A. Marlin., “A brief History of Social Reporting”. Business Respect. 51, March 2003.
MallenBaker. 2005 <www.mallenbaker.net/csr/CSRfiles/page.php?Story_ID=857>
19
“History of corporate social responsibility and sustainability”. The ESRC Centre for Business Relationships,
Accountability, Sustainability and Society. 2005. <www.brass.cf.ac.uk/History%20L3.pdf>
16
11
rights of people employed by companies, or group which represent consumers of companies’
goods. Moreover, none can hurt company more then its primary stakeholders which in theory,
keep company alive. Some authors will disagree with this statement as, it will be mentioned
after in this paper, shareholders play more important role in some countries. This does not
make a huge difference because the point is not focused on Who creates the pressure but on
How company reacts to it. Relevance of those associations is for the most visible in
undeveloped or developing countries when cases like “Nike in Indonesia”20 recurrently
appear.
In United States labor movement has grown out of difficult conditions created by
industrial wars in which many died, but employers still used every means to break strikes
while “11 million families were living on an average of $380 a year”21. Only a moment after,
“between 1897 and 1904, labor union membership rose from 447,000 to 2.073,000”22. In the
later stages, different ethnics groups came together under the same roof of labor associations,
women joined their efforts and at the same time won right to vote, and all of them carried out
actions to dethrone corporations’ power. Corporations slowly realized importance of labor
unions, which resulted in setting up the practices that provide better wages, optimal working
conditions, but also stability through system that is not fatal for corporations’ power23. Second
threat to corporations in USA emerged with totally new young generation “the flower
children” that challenged basic assumptions about lifestyle, fight for the different rights and
equity, raised voices against poverty etc. This generation dropped out of the consumer habits
what defied existing norms and values24.
Even though American companies are listed as number 1 in “blameworthy list”, situation
in Western Europe was not any better. When in 1992 unemployment rate in Europe exceeded
average of 10% in different countries, Europe was under pressure of advises by different
multinationals to reduce the social safety net benefits, to reduce employer social security
contributions, and strict employment-protection rules.25 This did not contribute to CSR as it
treated CSR as an inefficient tool in global market and a limit to survival of European
20
Along with Adidas, Nike controls 49 per cent of the sports shoe market and employs more than 600,000
people in contract factories. Workers in Indonesia, Thailand and other countries have complained in the past of
77-hour weeks, a ban on unions and dangerous conditions in which employees have lost limbs through crush
injuries. SEE The Ethical Revolution Sweeping through the World's Sweatshops at
<www.globalpolicy.org/socecon/tncs/2005/0416ethicalrevolution.htm>
21Wasserman, H. America Born and Reborn. New York: Collier Books. 1983: 110
22
Dubofsky, M. Industrialism and the American Worker. Arlington Heights, III.: Harlan Davidson. 1975: 87
23 Ibid, Korten p. 57 - 59
24 Ibid
25 Ibid
12
businesses. This provoked the affected groups to respond. The approach was slightly
different. Role of corporation was examined in terms of their importance for society and
future Europe as economic power. Accordingly, government in Europe contributed to CSR
more then any civil society organization [CSO]. At European level, various policy initiatives
related to CSR were undertaken either by European Commission or some other body. In
December 1999, the European Commission published its Communication on Fair Trade
focusing on trade liberalization and protection for social and environmental standards. Then,
EC organized two symposia in collaboration with US Department of Labor in 1998, and
during the same year EC Directorate – General for employment held a workshop for
„Monitoring Codes of Conduct and Social Labels. All these occurred with an intention to
promote EU as sensitive and highly aware of social and environmental concerns. From the
very beginning CSR is seen as “key element of sustainable development”26. Key steps of CSR
in the European Union27:
1995
March
2000
June
2000
March
2001
July
2001
July
2001
October
2001
July
2002
October
2002
June
2004
29June
2004
European Commission President Jacques Delors and a group of European companies launch the
Manifesto of Enterprises against Social Exclusion.
Lisbon European summit sets new strategic goal of making Europe the most competitive and
dynamic knowledge-based economy in the world by 2010. For the first time, the European Council
makes a special appeal to “companies’ corporate sense of social responsibility regarding best
practices on lifelong learning, work organization, equal opportunities, social inclusion and
sustainable development”.
EU adopts Social Policy Agenda, stressing the importance of CSR in adapting working conditions
to the new economy.
European Council in Stockholm welcomes business initiatives to promote CSR and calls for a wide
exchange of views around the forthcoming Green Paper.
European Commission publishes the Green Paper on promoting a European framework for CSR
(COM/2001/366).
European Commission Communication on promoting core labor standards.
ETUC Executive Committee adopts a wide-ranging policy on CSR.
European Commission Communication on Corporate Social Responsibility: A business
contribution to sustainable development (COM/2002/347).
European Commission sets up European Multi-Stakeholder Forum on CSR (CSR EMS Forum) to
exchange good practices and assess common guidelines.
ETUC Executive Committee adopts resolution laying down a series of priorities for the
development of CSR in Europe.
CSR EMS Forum to report to European Commission.
26
" Promoting a European Framework for Corporate Social Responsibility". CSR Europe response to the
European Commission: Consultation on the EU Green Paper. European Commission.2005.
<http://europa.eu.int/comm/employment_social/soc-dial/csr/csr_europe_eu_en011218.htm>
27
“Corporate Social Responsibility: Key steps of CSR in the European Union” European Trade Union
Confederation. 2005. <www.etuc.org/a/139>
13
In addition, important aspect to be considered when discussing and explaining difference
in development of CSR in Europe and America is issue on individualism vs. collectivism. “In
the US, a culture of individualism suggests that individuals are responsible for their own
success and, hence, if there is demand for solving ethical questions, it is the individual who is
responsible for making the right choices (e.g. Trevino and Nelson 1999; Ferrell, Fraedrich et
al. 2000). In Europe, however, it is traditionally not the individual businessperson, nor even
the single company, that is seen as primarily responsible for solving ethical dilemmas. Rather,
it is a collective and overarching institution, nominally the state”28
Characteristic of the framework in which CSR has developed in the US and Europe are
very different to other parts of the world. For instance, CSR in Japan, Latin America, and
Eastern Europe is not so much related to citizens or labor associations’ activities. It is concept
recently promoted and it is linked to foreign investment requirements, to popularity of CSR
overseas or to endeavors for adopting international standards like ISO29. Especially in the
countries being in war in the nearest past, the business responsibility is not seen as priority
amongst other issues considered as immediate objective30. However, practitioners from these
countries will argue that CSR concept existed since long time ago but systematic definition
and approach was imported from USA or Western Europe. Web portal on CSR in Japan
states that “Japanese companies have a unique and long history of contributing to society, for
example, through customer-oriented products and services, stable employment, philanthropy,
community involvement, and so on so forth. Most of companies with long history have had
mission statements which mention the strong commitment to society”31. Very similar
arguments are used by practitioners in SEE countries when discuss history of CSR. Croatian
and Serbian representatives32 who attended Conference on CSR in BiH opposed statement
that there is no CSR in former Yugoslavian countries, with examples of CSR activities dated
from1970: internships, recreation for employees, employees’ sports game, renovation of
cultural centre involving employees of different companies etc. In addition, they said that
CSR is nothing new to SEE but further development of old concept 33.
However, CSR is more then “being humanitarian and ethical” in terms of very different
initiatives taking place under the umbrella of CSR mania. The essential is to measure impact
Matten, D. and J. Moon. “Implicit and Explicit CSR: A conceptual framework for understanding CSR in
Europe”. Royal Holloway: School of Management. 2005. <www.rhul.ac.uk/Management/News-and-Events>
29
Japan has sent experts to the ongoing debate over how to incorporate CSR into international standards at the
International Standardization Organization (ISO). See <www.rieti.go.jp/cgj/en/columns/text_013.htm#note>
30
Sri Lanka, BiH etc.
31
CSR and Japan. CSR Archives. <www.csrjapan.jp/index_e.html>
32
Radmila Radic Dudic, Gradjanske Inicijative SCG; Lidija Pavic Rogosic, Odraz Hr.
33
Conference took place in Sarajevo, March 2005
28
14
business has on society and to help companies to foresee, manage and communicate their
strategy to control impact without impairing others. Nevertheless, it will be difficult to
delineate and recognize first CSR initiative ever and make everyone agree upon it.
2.3
CSR initiatives and institutions
Loads of different efforts and organizations are recognized in the past as CSR founders.
Growing need for both mandatory and non-mandatory reporting of the social, environmental
and economic impact of business activities slowly institutionalized CSR. Twenty years ago, it
was rarity to hit upon business reporting. However, some companies recognized advantage of
such action, thus started with information campaigns of their CSR “mind-set” and activities.
One is certainly Levi Strauss almost known as pioneer and today’s leader in CSR. If
chief executive officer [CEO] of this company create list of CSR successes in 90s, the list will
contain for sure: The award given by the Council of Economics Priorities for “unprecedented
commitment to non exploitative work practices in developing countries”, Money magazine
positioned it as first among all U.S. companies for employee benefits, and proclamation that
Levi Strauss is one of the hundred best companies to work for34.“Before, Levi Strauss was
accused of contracting in Haiti and Mexico where workers have been sacked for being union
members, as well as using low wages to prop up profits, and now when the campaign group
No Sweat35 uncovered evidence of abuses at a factory in Mexico recently, Levi Strauss sent
its own investigators, accepted the accusations were true and worked with the contractor to
ensure unions were recognized. The jeans maker has also started to buy some of its cotton
from organic sources.”36
Next to Levi Strauss there are Esprit, The Gap, Nike, and other global brands that have
gathered multimillion-pound profits by using sweatshop labor in developing countries.
Pressure groups were intensively targeting these companies with anti-sweatshop campaigns.
At last, these companies disclosed their exploitive business and openly discussed issue of
workers placed in difficult working conditions37.
And to end with long list of companies dealing with CSR, it is worth mentioning
manufacturers of conceivably the biggest human’s threats, fast food and tobacco. The first
34
See official Levi Strauss web site <www.levistrauss.com/responsibility/foundation/>
Campaign group established 10 years ago. Popular through cases with Nike, Levi Strauss, The GAP etc.
36
Frith, M. “Ethical Revolution Sweeping Through the World’s Sweatshops”. The Independent. Global Policy
Forum. April 2005. <www.globalpolicy.org/socecon/tncs/2005/0416ethicalrevolution.htm>
37
Ibid.
35
15
common associations related to these two “forbidden” words are Mc Donald and Philip
Morris. Both companies are today among the most active in CSR field.
Despite the exertion of business to act more “responsible”, sometimes it is burden to
accomplish it all alone without external lead and impetus. In-between 1989 and 1997 many
organizations have been established and incorporated social responsibility within their
mission or scope of activities: Business for Social Responsibility, The Copenhagen Centre,
Corporate Social Responsibility Europe, ETHIBEL, Ethics Institute of South Africa, The
European Business Campaign on Corporate Social Responsibility, Global Environmental
Management Initiative, The Global Reporting Initiative, Global Sullivan Principles, The
International Business Ethics Institute, and The Zicklin Centre for Business Ethics Research.
All these organizations have registered either as private companies, NGOs or Institutes aimed
at helping companies to adapt to CSR practices and CSR “way of thinking” by mobilizing,
advising, creating labels and principles, advocating, educating etc.
According to the Warwick Businesses school different phases took place in relation to
promotion of corporate social responsibility by different initiatives and institution. Three
phases are described:
a) Awakening (1960 -1983);
b) Engaging (1984 -1994);
c) Networking (1995 – today).
This very attractive analysis explains that during the first phase initiatives/standards
that were developed are as follows: US Environmental Protection Act ‘69, Club of Rome ‘72,
Brandt report ’80; Besides, during the second phase developed initiatives/standards are as
follows: Responsible care ’85, Superfund US ’85, Brundtland report ’87, ICC Principles of
SD ’91, Rio Earth Summit ’92; And finally, during the third phase new initiatives/standards
are: ISO 14 000 ’96, Amnesty International Business principles ’98, Triple Bottom Line
concept ’98 & AA1000 ’99, UN Global Compact ’00, Global Reporting Initiative, WEF
Corporate initiative statement. In line with those initiatives, some already mentioned
organizations were established but also institutions and “gatherings” such as Council for
Economic priorities ‘69, Greenpeace ’72, Davos ’88, Amnesty Business group ’91, Rio plus
10 in J’burg ’02, Worlds Social Forum in Brazil etc.38
Also, very prominent individuals decided to support CSR. “In October 2001, the
Prince of Wales hosted a conference for Human Resource Directors to explore the
Mohan, A. “Improving knowledge about CSR”. Warwick business school. 2003. Round Table. 2005.
<http://europa.eu.int/comm/enterprise/csr/roundtables.htm>
38
16
possibilities of establishing an international campaign to promote employee engagement.
Companies and other leading experts stepped forward to form a Working Group that
supported IBLF in developing the strategy for the launch of the campaign. ENGAGE which
was formally launched in Belfast in October 2002 operates in an atmosphere of growing
public awareness of and concern about social, economic and environmental problems”39.
Not long time ago, CSR reports were seen as rarity, and very often as one-off activity
taken by certain company. In addition, group of people who red reports was limited to hardcore campaigners or business consultants. However, this slightly changed and improved over
the years. According to Alice and John Tepper Marlin it went also through three phases
overlapping with media coverage and perspective of CSR. The first phase of CSR (1970 and
1980) was the weakest, not linked to corporate performance, but mainly to PR without critical
aspects. Report at that time was composed of advertisements and annual-report sections. It
was perceived as very personal and not connected to CSR. The second phase was pioneering
phase which open the door to today’s CSR reporting. “It began with Ben & Jerry's, which in
1989 commissioned a "social auditor" to work with the B&J staff on a report covering 1988.
The social auditor" was given free rein to interview anyone in the company for two weeks, on
any day or night shift”40. The auditor introduced an issue of stakeholders who represent wider
community including even suppliers. Hence, he recommended that the report should be called
a Stakeholders Report. Accordingly it should be divided into the major stakeholder categories:
Communities (Community Outreach, Philanthropic Giving, Environmental Awareness, and
Global Awareness), Employees, Customers, Suppliers, and Investors. The report was
launched with auditor's input who signed it and said that in his opinion Stakeholder Report
“fairly describes the performance of the company in the area of social responsibility for the
year 1988 with respect to five stakeholders groups”41 “The third phase of CSR reporting is
surely the most interesting because it introduces not only third-party certification of the
reports, but certification by bodies that are accredited to certify against social or
environmental standards. It breathes life into standards and on-site inspection, because social
auditors are firms and people who are accredited by environmental or social accreditation
bodies (or by both).The standards are already determined before an auditor goes in and the
procedures are specified. When a violation is found, the facility is given a chance to take
corrective action. The auditor returns to see that required corrective actions are made. Major
39
ENGAGE. 2005. <http://www.engage.org/>
Ibid, Marlin
41
Auditor was John Tepper Marlin
40
17
problems are not allowed to remain year after year”42. In light with mentioned standards and
certifications companies were/are under the pressure to protect brand name so businesses
attitude toward reporting became more proactive and they have tried to raise value of what
they report. The pioneers and global leaders and certified facilities of the new phase of CSR
reports are Social Accountability International [SAI] enhancing labor standards, and
environmental leader is Environmental Accreditation and Labeling [ISEAL] formed by Forest
Stewardship Council, the International Federation of Organic Agriculture and the Dutch Max
Havelaar Foundation43. Though, there are many other organizations writing and defining
standards and codes for corporate accountability: ILO, ISO, OECD, ETI etc.
“A global reporting survey conducted in 2004 by the Association of Chartered Certified
Accountants and CorporateRegister.com found that the number of corporate social,
environmental, and sustainability reports increased from fewer than 100 in 1993 to more than
1,500 in 2003. Similarly, a 2003 study of the world's 100 largest companies by the consulting
group CSR Network found that almost half of them (49) issued an environmental, social, or
sustainability report“ 44.
With increasing expectations to get more qualitative and informative CSR reports, burden
for those companies to provide such information in a standardized way also grow. Key
external standards on the whole applicable to reporting are:
a) The Global Reporting Initiative (GRI) as a multi-stakeholder initiative formed
to develop globally applicable guidelines that can be used voluntarily by
reporting organizations45.
b) The AA1000 Assurance Standard as the first assurance standard for social and
sustainability reporting. The standard provides a framework for assuring that
GRI-based and other CSR reports provide information that is material,
complete, and responsive to stakeholder concerns and interests46.
c) The CERES Report as a standardized format for corporate environmental
reporting developed through collaboration with companies, institutional
investors and environmental organizations47.
42
Ibid, Marlin
“CSR Instruments: Codes of Conduct”. The Multilateral Investment Fund. 2005.
<www.iadb.org/mif/v2/files/StudyCSRannexA.pdf>
44 BSR staff. “CSR Reporting”. BSR: Business for Social Responsibility. 2005.
<www.bsr.org/CSRResources/IssueBriefDetail.cfm?DocumentID=50962>
45 Global reporting Initiative. 2005. <www.globalreporting.org>
46 Ibid.
47 Coalition for Environmentally Responsible Economies. 2005. < www.ceres.org>
43
18
Besides the public, media and government are becoming more and more interested to
systematically approach CSR and reports. Recently, different media broadcasted CSR reports
of respective companies. Examples are CNN and Nike report or Wall Street Journal and Gap's
first CSR report. Considering governments, “a few governments have imposed more wideranging requirements for disclosure of social and environmental performance. For instance, a
2001 French law requires large companies listed on the French stock exchange to include in
their annual reports discussions of the social and environmental impacts of their activities in
France. Under pending regulations proposed in May 2004, the U.K. would require U.K.-listed
companies to publish Operating and Financial Reviews that would include among other
business issues information about a company’s employees, environmental issues, and social
and community matters”48. Nevertheless, governments have to comprehend their unavoidable
role in fostering CSR by creating better conditions for companies to behave more responsibly
and to efficiently manage different CSR strategies.
CSR and reports became mainstream incentive for business performance today and it will
be unanticipated to find any gigantic company without record on CSR. It is of course to be
assessed whether their actual performance match expected goal and reasoning set by public
and different mentioned institutions. CSR turned into some kind of democratic model in
economy sector relying on citizens’ and other associations’ participation which is monitored
by different institutions, and by means of beforehand placed rules and standards.
48
Ibid, Business for Social Responsibility
19
3
Contemporary view on Corporate Social Responsibility
In today's highly competitive market, companies need an extra niche, and many have
found that CSR activities can make the difference in winning and maintaining customers or
losing them. Contemporary view on CSR is important for understanding CSR practical
aspects and impact. This chapter will also provide brief insight into companies impending
CSR standards. The relevance of CSR is illustrated by the fact that there are quite good
researches providing facts and highlights that substantiate importance of this concept.
Key words related to this chapter: impact, ethical investment, cause promotion, cause
related marketing, corporate social marketing, corporate philanthropy, community
volunteering, and socially responsible business practices.
3.1
Practical aspects of CSR
In spite of many definitions that were born to put CSR in plain words, for ordinary
reader or even inexperienced company, it is still vague what CSR means in practice. It is easy
to guess that CSR is something about company “doing Good”. It is about company trying to
perform against stakeholders’ needs switching from confrontational to co-operational model
including almost everyone as stakeholders: market, consumers, media, NGOs, governments
etc. When talking CSR in nowadays’ it is impossible to avoid mentioning human rights, child
labor, sweatshops, environment, and ethics. „It can include anything ranging from actions
aimed at improving human rights and combating child labor to fostering local development
and diversity within the workforce to ways in which companies can improve their
communication and reporting on their labor practices“49. Kotler and Lee tried to systemize
and describe different ways/options for performing within CSR framework. They have also
pointed out that CSR shifted from obligation to strategy and that companies use it more and
more to support its goals and mission50.
Based on Kotler and Lee model, there are six options for companies’ initiatives under
which most social responsibly-related activities fall. Those 6 options are as follows: cause
promotion, cause-related marketing, corporate social marketing, corporate philanthropy,
community volunteering, and socially responsible business practices. Cause-promotion is
activity through which company provides money, in-kind contribution, and other resources to
Nassau, Laurentien van-Oranje and Sonia Casino Diaz. “Corporate Social Responsibility: A New Approach to
EU Policy-making”. European Union lobbying - Changes in the arena. Ed.Robin Pedler. New York : Palgrave
European Centre for Public Affairs, 2002
50 Ibid, Kotler and Lee pp. 5 - 9
49
20
raise awareness about a social cause. Company can do it independently, it can enter into
partnerships or it can be one of the sponsors. An example is The Body Shop promoting a ban
on the use of animals to test cosmetics. Companies working with environment are pretty much
interested in this option. Cause-related marketing describes companies’ effort to contribute
or donate a percentage of profits to a specific cause based on product sales. An example is
Dell that offers percent off selected new products when up to three products are recycled
online. Even though it is sometimes hard to see difference among first three options as
corporate social marketing means that companies support the improvement and/or
realization of a behavior change campaign aimed at improving public health, safety, the
environment, or community well-being. An example is Philip Morris that gives confidence to
parents to talk with their children about tobacco use. Corporate philanthropy is what
majority usually relate to CSR behavior. It means that companies directly make contribution
to charities or CSOs and very often in the form of donations or in kind services. An example
is McDonald’s House that offers places to stay for families with seriously ill children. It can
be any company that provides donations for different projects and programs though NGOs or
community foundation. Community volunteering is when company encourages its
employees, partners or members to voluntarily work in different community organizations
mainly NGOs. An example is Levi Strauss & Co. employees who provided support to
distribute leaflets about a new disease that was devastating the gay community in San
Francisco (HIV/AIDS). Socially responsible business practices means that company adopts
and conducts discretionary business practices and investment that support social cause to
improve community well-being. An example is Starbucks that work with Conservation
International to support farmers to minimize impact on their local environment51.
Presented scheme or model has a lot to do with American perception of CSR. Model is
surely very informative and educative for companies and beginners in the field of CSR.
Moreover, greater parts of world-wide CSR activities meet the previously described division.
Nevertheless, companies’ internal codes of conduct and their relationship with employees is
what is missing in this very comprehensive model. CSR initiative is seen almost as an extra
work for company in this model. Company has to choose a good cause, has to asses
community needs, has to make good implementation plan, has to evaluate. In today’s
European perspective CSR is not an added effort for company. It is incorporated value in dayto-day management and practices. It respects wider group of stakeholders never forgetting its
51
Ibid, Kotler and Lee pp. 23 – 251
21
employees. It is more about company being open to its stakeholders in a cooperative way, and
creating business-to-business partnership to follow different norms and ethical standards. "A
company has to be transparent and well behaved; just having a good quality product is not
sufficient anymore."52
European Commission published a survey in 2002 as part of a study in the context of
the Observatory of European SMEs, in which it presented that around half of European SMEs
are engaged in some form of socially responsible activity. To the contrary, it showed that
taking into consideration modern view of CSR, half of those activities would not be defined
as CSR. The reasons lie in the fact that providing support to sports and cultural activities
,through donation or sponsorship, is not anymore considered as advanced CSR53. Likewise,
any kind of charitable giving is especially criticized by public in different countries. They
believe it is not adequate for a company to build child playgrounds if a company produces
something that destroys health. Company has to, if not to solve a problem, to try not to foster
resolution of a problem. Satisfaction of employees and customers appears as an essential
indicator of company behavior.
In addition, other stakeholders should act more strongly to support development of
CSR concept in practical terms. Role of government is also perceived as helpful in terms of
clarifying what is CSR in practice but also acting as a role model for companies. Recently,
this was fairly visible with Canadian businesses that literally expressed need for having
federal government as a role model and a channel for disseminating best practices54.
Government could also help by: „adding CSR to the criteria that government agencies use
when deciding from which companies to buy goods and services, providing export credit
support for responsibly performing companies or sectors, easing customs checks for
responsible companies, and so forth“55. European Union [EU], if taken as an economic block,
should proactively support CSR actions and performance. In Rio Tinto plc statement to EU
Green Paper Promoting European Framework for Corporate Social Responsibility (CSR)56
“Corporate Social Responsibility, a Priority in Europe”. Survey of key business opinion formers and decision
makers. SocialFunds.com. (October 04, 2000). 2005. <www.socialfunds.com/news/article.cgi/article385.html>
53 European Commission. 2005. < http://europa.eu.int/comm/index_en.htm>
54 “8 Role of Government in Supporting CSR” Natural Resources Canada. 2005.
<www.nrcan.gc.ca/sd-dd/pubs/csr-rse/p8_e.html>
55 Aslam , Abid. “ When profit is not enough”. Backgrounder: Corporate Social Responsibility. Initiative for
Policy Dialogue. 2005. <www2.gsb.columbia.edu/ipd/j_corporatesocial.html>
56 The aim of the paper was to launch a wide debate on how the EU could promote CSR - "how to make the
most of existing experiences, to encourage the development of innovative practices, to bring greater transparency
and to increase the reliability of evaluation and validation"
52
22
they propose that “on a general footing the EU could support the promotion of CSR
performance by”57:
- raising awareness and supporting CSR initiatives at the international level,
- ensuring coherence between CSR policy and other EU policy,
- developing CSR related information tools in co-operation with other stakeholders
- organizing and moderating on-going CSR stakeholder dialogue,
- promoting research and analysis on CSR initiatives and development and,
- facilitating access to CSR information on the Internet, particularly for SMEs.
Along with NGOs and governments, academia should be the focal point for creating
new knowledge on CSR good practices trough research, but also education of managers. For
instance, “Corporate Social Responsibility Initiative, to be launched on March 4th 2006 was
established by the Kennedy School of Government with the goal of working with colleagues
at the Harvard Business School, Harvard Law School, and Harvard School of Public Health.
The CSR Initiative will consist of an integrated program of research, education and outreach
activities bringing together leading practitioners and scholars to advance both knowledge and
applied research in the field of corporate responsibility. The Initiative is supported by a core
group of Founding Companies: The Coca-Cola Company, Chevron Texaco, General Motors,
and Walter H. Shorenstein”58. Good pattern for win-win situation and partnership. World
Bank, apart from regular programs that support CSR, has decided to set up academia learning
cycle in the field of CSR and business ethics. „The World Bank Institute (WBI), in
partnership with Wharton School has organized a classroom discussion series. The series
connect classrooms in 8 countries through four video-conference sessions to participate
in discussions about case studies. The aim is to provide an opportunity for students and
professors from different countries to share their perspectives. Along with these VideoConferences, the students will be participating in WBI's online course on Corporate Social
Responsibility and Sustainable Competitiveness, through which they will be engaging in a 3
month online dialogue on CS“59.
Stewart, Shaun. “Rio Tinto plc.: Green Paper Promoting a European Framework for Corporate Social
Responsibility (CSR) – Rio Tinto Statement”. European Commission. (12 December, 2001). 2005.
<http://europa.eu.int/comm/employment_social/soc-dial/csr/pdf2/046-COMP_Rio-Tinto_UK_011212_en.htm>
58 Gavel, Doug. “Harvard Schools Unite for Corporate Social Responsibility Initiative” The HARBUS Online.
(March 1,2004). May, 2005.
<www.harbus.org/media/paper343/news/2004/03/01/News/Harvard.Schools.Unite.For.Corporate.Social.Respo
nsibility.Initiative-622624.shtm>l
59 “Global classroom on corporate responsibility and ethics”. World Bank. January - April, 2005.
<www.worldbank.org>
57
23
External and wide-ranging partnership and stakeholders’ role is evidently important, but
the internal force presents even bigger challenge when implementing CSR activity. Every
manager will always inquire information on how much it cost to implement CSR activity or
principle. Thus, it is sometimes difficult to persuade profit-oriented organization to
voluntarily commit itself to apply CSR principles or implement action. And of course, it costs.
But also it is cost-effective investment. „The practice of CSR is a continual learning and
improving process, which incorporates both legislative and voluntary elements, and which
turns principles and policies into measurable action and accountable practice, in as cost
effective and as transparent a way as possible”60. Afterward in this paper, benefits that a
company has from such commitment will be illustrated.
At this point, the best practices are brought into the focus by challenging logic to define
it best with an adjective. Since companies/industries are different, and society needs are
differently scaled, the dilemma is whether there is any common sense to highlight some
practice as better than the other. Some criteria have to exist beside the mentioned standards
and policy guidelines that define how a company should perform at the minimum. As stated
in different sources, authors who have tried to set up indicators on how to perform and
measure good CSR practice have put emphasis on cultural component, as well as country
priority. For example, in Africa, the criteria for selecting a good CSR program are separately
defined in relation to three priorities: environment, human rights and stakeholders. Further, it
is formulated in terms of presence and quality of sustainability policy; stakeholder dialogue;
compliance with best governance practices like King 2002; evidence of social impact in area
of business, including procurement; greater responsibility for maintenance of human; etc.61.
Based on CSR evaluation data which came from Ethical Investment Research Service
[EIRIS] the Top ten companies performing CSR standards are: 1. AstraZeneca UK 2. Bayer
Germany 3. Degussa Germany 4. ICI UK 5. Norsk Hydro Norway 6. BASF Germany 7.
Henkel Germany 8. Umicore Belgium 9. Diageo UK 10. BT Group UK. CSR was rated in
terms of corporate governance, Employees (equal opportunity, health and safety, employment
stability, unions, education/development), Society (protecting human rights in developing
countries, fair procurement, relationship with customers and vendors, community activities)
60
Ibid, European Commission. Rio Tinto statement.
Newton-King , Nicky. “JSE Securities Exchange South Africa“. An exchnage view. JSE Limited. 2005.
<www.jse.co.za>
61
24
Environment
(commitment
towards
environmental
issues
and
outcomes,
use
of
environmentally-friendly sources of energy)62.
It can be concluded that there are endeavors to crown a company as King or Queen of
CSR. Sometimes, various CSR awards or ranking lists can be seen as good driving
mechanism for companies to conduct themselves more responsibly and to inspire employees
to partner with communities.
3.2
Current trends and debates on CSR
As any other concept, or popular and publicly discussed phenomenon, CSR provokes
arguments pro and against its values and impact. CSR impact is discussed in terms of its
contribution to society and to company itself. Though, there are views of CSR as threatening
to companies and capitalism, in general.
Impact on society that is defined with qualitative indicators can be assessed easily just
by asking questions: How many? How much? How often? Qualitative and unforeseen impact
is very often placed under the agenda of a never-ending issue. Project named RARE –
Rethoric And Realities. Analysis of Corporate Social Responsibility in Europe has a goal to
address the particular issue of CSR impact. It is stated in the Project document that “using a
specially developed tool – CSR Impact Assessment – the rhetoric of CSR shall be separated
from factual impacts in the sectors. The Impact Assessment takes into consideration both, the
micro-level of companies and the macro-level of economic and socio-political effects. On the
socio-political level, where the focus of analysis lies, the project team strives to evaluate the
contribution of companies' CSR measures to achievement of the European Union's policy
goals in four areas of sustainable development”63 This does not differentiate EU from any
other institution or country, as it is said, all of them want to witness impact and all of them use
measurement system created according to their needs and visions. The most frequently
illustrated benefits societies gain from CSR are: community development, poverty reduction,
fair employment, environmental protection, sustainable development, social development,
creation of more vibrant markets etc.
Paradoxically, it is much easier to find literature explaining how a company can benefit
from CSR with only a few sentences about the impact on it has on the society. Thus, many
“CSR: Top 10 CSR performing Companies”. Ethical Investment. June 24, 2005.
<www.ethicalinvestment.org.uk/modules.php?name=News&file=article&sid=39>
63 Viganň ,Federica. “Citizens and governance in a knowledge based society 2004-2007” European Commission.
May, 2005.
<www.feem.it/Feem/Pub/Programmes/Corporate+Social+Responsibility+and+Management/Activities/200407RARE.htm Fondazione Eni Enrico Mattei>
62
25
consumers still argue that CSR is a fancy makeup for businesses and that business will never
truly care about society. The fact is that impact can not be measurable without clear plan on
what companies are keen to accomplish in society. The most frequently illustrated company
benefits are related to profit, human resource quality, risk management, competitive
advantage, reputation and image, investors, capital, public relation, increased efficiency,
innovation in market through cooperation with local community etc. One of the well-known
CSR consultancies in UK, CSR Network64, and its experts has prepared analysis on CSR
benefits to businesses. Analysis is shown in table below:
The Top 10 Benefits of Engaging in Corporate Social Responsibility (CSRnetwork
and Radley Yeldar)65
1) Increased profit
An 11-year Harvard University study found that "stakeholder-balanced" companies showed four
times the growth rate and eight times the employment growth when compared to companies that
are shareholder-only focused.
2) Access to capital
Companies that are committed to CSR often have access to capital that would not otherwise be
available, due to the increase in Socially Responsible Investment (SRI). A 2001 study showed that
12% of total investment in the USA was of a socially responsible nature. Likewise, there are were 313
green, social and ethical funds operating in Europe in June 2003.
3) Reduced operating costs/increased operational efficiency
Contrary to widely-held opinion, improved environmental management systems do not automatically
result in greater cost. Over time, they improve operational efficiency by reducing waste production
and water usage, increasing energy efficiency and in some cases, selling recycled materials
4) Enhanced brand image and reputation
A good reputation is often very hard to build – and yet can be destroyed in less than a day. A strong reputation in
environmental and social responsibility can help a company build this trust.
5) Increased sales and customer loyalty
Research has shown that consumers not only want good and safe products, but they also want to
know that what they buy was produced in a socially and environmentally responsible way.
6) Increased productivity and quality
Business for Social Responsibility say “Company efforts to
improve working conditions, lessen environmental impacts or increase employee involvement in
decision-making often lead to increased productivity and reduced error rate.
7) Increased ability to attract and retain employees
A company’s dedication to csr can help to attract and retain employees. People want to work for a
company that is in accordance with their own values and beliefs.
8) Potentially, reduced regulatory oversight
The more a company shows it is committed to CSR by complying with and going beyond legislation,
the more lenient governments and regulators may be with the company.
9) Reducing risk, and increased risk management
The more a company is committed to CSR, the less they are exposing themselves to business risk.
This could be reputational risk following bad press, e.g. the highly publicised “Nike sweatshops
10) ‘Keeping up’ with competitors and where the market is.
This is where business is heading: the world over, regardless of the regional culture.
64
csrnetwork has a proven track record in helping big businesses and other organizations make corporate social
responsibility a reality.
65 CSRNetwork. 2005. <www.csrnetwork.co>
26
Field where CSR produces a number of results is sustainability of non-governmental
sector [NGOs]. In the countries where government does not supply NGOs with an extra fuel
for their activities and where different donors are slowly phasing out their programs,
businesses can create room and conditions for improvements. Prolific partnerships between
NGOs and profit-oriented organizations can balance businesses’ intention to communicate
with community and NGOs mandate to represent community needs. In this respect, it is
worthy to be mentioned that CSR is also seen as reflection of real democratic values. It fosters
participation in business and creates democratic governance. However, Henderson criticizes
any form of equal partnerships by putting emphasis on doubtful capabilities of different actors
to speak for society in whole. He thinks that “no non-governmental organization, and no
grouping of such organizations, has a valid claim to represent and to speak for, the people of a
country when that country has a democratically elected and responsible government“.66 There
is a logical point in such judgment, except that it is certain that NGOs bear a huge
responsibility in any democratic society and are involved in grass-root programs representing
community needs. Moreover, NGOs can influence decision making processes by strong and
participatory advocacy. NGOs have skills gained through direct work and contacts with
communities, consequently those skills can be transferred to businesses when implementing
certain type of CSR activities. Both sides can benefit from such mutual partnerships.
Otherwise, a different approach can tempt these two sides entering into warfare around CSR
issues and values. Interesting approach can be found in Introductory paper of Sir Geoffrey
Owen who pointed out that “there are clear dangers for a company in getting into a fight with
an NGO, especially if - as is the case with several environmental groups - that NGO enjoys
considerable support among employees and customers“67. His second important remark is that
NGOs „increasingly well organized and with a growing international membership, have
become active in trying to persuade or compel companies to cooperate in advancing their
cause“. Nonetheless, in some countries, particularly developing ones, raising awareness on
CSR should target both businesses and NGOs to take more active role in it. NGOs also have
to be involved not only through advocacy but by taking on CSR principles themselves.
Regardless of the fact that CSR, in general, can create more positive results than cause
harm, it is difficult to oppose all practitioners and consumers who still challenge companies
66
Henderson, David. "The Role of Business in the Modern World: Progress, Pressures, and Prospects for the Market
Economy" Institute of Economics Affairs. (27 July, 2004). 2005. <www.iea.org.uk>
Owen, Geoffrey “Corporate Social Responsibility: rethinking the role of corporations in a globalizing world”.
Introductory Paper. Madingley Hall, Cambridge. (3-11 October 2002). 2005.
<www.21stcenturytrust.org/owen.htm>
67
27
and society to dig deep into CSR concept and prove its values and meaning. A quite sarcastic
mode in presenting consumer’s point of view could be recognized in Ed Mayo speech to
journalists68 when he said that conference after conference held on CSR theme, it grows to be
a well-developed scheme. He continued with a statement that there are probably more public
awards on CSR than there are socially responsible businesses and that if we search for
corporate responsibility on Google we will get 37.000 references. He added that CSR has
never been about consumers but only about businesses. The bottom line of his critics was
connected to mistrust in CSR and no reason for consumer to buy high-priced products even if
company is hypothetically socially “responsible”. His conclusion was that if companies
engage consumers, then it is possible to harness CSR to transform markets69. On the other
hand, in Online Forum of International Organization for Standardization [ISO], consumers are
attacked with thoughts that „most people will do almost anything to save the planet as long as
it does not involve any personal inconvenience. So if they can demonstrate their concern by
filling their petrol-guzzling Jeep Grand Cherokees and Dodge Durangos with CSR-friendly
Shell instead of fuel from some less socially aware oil company, they may feel a little less
guilty about sitting in a traffic jam pumping greenhouse gases into the atmosphere while the
public transport system falls into decrepitude“70. Consumers’ approach toward CSR is
generally assessed to be more attitudinal then behavioral.
In general, “true” motivation at the back of CSR is what is judged and disliked.
Deputy Editor of the Economist explained that “for most companies, CSR does not go very
deep. For most conventionally organized public companies, which mean almost all of the big
ones, CSR is little more than a cosmetic treatment“. He also acknowledged that for anything
that advances the company they should not get applause or an extra credit.
In The
Economist71 it is shown that the charitable contributions of FTSE 100 companies (including
gifts in kind, staff time devoted to charitable causes and related management costs) averaged
just 0.97% of pre-tax profits. A few give more; many give almost nothing (though every one
of them records some sort of charitable contribution). The total is not exactly startling. The
figures for American corporate philanthropy are bigger, but the numbers are unlikely to
68
National Consumer Council. 2005. <www.ncc.org.uk/pressinfo>
Ibid.
70 Kernaghan, Webb. “Investors as Drivers of CSR”. International Organization for Standardization. Online
Forum. (9 October, 2001). 2005.
<www.iso.org/iso/en/comms-markets/sr/background/messageboard/2001-10-09.html>
71
“The good company“. The Economist. January 20th, 2005.
<http://www.economist.com/displaystory.cfm?story_id=3555212>
69
28
impress many CSR advocates72. „Cynics may see it that way, but our feeling is that CSR
should never be used as “window-dressing” by companies who say one thing in public and do
another behind closed doors. It cannot be denied that the link between CSR and a company’s
reputation is increasingly being held up as a reason for embracing the concept, but critics
must also admit that it would be very difficult for a company to fake CSR in the long run“73.
There are always exceptions and positive illustrations. For instance Shell moved
forward to assimilate social, environmental and economic concerns into its decision-making
at all levels. They want to be more proactive and to “move on from what we might call
corporate philanthropy, which often meant handing over money and sitting back, to the more
structured approach of social investment"74. Controversially, the chairman of Shell was
criticized by The Financial Times for the perception that he “spent more time trying to
convince environmentalists of Shell's commitment to sustainable development than reassuring
investors that he was aware of the growing gap between Shell's performance and that of its
peers”75. However, Shell is not the only example. With a minimum effort, it will not be too
problematic to find companies with effectively measured and verified CSR successes.
Criticism brought by the various economic experts is directed to CSR demands placed
on companies’ vital business. Tight spot is created around the question what exactly
businesses generate from CSR and what they lose in the process of “giving the capitalism
more human face”76. Besides Henderson, who is a hard core opponent, there is also Ethan
Kapstein, professor of economics and political science at Insead, the French business school,
whose article "The Corporate Ethics Crusade" appears in Foreign Affairs magazine77.
Common feature of all their arguments is fear that “CSR distracts business from business and
CSR activists threaten businesses, investor interests, jobs and the free enterprise system”78.
Some of arguments given by different businesses are:
„Businesses are owned by their
shareholders - any money they spend on so-called social responsibility is effectively theft
from those shareholders who can, after all, decide for themselves if they want to give to
charity. The leading companies who report on their social responsibility are basket cases - the
“The 2004 Giving List”, Britain's Guardian. The Economist. 2005.
<www.economist.com/displaystory.cfm?story_id=3555212>
73
CSR Europe. Frequently Asked Questions. 2005. <www.csreurope.org/aboutus/FAQ/#affect>
74
Shell. 2005. <www.shell.com>
75
Friedman, Milton. “Why is Corporate Social Responsibility a Threat?” The Social Responsibility of a
Business is to increase its profits. Jan. 23, 2004. Free Enterprise Action Fund. 2005.
<www.freeenterpriseactionfund.com/about.html >
76
Henderson, David. Misguided virtue, False Notions of Corporate Social Responsibility. London: Institute of
Economic Affairs. 2002.
77
Ibid, Kernaghan
78
Ibid, Friedman
72
29
most effective business leaders do not waste time with this stuff. Our company is too busy
surviving hard times to do this. We can not afford to take our eye off the ball - we have to
focus on core business. It's the responsibility of the politicians to deal with all this stuff. It's
not our role to get involved. “79 It is probably necessary to pay attention to such arguments
against CSR as they are coming from businesses that are supposed to implement it. Yet it can
be of great importance to grant enough time for opponents to digest values and CSR as such.
Of course, business should not be under constant pressure to produce something that is
socially responsible. Core purpose of business is to create profit and it should not be forgotten
that profit employs people and, thus, tackles an important social issue. Even though such
attitude seems to be contradictory, it is not. CSR is not a threat to business, profits and
capitalism. It is a win-win solution for both business and society in global and national
framework. It combines needs, possibilities, capabilities of all parties included aimed at
reaching optimal scenario for community solutions.
3.3
Facts and Highlights
 94% of company executives believe the development of a Corporate Social Responsibility
(CSR) strategy can deliver real business benefits. (Source: Ernst & Young survey, 2002)
 1 out of 3 international executives think that social responsibility initiatives will increase
sales. (Source: Hill & Knowlton's Corporate Reputation Watch, 2002)
 71% of CEOs would sacrifice short-term profitability in exchange for long-term
shareholder value when implementing a sustainability programme.
(Source:Pricewaterhouse Coopers annual CEO survey, 2002)
 More than 100 empirical studies published between 1972 and 2000 have examined the
relationship between companies’ socially responsible conduct and financial performance.
In these studies, the majority of results (68%) point to a positive relationship between
corporate social performance and financial performance.
 The London Business School confirms these findings and has identified 80 studies on
CSR, of which 42 demonstrated a positive impact, 19 found no link, and 15 produced
mixed results and only 4 showed a negative impact (Smith, 2001).
“Arguments against CSR”. Mallen Baker. ( April 2nd, 2001). 2005.
<www.mallenbaker.net/csr/CSRfiles/against.html>
79
30
 Companies with a public commitment to ethics perform better on 3 out 4 financial
measures than those without. These companies also have 18% higher profits on average.
(Source: Institute of Business Ethics, 2003)
 A study of “stakeholder superstars” (including Coca Cola, Procter and Gamble, Johnson
& Johnson) showed that companies who consistently try to take into account its
stakeholders opinions outperformed the S&P 500 by more than twice the average over the
past 15 years. Total shareholder return was 43% over the past 15 years, while the total
shareholder return from the S&P 500 was 19% (Schmidt, 2000).
 In Europe, green, a 2001 CSR Europe/Avanzi study found that social and ethical funds
have grown by more than 58% in only 18 months (over the period 1/00 to 06/01). There
are currently almost 300 SRI funds in Europe.
 86% of investors believe that social and environmental risk management improves a
company's market value in the long term. (Source: CSR Europe/Taylor Nelson Sofres,
2001)
 In the US, the Social Investment Forum reports that there was more than $2 trillion in
assets under management in portfolios that use screens linked to ethics, the environment,
and corporate social responsibility.
 Socially responsible investment accounts for nearly 13 percent of the $16.3 trillion in
investment assets under professional management in the U.S.
 A similar survey conducted by Russell Reynolds Associates, indicated that about 50% of
the European investors and 61% of US investors have decided not to invest in a company,
or have reduced their investment, because of poor governance practices (Russell Reynolds
Associates, Corporate Social
 70% of European consumers say that a company's commitment to social responsibility is
important when buying a product or service. (Source: CSR Europe/MORI, 2000)
 1 in 5 consumers would be very willing to pay more for products that are socially and
environmentally responsible. (Source: CSR Europe/MORI, 2000)
 CSR accounts for over 25% of image and reputation impact on customer satisfaction.
 78% of employees would rather work for an ethical and reputable company than receive a
higher salary. (Source: The Cherenson Group,2001)
 Companies that introduce competitive employee benefit programs can decrease company
costs related to absenteeism, turnover, disability and health-care claims by 30%. (Source:
Medstat Group/American Productivity and Quality, 2001)
31
4
Corporate Social responsibility in Bosnia and Herzegovina
“Three years of war (1992-1995) destroyed the economy, and infrastructure, in Bosnia
and Herzegovina, causing unemployment to soar, as well as the death of about 250,00080
people and displacing half of the population. Bosnia has been facing a dual challenge: not
only must the nation recover from the war, but it also has to finish the transition from
socialism to capitalism”81. Gradually, BiH moved from emergency status to development
programs and capacity building.
Hence, in the process of recovery in terms of
competitiveness and endurance, many requirements emerged for BiH companies and
economy in general. Consequently, CSR in Bosnia and Herzegovina is still developing and
facing hurdles typical for countries in transition. In this chapter, the specific case of CSR in
BiH is outlined and key players are identified.
Key words related to this chapter are: Global Compact, tax revenue system, ethical
code of conduct, EU integration, and triple bottom line
4.1
CSR overview
Bosnia and Herzegovina as a sovereign country at present, and a part of socialist
Yugoslav system previously, has a long tradition of having the state as a main actor in
regulating social welfare, social rights, economy, helping the poor, community development
and so forth. As a result, “mentality” that exists on various stakeholder levels can be defined
as state dependency. However, attitude that the state will deal with all social problems can not
be prevalent any longer. Currently, there is a global trend towards a reduced role of the state
in the social welfare and involvement of other stakeholders such as the business sector is of
considerable importance. In this respect, experience shows that during the period of socialism
in BiH, companies have participated in social issues. “Individual and corporate donations and
sponsorships by firms to sport clubs, cultural events, the disabled, and children were common.
The socialist period also left a legacy of high levels of protection of labor rights and core
labor standards”82 Therefore, despite the fact that CSR is not officially documented
nowadays, different CSR initiatives can be found even tough they are not recognized or
articulated as CSR practice.
80
This number changes depending on source
“Economy of Bosnia and Herzegovina” .Wikipedia. 2005.
<www.answers.com/topic/economy-of-bosnia-and-herzegovina>
82 Bagic, Aida, et al. “Overview of CSR in Croatia” Ed. Kim Perlow. Zagreb: Academy for Educational
Development, 2004. < www.aed.hr/en/dokumenti/200403_CSRreport.pdf>
81
32
In order to briefly asses CSR case in BiH, the triple-bottom-line criteria will be used as
a tool. Triple bottom line includes three areas in which companies are expected to deliver
impact. “First one is economic profit: a company must be able to produce an economic
surplus in order to survive. This is not only a goal in it self, but a means for providing other
social goods, such as employment. The second bottom line is the environmental impact of the
company. The operation of most companies have effects on the environment, and many have
now introduced ‘green accounts’ in order to make visible the environmental impact of a
company. The third bottom line is the social impact. This relates to company’s concern for
human beings both internally (the employees), and externally (the society at large). For
example, internally, it is about improvement of health, environment and security conditions,
giving to employees a possibility for further education, and avoidance of discrimination of
any groups of employees (e.g. ethnic minorities, gender minorities, etc.). Externally, it may
involve a variety of topics such as concern for human rights, working conditions in supply
companies, corruption, sponsoring and contribution to the local community”83.
Regarding the first bottom line, “Bosnia and Herzegovina (BiH) is a lower middleincome country with a gross national income per capita of US$2,040 in 2003. Approximately
61 percent of GDP is created in the service sector, 23 percent in industry, and 11 percent in
agriculture”84. “More than half of total BiH income is controlled by 20 companies, of which
several are still state owned85. In 2004, Elektroprivreda BiH had largest income which
amounted to 645 million KM, while BH Telecom had largest profit equivalent to 164 million
KM86. “Taking into account the population living below the poverty line the most pressing
problem, however, is how to maintain the current level of economic spending and social
programs, given the fact that external financial support seems to be gradually waning”87
Intentionally, BiH is to be less dependent on foreign financial aid and more directed toward
private investments and business driven development. Data on transition economies88, such as
BiH, has shown that small and medium-sized enterprises are the leading movers in job
creation and new investments. Hence, it is reasonable to expect that SMEs will play an
Bull, Benedicte. „Corporate Sociial Responsibility: The Norwign Experience“. Centre for Development and
the Environment (SUM). (March 19th, 2003). 2005.<www.iadb.org/etica/Documentos/chil2_bul_respo-i.pdf>
84
“Bosnia and Herzegovina: Country Brief”. World bank. 2005. <www.worldbank.org>
85
Such as: Klas, Bosnalijek, BH Steel, Energoinvest, Sarajevska pivara, Fabrika duhana Sarajevo,BH Telekom
etc.
86 Metiljevic, Asim.” Vise od polovine prihoda u BiH ostvaruju drzavna preduzeca”. Bosna. 455. 4 August
2005: 43.
87
Hukic, Mersiha. “Rebuilding BiH: achievements and difficulties”. Centre for Balanced Development (CBD).
(February 9th, 2000). 2005. <http://i-p-o.org/rebuilding-bosnia.htm>
88
Croatia, Slovenia. Poland etc.
83
33
important role in the reinvigoration of the BiH economy. Approximately 2000 state-owned
large companies that dominated the economy in pre-war BiH, are presently privatized, or have
already been privatized.89 For example, employment generation through private sector, mainly
SMEs, proved to be a very efficient tool in small undeveloped community in BiH such as
Kalesija where 42% of people were employed by private companies during the privatization
process. Business sector appeared to be the foundation for economic development in this
municipality90. “Increased employment in farming can also have a positive effect on the
return of displaced persons in both entities since many farmers are still living in houses in
cities, waiting for development and employment in their villages of origin”91.
Conversely, it is very difficult to measure exact number of jobs created by the
private sector in Bosnia and Herzegovina. “Tax rates on labor are high, discouraging hiring of
new workers and increasing incentives for gray market employment. Many employers
underreport their labor force in order to avoid paying taxes and benefits. Official
unemployment is approximately 41%, although given the large gray economy; some World
Bank estimates place actual unemployment at around 17%”92. In the analysis of the post-war
labor market in BiH, it is evident that most of the unofficial employment is in the private
sector including youth and low-educated individuals. However, it is also evident that, in
comparison with the other two sectors, the business sector contributes higher net positive
employment growth.93
It is important to underline CSR perspective in relation to the privatization process
in BiH. It seems that fear that the privatization process will cause unemployment was not
realistic. Data shows that companies decreased their work force; however, this was not a
dramatic decrease. Companies with higher profit, in contrast to companies that registered
deficit, managed to maintain majority of staff. The situation is similar with bigger companies
vs. smaller ones. Privatization contributed to CSR in terms of providing chance for vulnerable
Lepsøy, Håkon, et al. “Private Sector Development in Bosnia and Herzegovina”. NIS strategy.
NORAD’Department for Latin America, the Middle East and South Eastern Europe. (May 16th, 2002). 2005.
<www. unpan1.un.org/intradoc/groups/ public/documents/UNTC/UNPAN019072.pdf>
90
“Upravljanje i Razvoj. Stvarna priča o rastu privatnog sektora u Bosni i Hercegovini”. ESI studija. 2005.
<www.esiweb.org/docs/showdocument.php?document_ID=31>
91
Ibid, Lepsøy
92
“Bosnia and Herzegovina: 2005 Investment Climate Statement for Bosnia and Herzegovina” U.S. Department
of State. 2005. <www.state.gov/e/eb/ifd/2005/41986.htm>
93
“Labor Market in Postwar Bosnia and Herzegovina: How to Encourages Business to Create Jobs and Increase
Worker Mobility“. World Bank. Report No. 24889-BIH. (November 4th, 2002). 2005.
<www.esiweb.org/bridges/bosnia/WB_LabourMarket.pdf >
89
34
groups such as youth and females to get employed94. However, some other negative aspects of
privatization in terms of CSR and ownership will be mentioned in next chapters.
Regarding the environmental issues, and the second bottom line it can be argued
that “because of the concentration of heavy industry, BiH was heavily polluted before the
war. The economic downturn after the war with industrial closures has therefore had
beneficial effects on the environment”95 Nonetheless, because of the use of old technology in
heavy industry it can be difficult for BiH economy to fulfill the countries obligations, which
would in a straight line influence creation of the financial basis for implementation of
environmental law96. Yet, Bosnia and Herzegovina is a state party to different international
agreements and it restarted the process of re-ratifying everything what was ratified in former
Yugoslavia. The tempo of the process differs between the Federation of BiH and Republic of
Srpska. The RS has already adopted what is still pending in the Federation. „Currently there
are activities in the Federation on preparation of The Law on the Environmental protection97
and Law on the Natural Protection. In accordance with the environmental laws, the secondary
legislation is currently undergoing the preparation and harmonization process with the EU
environmental legislation The environmental legislation requires from the enterprises to
obtain adequate permits/grants for their activities (the environmental permit, to meet the
requests for waste management, to establish monitoring system, reporting, polluter-pays
principle etc)”98 However, there is little emphasis on environmental issues in enterprises. As it
was mentioned, the laws are in place, harmonized with the EU systems, but so far little has
effectively been done to reduce pollution, save energy or secure proper handling of waste
material99.
Different initiatives have been created to support companies in adopting standards
related to the environment, management systems that are environment friendly. “Project
"Capacity Building for Implementation of Environmental Management System (EMS) based
on ISO 14001 – POEMS-BiH" is initiated by Center for Environmentally Sustainable
Development [CESD]100 and has as an aim to “build capacities in SMEs in BiH for
94
Ibid
Ibid, Lepsøy
96 Stefanovic, Djordje. “Report on the current status of acceptance and impanation of environmental law”. The
Regional Environmental Center. (2003).2005. <www.rec.org>
97 Draft Law on the Protection of the Environment, Draft Law on the Protection of the Waters, Draft Law on the
Protection of the Nature , Draft Law on Waste Management, and Draft Law on the Protection of the Air.
98 “Infrastructure and environment”. WKO.at. (5.-7. April 2005). 2005.
<www.portal.wko.at/wk/dok_detail_ file.wk>
99 Ibid, Lepsøy
100 “Project: Capacity Building for Implementation of Environmental Management System (EMS) based on ISO
14001 – POEMS-BIH"”. CESD. 2005. <www.coor.ba/en/aktivnosti.html>
95
35
introduction and implementation of environmental management system (EMS), as well as
internal auditing for EMS certification based on ISO 14001. This project will enable the
companies’ project participants to implement these activities step-by-step, with the final aim
of implementing EMS based on ISO 14001 and become ready for final certification by some
of the authorized certification bodies”. The four SMEs including Sarajevska Pivara,
Vegafruit- Mala Brijesnica, Zica - Sarajevo, Mebos - Samac, and two other SMEs Ferimpex Zavidovici and Vlasic Milk- Karaula/Travnik expressed their interest in participating in the
POEMS-BiH project. “The ISO 14001 was designed to provide any type of public or private
organization with environmental management systems standards. Companies adhering to the
ISO 14001 implement environmental management systems, conduct environmental audits,
and evaluate their environmental performance with guidance from the ISO”101. Based on BiH
Chamber of Commerce data there are seven companies in BiH that have already adopted ISO
14001.
Because of the complicated political system, and unclear jurisdiction over
environmental issues, the situation is hectic in terms of monitoring, controlling, approving,
disapproving any activity that is potentially environmentally questionable. Hence, there are
companies not taking into account environmental issues. For example, Finvest Drvar has
allegedly been engaged in unsustainable logging for over 9 years in Drvar area. Also, newly
privatized zinc mine, Sase Srebrenica, has been reported as a polluter of the rivers in
Srebrenica. As Bosnia has the third largest forest reserve in Europe, the issue of illegal
deforestation is the most relevant issue when discussing CSR and natural environment in BiH.
It directly influences soil erosion, courses of the rivers, and may cause further ecological
crisis. Eko Gorani, a Bosnian Environmental NGO, said that they raised an issue of illegal
deforestation and urged 10 Federation Cantons to halt uncontrolled deforestation. However,
they have never received an answer from any of the authorities. Sarajevo Canton claims that it
is countering the activities of the illegal loggers by restoring damaged forests and investing
1.2 million KM this year alone on activities such as tree planting”102.
The third bottom line is the most inclusive and, to a certain extent, culturally
bounded. Also, it represents what is usually considered as CSR, treatment of human beings
and community at large. The already mentioned socialist tradition to invest in local
communities and protect labor remains present nowadays in BiH. Capacities and
101
International Standard Organization. 2002. <www.iso.org>
Zornic, Ilda. “Illegal Loggers Loot Bosnian Forests”. Environment News Service. 2005.
<www.ens-newswire.com/ens/jan2005/2005-01-03-01.asp>
102
36
opportunities for companies to practice it unfortunately declined. The reason can be a lesser
amount of profit, insufficient legislation and lack of information flow between different
sectors. Still, BiH national labor legislation guarantees fair employment conditions, workplace safety, vocational guidelines and trainings, equality of opportunity and treatment etc.
BiH also ratified over 65 different International Labor Organization [ILO] Conventions
including C148 Working Environment (Air Pollution, Noise and Vibration) Convention,
1977, C142 Human Resources Development Convention, 1975 , C182 Worst Forms of Child
Labor Convention, 1999103 etc. Because of the unfriendly businesses climate and difficulties
that businesses face it is expected that their care for the community will be of minor scale.
Surprisingly, there are several good examples, notwithstanding that most of the companies
find themselves responsible to provide sponsorship for different sport and cultural events. For
instance, TV Hayat and its effort to support and cover any humanitarian action primarily
linked to Srebrenica inhabitants who live in poverty. Moreover, in their mission it is stated
that they serve the community and want to contribute to its development. Followed by this
example there is KLAS d.d. that is certified by ISO 9001 and for many years use advanced
technologies. “KLAS also continuously develops programs aimed at providing scholarship to
talented students and is one of companies in BiH that founds its future activities on the
employment and promotion of young staff”.104 Novi Grad Municipality in Sarajevo, has
initiated a project of announcing a tender for construction of a shopping center in settlement
of Dobrinja. The condition for winning the tender was that the buyer, besides building the
shopping center, also builds a sports hall and gives it over to the local community. An
unexpectedly high number of interested companies took part in the tendering procedure,
which was won by Merkator105. Also, ProCredit Bank confirmed that it t cares about the
society in which it operates. It supported Think BiH project organized by the Goethe Institute
that wants to promote Bosnia and Herzegovina within itself106.
In many developing, or undeveloped countries, low-wage labor and the unemployed
encounter mistreatment and exploitation by private companies107. In general, it is difficult to
find official and confirmed data on maltreatment of labor force in BiH. There are assumptions
and considerations related to gender and ethnic discrimination in BiH, however, there is yet a
widely accepted proof to be found. For example, there are views that females have been
103
International Labor Organization. 2005.<www.ilo.org/ilolex/cgi-lex/ratifce.pl?Bosnia>
Klas d.o.o. 2005. <www.klas.com.ba/eng/klasdanas.wbsp>
105 Metiljevic, Asim.”Merkator gradi sportsku dvoranu”. Bosna. 455. 4 August 2005:42.
106
ProCredit bank. 2005. <www.procreditbank.ba>
107 Most notably the cases of ethnic minority issues around Shell plants in Nigeria, or the treatment of workers in
the maquiladora zone on border between the United States and Mexico.
104
37
discriminated against in favor of demobilized soldiers. Also, sources point toward gender
discrimination in pay at socially owned enterprises, but not necessarily at private
businesses108. Even though women are entitled to one year of paid maternity leave, based on
data from State Department, women in all parts of the country encounter problems with
regard to the nonpayment of maternity leave allowances, and the unwarranted dismissal of
pregnant women and new mothers. However, this is not the case only in private companies, as
the same problem appears in NGOs etc. Ethnic discrimination can be illustrated by examples
like Stolac municipality where privatized companies owned by Croats do not employ
Bosniaks. Based on United Nations Development Program report on municipal development,
nontransparent and discriminatory hiring practices are visible in all BiH municipalities,
especially within public companies such as post and telephone companies, electricity
companies, and forestry companies. These companies tend to employ members of the
dominant ethnic group or political party in the given area.109
Child labor exploitation has not been officially registered in BiH. “The minimum
age for employment of children in the Federation and in the RS is 15 years. The labor
regulation in BiH prohibits children from performing hazardous work, such as night work.
Child labor is not known to be a problem; however, children sometimes assist their families
with farm work and odd jobs. There have been credible but unconfirmed reports that children
are trafficked to work in begging“110.
The issue of the disabled persons has to be taken into consideration by companies
when rethinking CSR strategies. This can be a prolific field for companies to build upon their
CSR activities. Especially having in mind the post-conflict environment in BiH, where the
number of disabled persons is rather high.
BiH Labor Law guarantees occupational safety and health regulations, overtime
pay, rest and vacations. Because of the small number of available jobs, in some cases, it can
be difficult for employees to leave even unsafe workplaces because of lack of employment
opportunities. However, it is difficult to point out any specific cases. Perhaps, the issue of
returnees who do not manage to get health insurance because they are forced to work in the
gray economy would be the most appropriate example. “Regarding social benefits, employees
and employers share the costs of health care, pension, and unemployment insurance in the
“Bosnia and Herzegovina: Country Reports on Human Rights Practices”. Bureau of Democracy, Human
Rights, and Labor February. (February 23 rd, 2001). U.S. Department of State. 2005.
<www.state.gov/g/drl/rls/hrrpt/2000/eur/693.htm>
109
RMAP consolidated report 2004. United Nations Development Program. 2005. <www. undp.ba>
110
Ibid, Bosnia and Herzegovina: Country Reports on Human Rights Practices”.
108
38
Federation, while in Republika Srpska, all of these costs are borne by employers”. The
problem appears when employers are not in position to pay benefits and employees are still
willing to stay and keep their work place.
It is important that ordinary citizens are allowed to be shareholders of companies, as it
increases their influence in the decision-making. In some cases, ownership creates basis for
CSR. However, it is widely perceived that privatization in BiH was not always performed in a
transparent manner. Furthermore, the method was not beneficial as “86 of the most valuable
companies in BiH were privatized under the principle of so called privatization by tender, and
employees by mentioned companies and citizens with average income had no practical
possibility to participate in. It was conducted in such a manner that 66% of assessed value had
to be paid in cash and the remaining part in securities. The money was transferred to the
consumer treasuries of the public administration and not to company as economic subjects.”
This was not positive for companies or for citizens and employees.
Based on the available information, associations of consumers and associations of
employees were not fully active in fighting irresponsible business practices or promoting
responsible ones. “The law in both entities prohibits discrimination by employers against
union members and organizers, in accordance with ILO standards. Practical barriers existed
for employees to bring complaints against employers, such as high unemployment, a
backlogged court system, and the large number of workers in the grey economy. Some unions
reported that employees of private companies were threatened with dismissal if they joined a
union”111. Also, number of employees’ unions is, by all accounts, smaller in private
companies than in the companies owned by the state.
Media react sporadically to the issues related to CSR. The scenario closest to CSR
advocacy occurred when USAID Media Project initiated a television program which resulted
in a government action to correct misleading advertising. “Dzepobran, a consumer protection
TV series, aired a story on one of the major grocery stores in BiH. The crew discovered that
the store's promotional campaign “Buy Three, Get One Free” was not true. Buying four
products individually would have actually been cheaper. Based on the show, a government
market inspection team came to the store the next day and initiated an investigation that
forced the store's management to admit their "mistake" and take steps to correct it”112.
Accordingly, there is no official record of issued CSR reports. Sporadic information
appears in newspapers and few companies provide brief information on their web-sites.
111
112
Ibid
“BiH in action”. USAID. 2005. <www.usaid.gov/locations/europe_eurasia/countries/ba/index.html>
39
Based on different information, cases and needs, it can be concluded that fundamental
framework for CSR exists in Bosnia and Herzegovina. It still remains debatable if there is
awareness, responsibility, know-how, and inspiration for doing it.
4.2
CSR initiatives
Several initiatives in BiH are gradually meeting the goal of directly or indirectly
promoting Corporate Social Responsibility. Various civil society organizations collaborate
with enterprising ideas and capacities, but funds are mainly insured by the international
community113. Local businesses are still skeptical, but are slowly getting involved within the
initiatives.
4.2.1 Global Compact in Bosnia and Herzegovina
As it was previously mentioned, Global Compact [GC] was one of the initiatives
created in the networking phase of CSR global promotion and development. The Global
Compact was initiated by United Nations Secretary-General Kofi Annan in 2000114. He
invited business leaders to join an international initiative – Global Compact – that would
bring companies together with UN agencies, labor and civil society to initiate and share ten
universal principles in the areas of human rights, labor, environment and anti-corruption.
Global Compact is an instrument that relies on companies’ voluntarily endeavor to be
involved in such scheme and accordingly it is not a mandatory task. Furthermore, it relies on
public accountability, transparence and business self-interest115. The Global Compact has
encouraged the creation of local networks, organized on country, or regional basis.
In November, UNDP’s Nordic Office for business partnership performed numerous
stakeholder consultations in BiH. It was concluded that there was considerable interest in the
GC and the establishment of a local network. Consequently, UNDP Bosnia and Herzegovina
decided to launch the GC and a local network in BiH. The launch will take place on
September 19, 2005 in Sarajevo.
The Global Compact pursues two complementary objectives in BiH: first, to
incorporate the spirit of the GC and its ten principles related to Human Rights, Labor rights,
Environmental sustainability and Anti-corruption, in a company’s business strategy and
operations; second, to encourage partnerships among key stakeholders for the wider
development of Bosnia and Herzegovina. The local Network will provide a countrywide
113
UN, World Bank, EC, IRC
For dates and history <www.unglobalcompact.org>
115
BiH Global Compact Launch. UNDP. 2005. <www.undp.ba>
114
40
platform for mutual learning and policy dialogue on the GC principles, corporate social
responsibility and the private sector’s role in BiH society. The basic idea behind this project
is to advance responsible business practices in BiH, to encourage business engagement in
society and to facilitate dialogue between businesses, the UN, labor organizations,
government and civil society. Gaining knowledge and inspiration on how to deal with
potential consumers’ campaigns is surely helpful preparation for companies’ future exertion.
It serves as an added value for companies’ survival techniques. What’s more, companies can
understand why is it noteworthy to properly respond to community needs articulated through
unsatisfied consumers’ boycotts. The participants of the Global Compact gain access to an
extraordinary network for learning and exchange of experiences consisting of a variety of the
largest corporations in the world, United Nations and Civil Society Organizations. The Global
Compact counts on the participation by over 2,000 companies, including Ericsson, Nokia,
Volkswagen, DHL, Daimler-Chrysler, Nestle, Nike, Deutshe Telecom, etc. But the GC is also
counting on the participation on Small and Medium sized enterprises. Participation in the
Global Compact will help BiH companies to adapt to EU values and principles. EU based
companies are increasingly emphasizing the tremendous importance of good corporate
behavior in order to stay competitive. By joining the Global Compact, BiH based companies
can learn and conduct a dialogue with many of the most successful companies in the world,
with civil society organizations, labor organizations and the United Nations. By implementing
the ten GC principles and be engaging in society, BiH companies can display its commitment
to high standards and thus become more attractive as a business partner for EU based
companies and meet increasing consumer demand for corporate social responsibility
UNDP, in the course of GC, entered into partnership with Foreign Trade Chamber for
the reason of having a strong partner with reliable links to different stakeholders, companies
and investors. They are jointly supporting the process of establishment of a local BiH Global
Compact Network consisting of companies, civil society organizations and the UN
agencies116. Governmental officials or agencies are not necessarily part of GC in BiH.
Common for many GC Networks is that it is a “business governed initiative”117 and the very
same principle shall be kept in BiH. GC BH Network Secretariat will be placed in UNDP and
once the Network reaches its sustainability Secretariat can be moved to Foreign Trade
Chamber or to different businesses on the rotation basis, depending on stakeholder interest.
116
117
Ibid. BiH Global Compact Launch
Silborn, Patrik. UNDP. Personal Interview. June 22nd 2005.
41
It is decided that BH GC Network will initially focus its attention on fighting different
forms of corruption and its supporters. Luckily, nearly all contacted BiH companies expressed
positive opinions on idea of having local GC Networks118 and, hopefully, majority of them
will officially join this effort. The procedure is fairly simple, by sending a letter to CEO Kofi
Annan a company is automatically integrated into this eminent global movement, yet
structurally belonging to a local Network. The companies are than expected to, in order to
integrate the ten principles into their strategy and operations, set in motion changes in their
business principles. Also, the companies are obliged to, once a year, publicize in a report
(stakeholder report, annual corporate report, etc.) the progress of integrating the principles and
engaging in society. Even with the very poor knowledge on CSR, and GC principles, BiH
companies can play a critical role in GC Network development by actively taking part.
Chance for further trainings will be given to members of GC through series of round tables,
discussions, and best practice models, which will surely upgrade their knowledge and
contribute to experience sharing.
Hence, GC should become the central meeting point for different stakeholders
concerned about CSR in BiH and parties eager to contribute. GC presents all-inclusive
contemporary approach that integrates and consolidates all important features of CSR ranging
from advocacy, through concrete actions, to final reporting and transparency. The advantage
of being a part of GC is that company will not be in a position to single-handedly cope with
changing social requirements related to CSR. Also, GC is a great opportunity for a company
to be promoted inside of local and international markets. The number of truly dedicated
supporters to GC in BiH can be used as an indicator for further CSR analysis and
development strategies in terms of measuring the exact potential and interest. Other
stakeholders can play a role as watchdogs, educators, campaigners etc. NGOs should glue
their initiatives and efforts to existing GC process and try to put forward ideas and actions
corresponding with GC main principles. BH GC Network launching event is planned for
September 2005.
4.2.2 Ethical Code of Conduct and Corporate Governance Codes
Different codes manage and shape internal and external corporate behavior. Ethical
corporate code determines basic roles and duties within a company, and companies’ relation
with external environment. Corporate governance code provides standards for governance
118
Silborn, Patrik. UNDP Personal Interview. June 5th. 2005.
42
structures, transparency and disclosure, equitable treatment of shareholders and their
protection etc. This set of codes mutually contributes to corporate performance, hence, to
CSR. Moreover, it includes fortification of interests of both the stakeholders and the
shareholders. Also, neither code means anything if not practically adapted to company’s
environment and implemented on daily basis.
In relation to development of corporate governance system, two initiatives are taking
place in Bosnia and Herzegovina. Initiative undertaken by Canton Sarajevo Chamber of
Commerce [KSCK] is an effort to promote and establish Ethical Code within companies.
KSCK in cooperation with Chambers of Commerce from Belgrade, Ljubljana and Zagreb
discussed their liability in the field of socially responsible manners of companies. Chambers
from Sarajevo and Zagreb have drafted text and a manual of Ethical Code of Conduct for their
members, which is at present subject of discussion and adoption. They moved even further
and wrote societal mission for all Chambers of Commerce in the SEE region. In short, this
mission implies their role in creation of CSR and realization of corporate ethics through
accepting Ethical code of conduct to be Chamber based and then Code of conducts tailored to
different corporate branches119.
Another initiative is implemented by the European Commission Delegation in Bosnia
and Herzegovina [EC Delegation] and “it is part of EC Delegation wider efforts to support
improvement of legal framework for capital market development in BiH and enhancement of
operations and work of main players in capital markets, including Privatization Investment
Funds and joint stock companies”120. Based on their assessment, BiH does not have a
corporate governance code. Security Commission of FBiH, which strives to regulate corporate
governance related issues, has the authority to prescribe standards for protection and it is
responsible for regulation and monitoring of the application of corporate governance standard.
Until now they have issued three sets of standards which are, according to EC Delegation
expert’s assessment, response on identified issues such as organization on shareholders’
meetings of registered joint stock companies and privatization investment funds, rather then
comprehensive recommendation on good corporate governance121. It is evident that issues
important, not only for internal company management, but for society as whole, in terms of
transparency, rules and responsibilities of boards, are not yet covered by these standards.
Grebo, Kemal. “Regionalna inicijativa privrednih komora u promociji drustveno odgovornog poslovanja”.
Canton Sarajevo Chamber of Commerce. March 21st, 2005.
120 Pavelic, Davor. “Corporate Governance Codes and Best Practices”. European Commission Delegation in
Bosnia and Herzegovina. April, 2005: 4 - 10
121 Ibid, Pavelic
119
43
Accordingly, the role of government can be discussed in terms of creating institutional
and legislative changes to support, not only concrete activities, but also create fertile
environment for recognition and adoption of different standards and procedures. Hence, this
paper will examine role of government in CSR in the following parts.
4.2.3 NGOs effort
Despite the fact that NGOs in BiH are not remarkably active in the field of CSR,
several NGOs have decided to endorse NGO role through concrete projects and initiatives.
Most of the projects are related to awareness raising, research and organized discussions. This
kind of approach provides good back up for any further action-oriented attitude as it will build
a comprehensive knowledge-base for effective and justified actions. CSR related perception
of NGOs in BiH can also be one-sided, as CSR is seen as a good funding mechanism once the
international donors move from this region. However, the NGOs should perceive CSR not
only as a good opportunity for fund-raising, but as a social value to be promoted.
4.2.3.1 IRC initiative
International Rescue Committee in Bosnia and Herzegovina launched a CSR initiative
in 2004 with an aim to promote CSR as framework for partnership between CSOs,
governmental institutions and businesses. Their approach was to organize round tables and
series of discussions, and to afterwards, as a final product of the initiative, set up a short-term
training program in cooperation with Sarajevo Business School and the regional Conference.
First round table took place in spring 2004 and resulted in establishment of
cooperation among Canton Sarajevo Chamber of Commerce, IRC and Faculty of Economy of
University of Sarajevo. These three parties have introduced many participants to the meaning
of CSR, current situation in BiH regarding CSR, and to what are achievable perspectives.
Respectable companies joined the round table and contributed to discussion by articulating
their experiences and points of view on the subject matter. Most of them complained how
difficult it is to cooperate with NGOs on daily basis, as there is no available time, and no
concrete idea on what can be done. Concrete idea on how to improve situation was lacking in
companies ‘opinions.
Regional Conference, which took place in March of 2005, has hosted several
businesses from Croatia, Serbia and Montenegro, and Bosnia and Herzegovina along with
NGOs and governmental representatives. It took two days of discussion to reach a conclusion
relevant for all three represented countries. Discussion included history of CSR, best practices
44
and several round tables on various topics including CSR role in media, multinationals in
BiH, innovation in sustainable investment practices, NGOs and CSR etc.
Aims of the Conference were as follows: (i) to explain the concept of CSR – raise
awareness in all sectors of society (ii) to give regional overview of the situation related to
CSR in S&M, Croatia and B&H (iii) to present successful case studies from respective
countries (iv) to give recommendations for further development and application of the CSR
concept in the region122. Interest of BiH companies for the Conference was pretty low.
Several of them appeared at this important event, but most of them refused to come because
they had no time.
Out of 55 participants, 50% were organizations from BiH, but out of these BiH
participants, less than 10% were companies. Sharing of experiences has made it clear that the
situation does not differ drastically from country to country. There is already an interest group
in Croatia actively working on CSR123 along with process of labeling different environmentfriendly products. In Serbia and Montenegro situation is not as bright as in Croatia, although
CSR is not unfamiliar term for NGOs effectively partnering with private sector in Serbia.
Good example is sustainable and innovative pool of funds, provided by the business sector in
Leskovac, used for community support.124 Situation in BiH is similar, but there is yet to be
developed a definition of CSR terminology. CSR is a fairly new term and not in wider use.
However, in all countries there are many requirements to be indemnified and measures to be
implemented in order to, promote and improve CSR. Conclusions of the Conference on how
to develop and improve CSR were defined in all encompassing manner. The most important
are as follows: (i) to strengthen co-operation between sectors of society (government,
private and non-government/non-profit sector) as co-operation between sectors has to grow
from implementing ad hoc projects to developing and nurturing partnerships, targeted towards
achievement of long-term goals for social change and development; (ii) to continue and
further develop regional co-operation as the western Balkans region has a lot of common
ground and linking elements that should be utilized for progress of entire region. Co-operation
between Croatia, Serbia & Montenegro and Bosnia & Herzegovina through exchange of CSR
best practices and formation of common informative resource, such as a web site, can greatly
contribute to faster acceptance and practical application of CSR; (iii) to raise awareness and
level of knowledge about CSR in all sectors of society since taking into account the
Daguda, Aida. International Rescue Committee. Personal Interview. March 23rd. 2005.
NGO “ODRAZ” is actively promoting CSR.
124 “Fond Izazova” established by Educational Centre Leskovac which distributes financial support given by
different businesses.
122
123
45
advancement of this concept, although fairly unknown in this region, it is necessary to invest a
lot of effort in making the knowledge about the CSR easily accessible to business, NGOs and
government representatives. Academic institutions can and should play valuable role in
creating solid knowledge base about CSR in the region. In addition, multinational companies
should take a leading role in promotion of CSR as multinational companies should be socially
responsible and after taking over a global brand, local offices of multinational companies
should inherit their business standards and values; (iv) to change legal regulations as it is
necessary to regulate legal framework within which CSR activities are implemented, mostly
tax deduction system in all three countries; (v) to further strengthen the NGO sector and
make it more professional as the NGO sector in the region has to continue with building of its
own structure, reputation and relationship with other sectors; (vi) to propound and
emphasize the role of CSR in the process of European integration as there is a European
CSR campaign in the EU currently, whose main aim is to foster involvement of CSR in
business making, as well as promotion and establishment of reward system for achievements
thus far; (vii) to continue investing in communities in an innovative and sustainable
fashion as we should get over lack of trust and abuse of donor resources through focusing on
promotion of best practices and establishment of transparent mechanisms of support in
communities; (viii) to strengthen role of media as a key factor in promotion of CSR as it
is necessary to establish coherent strategic and long-term promotion of CSR of all actors in
society (including media) through constant education of journalists, promotion of their
research and animation of key people and decision-makers in media; (xi) to propound the
role of government in promotion of CSR as government authorities should play the role of
mediator between business, NGO and all other interested parties125.
In general this was only a beginning of joint efforts “bearing in mind numerous and
complex challenges which this region is facing, as the role of international community is
lessening, as well as limited experience in building successful inter-sectored partnerships, the
promotion of CSR concept in the countries of the region presents a step forward at this stage
and valuable attempt towards ensuring that civil society becomes stronger, more productive
and sustainable”126.
“Odgovorno poslovanje za dobrobit privrede i drustva”. IRC regional Conference, minutes. 21 st – 22nd,
March. 2005.
126 Ganibegovic, Majda. International Rescue Committee. Personal Interview. March, 23 rd. 2005.
125
46
4.2.3.2 Centre for Promotion of Civil Society research
Centre for promotion of civil society [CSPD] has conducted research on CSR in BiH
that was also supported through IRC program. In this research, as is the case in all IRC
programs, CSR is mainly treated as a tool for strengthening civil society in BiH and for
providing financial support to NGOs. Therefore, 100 NGOs were contacted to enlighten their
experience in cooperating with private sector and majority of research questions were created
to follow this direction. After the research was done, the CEO of CSPD127 officially stated
that it is impossible to investigate CSR in BiH as it does not exist as concept or tangible
variables. However, research confirmed what has been previously mentioned about CSR in
BiH and its current status.
Results shows that only 1% of NGOs received permanent financial support from
different businesses or public sector and that most of them rely on international donors
stationed in or outside BiH. Forty eight percent of NGOs confirmed that they have/had
sporadic cooperation with business sector, which was mainly in form of receiving financial
grants for their activities. Number of organizations said that cooperation with the business
sector was based on service exchange. For example: (i) cooperation on municipal
development plan (ii) exchanging training for money (iii) shared humanitarian actions (iv)
participation on trade fairs etc. NGOs perception is that taxation system and the legislation
has to be improved in favor of better conditions for business to use donations as CSR tool,
and that NGOs should play a critical role in pressuring the government to impose this change.
NGOs also expressed what the biggest obstacles are to cooperation between businesses and
CSOs. In this respect, they mentioned lack of understanding about NGOs and their role in the
private sector. Furthermore, they mentioned improper presentation of NGOs toward private
sector, insufficient legislation regulating this cooperation, and uninspired tax deduction policy
in BiH etc. Valorized recognition of common capacities, values, and purpose has to be built
by both sectors as highlighted by NGO leaders, as well as high transparency from both
sides128.
Within the same research, business representatives provided their opinion and
approach to question of cooperation with NGOs129. The companies that took part said that
NGOs generally “do good” and implement useful programs. Secondly, they claim that NGOs
Sero, Fadil. Introductory speech. IRC regional Conference. March 21 st, 2005.
Šero, Fadil and Slavko Klisura. “Corporate Social Responsibility”. Research document. Centre for Promotion
of Civil Society. 2005.
129
«Klas» - Sarajeva, UPI Banka dd – Sarajevo, «Lura» - Livno, «Lijanovići» - Široki Brojeg, «Coca Cola» Sarajevo i «Bekto – International» - Goražde.
127
128
47
have to work to deserve respect from the business sector. Thirdly, they claim that NGOs are a
prolonged hand of the international community, and that NGOs have to look after their
business and let companies do their own. They also mentioned that, in a very unfriendly BiH
business environment, it is rather difficult to follow any other principle than commercial
successes. Furthermore they explained that the problem is not the companies, but the state
with low labor costs, such as Bosnia, which creates pressure on competitors to produce excess
profit. In this context, it is excess work to think about human rights. However they still have
to fight to satisfy basic consumer requirements: good price, quality, availability, security and
usefulness. Business representatives are interested in supporting NGOs, as well as to get
support from NGOs in creation of positive business environment. Exactly 50% of interviewed
companies said that they have supported NGOs but because of the legislative obstacles they
are not ready to continue. Further 25% said that they are interested to support NGOs working
with people with special needs, and 25% said that they mainly have supported sport clubs as it
was in their interest. The same companies expressed their opinion on what is necessary to be
done in order to strengthen CSR: (i) awareness raising (ii) coordination amongst business
associations and joint platform for exchanging the best practices (iii) help to companies to
incorporate and apply CSR strategies and provide CSR reports (iv) technical support to NGOs
to enable them for cooperation with private sector and information sharing130.
4.3
Policies and legislation
In BiH, polices and legislation pertaining to CSR are discussed in light of EU
integration processes. CSR is seen as an element included in the process of EU integration,
and Lisbon strategy is promoted as overall framework for CSR development. Representative
of Agency for European integration131 in BiH said that CSR is a problematic issue even in
developed countries. Hence, she claims that, for BiH, it would be best to incorporate the CSR
Strategy into the overall European integration and partnership process. Lisbon strategy132 can
serve as a benchmark for communication of priorities, and setting up prospects in the field of
CSR. Promotion of further structural reform can be seen as first step in that process. Her
Ibid, Šero, Fadil and Slavko Klisura.
Ramljak,Daria. “Drustveno odgovorno poslovanje u svjetlu evropskih integracija”. IRC regional Conference.
March 21st, 2005.
132 The Lisbon Strategy, also known as the Lisbon Agenda or Lisbon Process, is an action and development plan
for the European Union. It was set out by the European Council in Lisbon on March 2000.
<www. europa.eu.int/growthandjobs/index_en.htm>
130
131
48
examples and ideas are the following: further improvement of corporate governance133,
reduction in labor rigidities, and support to mobility of labor in BiH market. Supportive
measures will be as follows: (i) harmonization of employment and work procedures with EU
standards (ii) fighting the grey economy (iii) development of high-quality and efficient
educational and vocational systems (iv) employment procedures which will enable employers
to pay social and pension benefits (v) to allow the market to operate by reducing government
interference and lowering the ratio between government expenditure and GDP (vi) to
strengthen state-level capacity in the field of environment, ensuring the full functioning of a
State Environment Agency etc.
An issue of debate is political corruption that became an acute problem in Bosnia and
Herzegovina. “Transparency International in its 2004 Corruption Perception Index ranked
BiH 82 out of a total of 145 countries, on par with countries such as Armenia and
Madagascar”134. Corruption is widespread, encompassing business sector as well. “In view of
the wrongdoing which has been uncovered in the Special Auditors’ reports into the BiH
electricity sector135, PTT etc. the High Representative announced that he has enacted several
pieces of legislation designed to tackle corruption in public utilities. One is Law on Donations
in both Entities. This legislation will only allow public companies to give money out of
profits, and only when: (a) they are for the cultural, sport, social welfare or humanitarian
purposes; (b) the management board and the appropriate minister has unanimously approved
the decision; and (c) the donation is published in the official gazette for a certain period prior
to the gift, to ensure transparency“136. By some measures this legislation hampers CSR
efforts.
The second issue is Tax Law considering donations.137 In Federation of BiH,
contributions for humanitarian, cultural, educational, and scientific purposes, which can not
be over 0.5 of total yearly revenue, are tax deductible, as well as contributions for amateur
sports. Membership fees and contributions for professional organizations and political parties
are tax deductible up to 0.1% of total revenue. Also, up to 0.5% of total revenue can be tax
deductible for promotional activities. The Law does not distinguish between donations made
Zakon o Ekonomsko-socijalnom vijeća, Zakon o radu (BiH), Uspostava Ekonomsko socijalnog vijeća,
Uspostava sekretarijata Ekonomsko-socijalnog vijeća
134 Ibid, “Bosnia and Herzegovina: Country Reports on Human Rights Practices”.
135 the ordinary citizens and small businesses of Herzegovina who paid their electricity bills were in fact
providing free electricity and kick-backs to the HDZ’s privileged elite
136 Decision declaring the Law on Donations/Grants of the Federation of Bosnia and Herzegovina. “Official
Gazette of the Federation of Bosnia and Herzegovina”. No. 13/03 (April 2, 2003)
137
Law on Corporate Income Tax. Official Gazette of F BiH. No. 33/02 and 28/04
133
49
to natural persons, NGOs, or other organizations, as they are all considered under the same
legal arrangement. In the RS, contributions to humanitarian, cultural, educational, and sports
purposes are recognized as tax deductible up to 1% of the total yearly revenue. In RS only
donations or contributions to humanitarian organizations that are registered are tax deductible.
Membership fees and contributions to professional organizations are recognized as tax
deductible up to 1% of yearly revenue. Costs of promotional activities are tax deductible up to
3% of yearly revenue, but, as in FBiH, it seems that this rule encompasses contributions to
NGOs as well.
Many BiH companies argue that this is a rather discouraging Law regarding donation
and that it would be much easier if this Law is adjusted and used as tool to motivate
companies to be more socially responsible. In neighboring country deductible amount is
higher. For instance: Macedonia (3%), Bulgaria (5%), Albania (2%), Croatia (2%) etc.
Different systems can be used when promoting a role of tax benefits. Tax incentives for
donors are usually as follows: (i) tax deduction; (ii) tax credits; (iii) tax designation schemes –
1% Law. Deductions are the most common form of benefit granted. The important is that gift
or donation must be to foundation, association or other non-profit-organization. For example
in US, a deduction is allowed both to individuals and corporate donations. Individual
donations in FBiH are 100% deductible. In RS, individual donations are deductible up to 10%
of income. 1% Laws pioneered in Hungary in 1996 and later in Slovakia. It grants private
individuals a right to designate the use of 1% of their taxes paid to a non-profit-organization
and 1% to a Church. The donation is anonymous. It can be beneficial to enhance the role of
tax benefits in BiH. Taxpayers would have a direct influence on how their taxes are used and
the concept and existence of NGOs would be more widely known138.
Shea, Catherine. “ Promoting Philanthropy: promoting Role of Tax Benefits”. International Centre for Notfor-Profit Law. (2003). 2005.
<www.ngo.ee/orb.aw/class=file/action=preview/id=5046/286,2,Tax Benefits for Charitable Giving>
138
50
5
Empirical analysis
The research has examined and evaluated CSR as perceived by companies and
consumers. Results produced by this research are divided into two sections: (i) description of
BiH company activities based on Kotler and Lee CSR model139 (ii) overview of BiH
consumer’s attitude toward CSR. As there are several companies that are applying CSR
principles with a loose knot to modernize approach, it won’t be apposite to reflect upon all
their programs. The purpose of the Case study is to present company whose CSR model can
be currently endorsed as best practice example in BiH. Consumer’s attitudes are quantified
and should be perceived as an indicator of trends in BiH, and not as an indicator of actual
consumers’ behavior or ultimate opinion.
5.1
Case study
This research is an in-depth case study of one company who has been involved in
implementing CSR activities.
Semi standardized interview was used to gather data necessary to develop a case study
narrative. Questions are structured from more general inquiring basic information on the
subject of company, then with focus narrowed to more specific and related to CSR activities.
Company selected for Case study is PC Kids d.o.o from Bosnia and Herzegovina. The
interview was conducted with current company chief executive officer [CEO].
5.1.1 Basic information on PC Kids
PC KIDS d.o.o is a BiH company dedicated to information technology and
representation. It is located in Sarajevo with main service related to creation and maintenance
of computer networks of all sizes. Also, they work on installation and maintenance of
software. In short, they vend and mend computer equipment. All 140 PC Kids employees are
certified by either HP or some other brands. The company was created in war when, at that
time, daily newspaper Oslobodjenje employees imported the first computers via using
available channels in Dobrinja. Today, PC Kids is the most successful computer company in
BiH. Their main partners are Hewlett-Packard's enterprise, Microsoft140, APC Legendary
reliability141, and Enterasys Networks142
Kotler’s Six options for doing good
Certified for importing and representing
141
PC Kids certified partner, APC creates delighted customers by improving the manageability, availability and
performance of information and communication systems through the rapid delivery of innovative solutions to
real customer problems.
139
140
51
5.1.2 PC Kids CSR Records
PC Kids signed contract with its main American partner HP aimed at implementing
project “PC KIDS helps to displaced persons in BiH”. They initiated this action by asking
themselves a question: What business can do to help community? An eminent problem of
refugees, returnees and displaced persons who live without secured homes or in devastated
houses has appeared as priority area to tackle with their premeditated aid. Basic idea was to
insure funds for these groups in need to build or refurbish or fully reconstruct the houses. PC
Kids and HP conducted a need analysis and entered into partnership with different
associations dealing with displaced person and refugees by providing service to this group.
They have made list of 50-60 different associations, verified and assed their status in order to
finalize agreement. Agreement consists of role and responsibilities of both parties describing
PC Kids and HP as finance provider and association as finance distributor and monitor.
Money was collected in a form of taking a percentage of profit earned on computer sale and
giving it to Fund established by associations. Each and every purchaser had full freedom to
decide in which Fund money should be sent. This was not controlled by company or
association. It happened that aid from Sarajevo goes to Bjeljina, from Mostar to Banjaluka
and similar. After showing proof that money was paid in some of the offered funds, consumer
could buy computer for price not including tax. Buyers were individuals with altruistic
motives and different organizations such as BH Telekom, American Embassy, different
Banks, Elektorprivreda that wanted to support action. 50 different companies participated in
Action by ordering computers and other equipment. Some of the companies requested that
organizers should buy material for reconstruction instead of giving money to refugees.
Action takes place during the religious holidays, the time which is considered as
“giving” months. HP and PC Kids contributed with 5% each to total financial aid. Action is
organized each year for already 6 years. Annual collected support exceeds 38.000 KM and up
till now they have provided support in amount of 430.000 KM. This brings them on the first
position as the biggest private donor of all companies in BiH ever invested in charitable
cause. PC Kids benchmark is to exceed half a million KM with collected financial support. In
their opinion the biggest obstacle to the amount collected is that they have to pay taxes on
donation. Around 300 000 different families applied to receive support from different Funds
created through mentioned action. PC Kids employees actively participate in preparation of
the Action.
142
Elite partner
52
PC Kids in addition support children with Morbus Crohna and Ulcero Collitis. They
sponsored CD „Diseases is not the end“143, which was dedicated to raise awareness on this
ailment and raise support for people suffer from it. In addition, 70 famous artists donated their
songs or melodies to CD. PC Kids also provided financial support to association dealing with
Morbus Crohna patients. Employees also voluntarily participated by visiting children,
collecting food and clothes, etc.
There is neither report issued by PC Kids nor information can be found on their website or HP web-site. Prior to the Action they organized press - conference and announced
when Action will start and basic criteria and aims.
PC Kids logo sometimes appears among logos of sponsors of different sports or
cultural events.
5.1.3 PC Kids CSR analysis
Analysis of PC Kids CSR activities based on Kotler and Lee model shows that PC
Kids commits to making contribution to society based on cause related marketing,
philanthropic action and community volunteering.
Project “PC Kids help to displaced persons in BiH” is a typical example of Cause
related marketing through which company match consumer contribution (5% HP and 5% PC
Kids) related to specific product: computer in PC Kids case. It is also recognized that Action
follows specific time frame which is holiday’s time in PC Kids case. Both characteristic are
pretty common to world wide Cause-related marketing initiatives considering product links
and agreements with communities. As cause related marketing depends on consumer action
PC Kids demonstrated that it si possible to rely on BH society when solving problems and
developing communities. However it is also a risk, as whole initiative depends on consumer
response. Fortunately, this is very successful initiative in terms of involving broader range of
stakeholders, creating partnership in order to encourage community to take responsibility and
ownership over the results. Hence, PC Kids managed to implement very formal agreements
and coordination with charities which is also very typical for CRM. PC Kids succeed in
choosing a good cause that is visible and important for all communities in BiH: help to
refugees, returnees and displaced persons. In this particular case, cause was sufficiently
enough attractive to mobilize companies and citizens. The same goes for specific product.
CSM is very much associated with products that have mass market appeal and large
“Disease is not the end” is a huge project sponsored by PLIVA company with an aim to help patients
suffering from Morbus Crohna and Ulcero Collitis
143
53
costumers’ base. Computers are product of that kind. Benefits for company implementing
CRM are mainly related to marketing as such. Different reports showed that consumers are
more likely to switch brands or retailers to one associated with good cause, when price and
quality are equal. Even though, PC Kids does not articulate clearly benefits related to the
Action there are different magazines affirmatively writing about PC Kids humanitarian
motives and behavior144.
Second PC Kids project supporting Association for Morbus Crohna and Ulcero
Collitis represents mixture of Corporate Cause promotion and Corporate Philanthropy.
Corporate Cause promotion is indicated through supporting CD with an aim to raise
awareness on specific issue: Morbus Crohna and Ulcero Collitis. However, this is good
approach if corporate wants to strengthen its image but it is always better to chose cause
which is in line with corporate mission. In PC Kids case it would be beneficial to promote
programs for children with difficulties in using or learning computer skills or to go for
behavioral change and encourage children to read more books instead of only playing
computer games. To go even further, it will be logical to invest in this action if PC Kids
intends to employ people suffering of mentioned diseases. Otherwise, it was not the best
selected program for PC Kids to support and promote. Cause promotion can also leave
company without long term marketing outcomes as visibility for the corporation can get lost.
Investing in CD as sustainable promotional material is not very efficient as CD can also be
used one day and second day will be replaced by other music. Materials like CDs, T-shirts,
sport caps, etc. are not always the best solution for company to promote its involvement in
Cause promotion. For PC Kids, it can be also difficult to track results for the company from
the promotional effort but also to track results of expenditures and non-monetary contribution.
The main sponsor of an initiative Pliva is for the logical and visible reasons included. It is
company producing medicines and indirectly treating diseases. For PC Kids there is not
interest for co-branding in this area, and that is what usually attracts companies to cause
promotion.
Besides CD, PC Kids provided pure financial aid to Association which can be
accredited as philanthropic giving. Philanthropic giving was pioneer model for many
companies to invest in society. As CSR is still in the development phase in BiH it is
expectable that many companies will immediately chose this model. It is good way for
company to show interest but it is very short-termed in terms of building continuous CSR
“Sedmica u Fokusu”. Dani. February, 2004. 2005.
<www.bhdani.com/default.asp?kat=fok&broj_id=348&tekst_rb=3>
144
54
practices. PC Kids provided direct contribution to a cause in a form of cash grants. The
biggest critic is again directed to cause that does not reflects PC Kids mission and main
business performance areas. Also it would be beneficial for PC Kids to establish systematic
program for grants distribution, with clear criteria representing its goals, monitoring and
evaluation.
The final PC KIDS effort remaining on the list is in-kind contribution to community
through involvement of employees in concrete projects. According to their sayings this has
contributed to team building and employees commitment to the company. PC Kids employees
donated their times and talents in the field of humanitarian work for children in hospital and
poor children. This effort produced results on two levels. One level is direct impact on
targeted beneficiaries. Second level is related to development of voluntarily spirit among
employees and in community. Generally, companies advanced in this area chose to organize
volunteer work of their employees through web-sites listings, existing offers, or awarding
cash grants where employees spend a time or providing paid time off during the year to do
volunteer work. PC Kids chose to support volunteer engagement of its employees based on
their humanitarian motives and needs. However, it is a far from systematically organized
volunteering program within the company.
Despite the fact that PC KIDS is the highly regarded and foremost organization in the
field of community development in BiH it seems that for the management of the company it is
not clear what such efforts means for company business and its growth. The described
projects are not internally recognized as CSR program or initiative. CEO of the company is
not even familiar with CSR concept and she claims that only motive for them is associated to
humanitarian goals and that company does not track or expect potential benefits to be brought
to the company145. In researches overseas it is shown that 94% of company executives believe
the development of a CSR strategy can deliver real business benefits146 or 1 out of 3
international executives think that social responsibility initiatives will increase sales 147.
Consequently, PC Kids do not issue CSR report by taking a risk not to act in transparent
manner. As HP is the main partner to PC Kids and partner in their humanitarian projects it can
easily be concluded that idea came from this world well-known leader in CSR. Idea however
is not still fully digested by PC KIDS management who act as being uncomfortable to
acknowledge PC KIDS benefits from CSR activity.
145
Sabic. Amira. PC Kids CEO. Personal Interview. February 2005.
Ernst & Young survey, 2002
147 Hill & Knowlton's Corporate Reputation Watch, 2002
146
55
5.2
Basic Customer Attitude Survey
Basic Customer Attitude Survey focuses on measuring customer’s perception of CSR and
how important for customers is if company delivers in this manner. Consumer perception
indicates consumer interpretation of current situation related to CSR. This interpretation
depends on various factors: media, knowledge, experience, availability of information etc.
Why measure consumer perceptions of CSR? What did we plan to learn?
“Purchase behavior is driven by many factors such as personality, ages, culture, social
surroundings etc. and consumers purchase based on perceived wants and needs. There are a
number of reasons that a consumer may assign positive or negative value to the product,
regardless whether it fits these needs or not”.148 Many researches showed that companies that
act in socially responsible ways are generally evaluated more positively by consumers than
companies not known as socially responsible.149 “Researches also indicate that consumers do
vary on their responsiveness to CSR. For example, Webb and Mohr (1998) found a number of
interviewees who said they shopped based on price, quality, or convenience rather than
choosing retailers because of the social causes they support. Experimental studies, however,
have generally found a positive impact of CSR.”150 A 2000 CSR Europe/MORI poll found
that 70% of European consumers say that a company's commitment to social responsibility is
important when buying a product or service, and 1 in 5 would be very willing to pay more for
products that are socially and environmentally responsible. “A company's commitment to
sound labor practices, environmental stewardship and good community relations plays an
influential role in how it is perceived by the public, especially in developed countries. The
effect can also be seen, albeit to a lesser degree, in developing countries. In 20 developed
countries surveyed, CSR-related factors collectively accounted for 49% of a company's
image, compared with 35% for brand image and just 10% for financial management.
Conventional activists 'demand that corporations fulfill their operational responsibilities - that
is, duties they encounter in the course of their businesses. Social activists, on the other hand,
'expect companies to exercise citizenship by going beyond the sphere of their everyday
operations and playing a socially minded leadership role'. Conventional activists are more
Flaubert, Gostave. “Theory of consumer perception”. Ed. Dana Dieckman. 2005.
<www.ciadvertising.org/sa/spring_04/adv382j/danamd/theory%20site/perceptionrealitypurchase.htm>
149
Lichtenstein, R. Donald, Minette E. Drumwright and Bridgette M. Braig. „The effect of CSR on Customer
Donation to Corporate supported Non profits”. American Marketing Association. 2005.
<www.marketingpower.com/content21339C5891.php>
150
Mohr, A. Lois and Deborah J. Webb. “The effects of corporate social responsibility and price on consumer
responses” The Journal of Consumer Affairs. Vol. 39. Issue 1. p. 121. April, 2005. Blackwell – synergy. 2005.
<www.blackwell-synergy.com/doi/full/10.1111/j.1745-6606.2005.00006.x>
148
56
likely to be North Americans with high levels of education and income. Social activists are
more evenly distributed across the global population”151.
In this research, purchase intent and opinion on CSR were measured by asking the
respondent three multiple choice questions. The respondent were asked to select exactly one
answer (statement) from the all possible so she or he could rate how likely he or she would be
to buy product from socially responsible company. Respondent also were asked what CSR
represent in his or her opinion and what motivates company to act more responsibly.
Methodology of data collection:
 Research method: Face-to-face or personal interviews
 Selection of households: Method of “Random movement route”.
 Selection of correspondents: Method of “Last birthday” (person who, in a given
household, has most recently celebrated birthday) for persons older than 18
 Time of research: May 2005.
 Sample N 1500: random, stratified. The sample is representative at BiH level, the entity
level, and 3 areas with one ethnic numerical majority, for over 18 year olds.
Sample characteristics:
Gender
Settlement
type
Age
Education
Income
Entity
Male
Female
49%
51%
Urban
Rural
42,9%
57,2%
18-35
35-50
51+
38,8%
26,3%
34,9%
No
Basic
High school
University
11,7%
18,7%
57,1%
12%
No
Up to 300 KM
301-500
501+
4,3%
31,8%
22%
28,7%
FBiH
RS
D Brcko
58,3%
39,6%
2,2%
“Corporate Social Responsibility Monitor 2001: Global Public Opinion on the Changing Role of
Companies”. CSR monitor. 2005. <www.bsdglobal.com/issues/sr_csrm>
It identifies those aspects of corporate practice that matter most to the general public. It also reveals some
intriguing differences in priorities between different regions of the world.
151
57
5.2.1 BCAS Data analysis
For all given values Chi square is statistically significant (p<0.01). Chi square values
denote the degree of confidence that relationship between variables described in research is
systematic in the larger population and not attributable to random error. By itself, it does not
ensure that the relationship is theoretically or practically important or even very large.
Only some of differences will be relevant in terms of the practical effects on CSR.
P1: In your opinion, in BiH a company is socially responsible if it:
Table 1: All respondents
N
110
%
7,32
Gives a percentage of profit made on one of its products for
construction of playgrounds for children
153
10,17
Provides sponsorship for sports and cultural events
161
10,75
Pays social benefits and taxes for its employees
363
24,20
There are no socially responsible companies in BiH
446
29,73
N/A
268
17,84
Promotes work and development of the party for which I vote
Table 1 reflects upon respondents (consumer) opinion on CSR implication and what
respondents understand by CSR. One - third of respondents (29, 7%) claim that there are not
socially responsible companies in BiH. There are 24, 20% of respondents who claim that
company is socially responsible if pays social benefits and taxes for its employees. Almost an
equal number of respondents claim that company is socially responsible if provides
sponsorships for sports and cultural events (10, 75%) and if gives percentage of profit made
on one of its products for construction of playgrounds for children (10, 17%). There are also
18% of respondents who did not know what CSR is or did not provide an answer. It was
expected that vast majority of respondents will associate CSR with labor treatment, social
benefits and pension. It can be due to the terminology used. Even if person is not familiar with
CSR, the expression social will immediately provide a link to social issues such as social
protection, benefits etc. It can be explained by using arguments that they think that companies
are socially responsible if follow practice prescribed by law.
58
It seems that demographic variables of gender and age do not play significant role in
creating opinion on what CSR represent in practice. Even though it can be expected that due
to experience the young adults (ages from 18 to 35) will relate CSR to more modern concept
of giving donation whereas older generation will relate CSR to socialistic concept of
providing sponsorship (ages over 35). Surprisingly, only 5, 95% of respondents from middle
age group (ages from 35 to 50) think that company is socially responsible if provides
sponsorships for sports and cultural activities, whilst the percentage is much higher among
respondents from other age groups (Table 2 and Table 3).
Table 2: P1 – Gender
Male
N
55
%
7,47
Female
N
55
%
7,17
Gives a percentage of profit made on one of its products for
construction of playgrounds for children
69
9,34
84
10,96
Provides sponsorship for sports and cultural events
91
12,41
70
9,15
Pays social benefits and taxes for its employees
185
25,14
178
23,30
There are no socially responsible companies in BiH
210
236
30,86
N/A
126
17,08
142
18,56
18 - 35
N
%
35 - 50
N
%
51+
N
Promotes work and development of the party for
which I vote
38
6,61
27
6,93
44
Gives a percentage of profit made on one of its
products for construction of playgrounds for children
59
10,12
44
11,09
50
Provides sponsorship for sports and cultural events
84
14,44
23
5,95
54
Pays social benefits and taxes for its employees
160
27,56
89
22,48
114
There are no socially responsible companies in BiH
149
25,64
141
35,82
156
91
15,64
70
17,73
107
Promotes work and development of the party for which I
vote
28,56
Table 3: P1 – Age
%
8,40
9,53
10,26
21,76
29,69
20,36
By contrast, living in certain entity can play a much greater role in influencing opinion
on CSR, with a substantially lesser proportion of respondents from D Brcko claming that
59
there are no socially responsible companies in BiH. Whereas 38, 17% of respondents in RS
and 24, 65 % of respondents in FBiH agree with this statement (Table 4)
Table 4: P1 – Entity
F
BiH
N
68
%
7,75
N
42
%
7,08
Gives a percentage of profit made on one of its
products for construction of playgrounds for children
77
8,81
73
Provides sponsorship for sports and cultural events
109
12,43
Pays social benefits and taxes for its employees
211
There are no socially responsible companies in BiH
N/A
Promotes work and development of the party for
which I vote
RS
D
Brcko
N
%
12,29
3
7,90
48
8,00
5
15,75
24,11
143
24,03
9
29,81
215
24,65
227
38,17
4
11,67
194
22,25
62
10,44
11
34,87
Opinion differs between respondents with university degree and respondents with high
school and below. Only 5, 25% of respondents with high school claim that company is
socially responsible if promotes work and development of the party for which they vote.
Whereas 12, 20% of respondents with university degree support this statement. Only 11, 24%
of respondents without any education and 17, 26 % respondents with elementary school said
that company is socially responsible if pays benefit and taxes for its employees. Whereas 31,
28% of respondents with university degree and 27, 65 % of respondents with high school
agree with this statement (Table 5).
Table 5: P1 – Education
No
9,35
High
school
%
5,25
8,41
8,69
11,13
9,54
Provides sponsorship for sports and cultural events
13,17
12,52
9,55
11,68
Pays social benefits and taxes for its employees
11,24
17,26
27,65
31,28
There are no socially responsible companies in BiH
25,80
30,57
31,62
24,17
N/A
32,06
21,60
14,80
11,13
%
9,32
Promotes work and development of the party for
which I vote
Gives a percentage of profit made on one of its
products for construction of playgrounds for children
60
Elementary
%
University
%
12,20
P2: If a company is socially responsible, meaning if it invests in community development,
respects human rights etc., it means that:
Table 6: P2 – all respondents
N
%
196
13,10
335
22,35
288
19,22
183
12,19
155
343
10,30
22,84
Has higher profit than other companies
Wants to be more popular and to attract higher number of buyers
Wants to satisfy its employees and create positive interaction
among them
Wants to free it self from paying taxes
Wants to help community development for philanthropic reasons
without profiting from it
N/A
Table 6 reflects upon respondents’ opinion on what is driving mechanism behind
company’s socially responsible behavior. It showed that 22, 3% of respondents think that if
company is socially responsible it means that company wants to be more popular and to
attract higher number of buyers. Also, 19, 22% of respondents think that company’s
responsible behavior is aimed at making employees satisfy and creating positive interaction
among them. Almost an equal number of respondents think that company wants to free itself
from paying taxes (12, 19%) and have higher profit then other companies (13, 10%). Only 10,
30% think that if company is socially responsible it means that company wants to help
community for purely philanthropic reasons. According to this data, it is visible that
respondents’ opinion is almost equally divided between two judgments of companies’ socially
responsible behavior: self-centered motives such as increased number of buyers, no taxes etc,
and viewing motivation in relation to employees and community benefits.
Gender appears to make little difference to how we judge company’s motivation
behind CSR. The differences in response rates between men and women are a mere 3
percentage points for all statements (Table 7)
61
Table 7: P2 - Gender
Male
N
Female
N
Col %
92
12,03
Has higher profit than other companies
104
Col
%
14,21
Wants to be more popular and to attract higher number of buyers
173
23,60
162
21,15
Wants to satisfy its employees and create positive interaction
among them
148
20,18
140
18,30
Wants to free it self from paying taxes
83
11,32
100
13,02
Wants to help community development for philanthropic reasons
without profiting from it
75
10,22
79
10,38
N/A
150
20,47
192
25,12
It is not surprising that despite an education, consumers will believe that behind
companies’ responsible behavior there is something more than philanthropic spirit and that
such behavior has to be linked with image and profit (Table 8).
Table 8: P2 – Education
No
%
10,33
Elementary
%
14,10
Highschool
%
13,52
University
%
12,19
Wants to be more popular and to attract
higher number of buyers
22,38
26,32
20,31
26,57
Wants to satisfy its employees and create
positive interaction among them
13,31
13,58
21,38
23,53
Wants to free it self from paying taxes
7,18
12,04
13,85
9,82
Wants to help community development for
philanthropic reasons without profiting
from it
N/A
8,09
7,16
11,24
11,99
38,71
26,79
19,70
15,91
Has higher profit than other companies
Majority of respondents from D Brcko (47, 1%) claim that if company is socially
responsible it means that it wants to satisfy its employees and create positive interaction
among them. This differs from other two entities. Yet again, issue of popularity and
company’s image appeared as important feature when respondents from different entities
judge companies motivation: 22, 92% in F BiH and 21, 66 % of respondents in RS think that
company wants to attract buyers by performing responsible practices (Table 9).
62
Table 9: P2 – Entity
F
BiH
N
120
%
13,79
N
76
Wants to be more popular and to attract higher
number of buyers
200
22,92
Wants to satisfy its employees and create positive
interaction among them
156
Wants to free it self from paying taxes
Wants to help community development for
philanthropic reasons without profiting from it
N/A
Has higher profit than other companies
RS
%
12,73
D
Brcko
N
0
%
1,03
129
21,66
6
19,40
17,84
117
19,77
15
47,01
76
8,69
103
17,35
4
11,86
71
8,09
80
13,44
4
12,37
251
28,67
89
15,05
3
8,33
P3: When buying a certain product how important is it for you to know that the
company producing it invests in community development, and cares about the
community in which it operates, including human rights and environment?
Table 10: P3 – all respondents
N
Very important and I always choose products made by a company with an image
of one which invest in community development, regardless of the price of product.
281
%
18,75
It is important that companies invest in community development, but that does not
affect my buying products of that company, only if I like the product I will buy
from such companies
390
26,02
Not important, when shopping, I only care about the price and the quality of the
product
623
41,54
N/A
205
13,69
Table 10 reflects on respondents’ attitude toward importance of CSR for their
purchase behavior. Even though it was expected that respondents will provide socially
suitable answer by claming that it is very important for them to buy product of socially
responsible company, in contrary they were very straightforward: 41, 54 % of respondents
said that when buying a certain product the only important are price and the quality. Only 18,
75% said that it matters to them if company is socially responsible and that they always chose
to buy products from such companies. Whereas 26, 02 % said that it is important that
companies invest in community development, but that does not affect their purchasing
decisions, only if they like the product they will buy from such companies what again brings
to quality and price. Taking into consideration BiH purchasing power it is expected that
63
consumer will have to look into price when buying certain products. However, products of
socially responsible companies are not by design more expensive. Providentially, attitude can
be modified and does not always signalize actual behavior. Nonetheless, 18% of consumers in
BiH who already care or 26% who find CSR important can serve as initial capsule for moving
toward wider awareness.
Even though one would say that women are more socially concerned then man, there
is no significant difference between male’s and female’s related to their purchasing habits and
CSR (Table 11).
Table 11: P3 Gender
Male
N
142
%
19,29
Female
N
140
%
18,24
It is important that companies invest in community development,
but that does not affect my buying products of that company,
only if I like the product I will buy from such companies
192
26,17
198
25,87
Not important, when shopping, I only care about the price and
the quality of the product
299
40,74
324
42,31
N/A
101
13,81
104
13,58
Very important and I always choose products made by a
company with an image of one which invest in community
development, regardless of the price of product.
From the analysis of data taking into consideration settlement type the following facts
are revealed: 24,13% of respondents from urban areas said that it is very important to them
when buying certain products to buy it from socially responsible company, while only 14,71%
of respondents from rural area confirm the same. On the other hand, 30, 7% of respondents
from rural area said that it is important that companies invest in community development, but
that does not affect them buying products of that company, only if they like the product they
will buy from such companies. Whereas only 19, 77% of respondents from urban area
confirm the same attitude. However, nearly 50% of both groups said that price and quality is
only what matters to them when shopping (Table 12).
While our study does seem to show that education contribute to awareness, it certainly
doesn’t show that it create more positive behavior. There is no difference between purchase
habits in consumers with different level of education.
64
Table 12: P3 – Settlement type
Grad
N
155
It is important that companies invest in community development,
but that does not affect my buying products of that company, only
if I like the product I will buy from such companies
Not important, when shopping, I only care about the price and the
quality of the product
Very important and I always choose products made by a company
with an image of one which invest in community development,
regardless of the price of product.
N/A
%
24,13
Selo
N
126
%
14,71
127
19,77
263
30,71
271
42,06
352
41,15
90
14,04
115
13,43
It was expected that respondents with higher income will be more concerned about
CSR because they can afford it. However, 21, 48% of respondents with monthly income
higher then 501 KM said that they always chose to buy products from socially responsible
companies. Moreover, 12, 44% of respondents with no income confirmed the same. Also 36,
82% of respondents with no income said that it is important that companies invest in
community development, but that does not affect their purchase decisions. Whereas the same
statement is confirmed by 23, 34% of respondents with income up to 300 KM, and 28,63% of
respondents with income over 501 KM. 39,07% of respondents with no income said that
when shopping they only care of price and quality of the products, while more respondents
with higher income said the same (Table 13).
Table 13: P3 – Monthly income
No
Do 300
KM
301 - 500
%
12,44
%
15,75
%
18,80
%
21,48
It is important that companies invest in community
development, but that does not affect my buying products of
that company, only if I like the product I will buy from such
companies
36,82
23,34
28,05
28,63
Not important, when shopping, I only care about the price
and the quality of the product
39,07
45,17
41,43
41,05
11,66
15,74
11,71
8,85
Very important and I always choose products made by a
company with an image of one which invest in community
development, regardless of the price of product.
N/A
65
501+
6
Conclusion
 Companies in BiH are not performing CSR strategies in advanced fashion.
 When buying a product/service, customers in BiH do not make their
choices based on companies CSR record/strategy.
Corporate Social Responsibility evolved into a modern widely accepted concept; hence it
is explored within the global agenda. It represents a comprehensive concept related to the role
of business in global market and development. CSR is based on the presumption that the
stakeholders expect companies to perform responsibly in terms of reducing negative outcomes
resulting from their merely profit-orientated goals: violation of human rights, poverty
fortification, sweatshops, environment degradation, labor exploitation etc.
An assortment of definitions and approaches to CSR came into view and one is
determined by socio-cultural and economic situation in a country but also by the political
system and beliefs. In USA, CSR has developed as an attempt to respect shareholders’ needs
and promote companies’ image through philanthropic events, while in Europe CSR is seen as
day-to-day management practice and modus operandi concerning wider group of
stakeholders: “Europe with human face”152. In different developing countries CSR is still not
adopted as corporative value but it is more ad-hoc reaction to external market and investors’
requirements. In addition, in developing countries, especially in ones with socialistic
background CSR is commonly perceived as sponsorships of sport or cultural events, and/or
payments of social benefits prescribed by law.
Definition and synonyms of CSR consist of terminology like: community development,
partnership, giving back to society, ethical investments, corporate citizenship, capacity
building, sustainable development, etc. In today’s competitive market nearly each and every
respectable corporation adopted and developed difference CSR strategies, societal mission,
community funding mechanism, learning programs etc. CSR includes both internal
corporative behavior and external relationships. Internal behavior comprise of fair and ethical
labor practices, corporative governance code, different standards and labels related to
production and service. External partnership considers link to stakeholders and communityfriendly programs. Based on Kotler and Lee review there are accustomed ways of “doing
good” that are implemented by different companies: Cause promotion, Cause- Related
152
Lisbon strategy
66
marketing, Corporate Social Marketing, Corporate Philanthropy, Community volunteering,
Socially responsible business practices. Which option will be used sometimes depends on
society needs but also on industry type, companies’ priorities and core business, knowledge
and capacities. Moreover, corporations like Nike, Shell, B&J, J&J, McDonald, Levi Straus,
apply multiform and combined CSR programs.
Along with different companies, a number of supportive initiatives have been developed.
Wide range of service is provided to companies if they want to learn how to develop effective
and beneficial CSR program. Initiatives like CSR Europe or UN Global Compact represent a
networking scheme applied to CSR in order to bring companies to work together, to discuss
CSR, exchange information and best practice, promote their programs and find partners.
Other stakeholders also can join such initiatives. In order to standardize CSR efforts and to
make it ‘handy’ for companies and users, some initiatives set down standard codes and
measures (Caux Round Table, the Global Sullivan Principles, the Dow Jones Sustainability
Index, the FTSE4Good and other mechanisms that now proliferate in sectors and countries).
Standards are also developed for companies’ reporting on CSR. It is not sufficient enough to
apply CSR strategy but companies have to prepare reports with transparent and detailed
information on its business and CSR activities: The Global Reporting Initiative (GRI), The
AA1000 Assurance Standard, The CERES Report as a standardized format for corporate
environmental reporting developed through collaboration with companies, institutional
investors and environmental organizations.
Contemporary view on CSR rationale brings into play arguments challenging CSR
impact and motivation behind. In theory, CSR is favorable both for company and for society.
In practice, it si difficult to verify all achievements and to appraise concrete changes. It also
put forward question whether companies are accountable for social problems and instability.
Companies are not obliged to takeover public service role but they can be helpful in terms of
making complementary actions and preventing potential problems resulted from their
business. CSR contributes to companies in more than a few different areas such as increased
profit, access to capital, reduced operating costs/increased operational efficiency, enhanced
brand image and reputation, increased sales and customer loyalty, increased productivity and
quality, increased ability to attract and retain employees, potentially reduced regulatory
oversight, reducing risk, and increased risk management, keeping up’ with competitors and
where the market is. Impact on society can not be generalized as there are very different
programs: it can be parental education, rebuilt children playgrounds, donation to humanitarian
programs, scholarships, investment in IT innovations, anti-drugs-tobacco campaign, GMO
67
awareness etc. In developing countries CSR can contribute also to conflict resolution, fair
competition, efficient privatization, unified corporate codes and standards, environmentfriendly business practices, ethical investments, partnerships etc. However, skeptics argue
that real managers do not have sufficient time at their disposal to dedicate to high-quality and
systematic CSR program and for that reason impact can be in short supply and potential
harms are still unforeseeable. However, CSR is valued by many stakeholders and many
researches’ results proved its multilevel significance. NGOs enter in partnership with private
sector in order to establish interactive mechanism for development of CSR and to ensure winwin situation as upshot of joint venture. More and more customers build their purchasing
behavior based on companies’ CSR records.
This paper looked upon CSR in BiH context taking into account, both customer, and
business perspectives. It reviewed the meaning of CSR for BiH customers when they make
decisions about specific products, and companies when they create their business performance
practices. In conclusion, both results from case study and survey indicate that CSR is still an
undeveloped concept in BiH in terms of contemporary approach. Research shows that
companies in BiH are not performing CSR strategies in advanced fashion. CSR is not well
embedded into companies’ core business and there is no long-term commitment to CSR. It
showed that companies in BiH are rather oriented to merely promotional activities such as
sponsorships of difference events and marketing material, then to a long-term systematic CSR
approach. Different reasons are set behind the scene. The reason can be the ignorance of
possibilities and benefits that CSR generates for business or lack of resources and knowledge
to implement such demanding strategies. Furthermore, overall BiH business climate does not
encourage companies to act more responsibly toward society i.e. strict law regulating
donations. Existing CSR activities in BiH are results of sporadic efforts, while a strategic
component is missing. Companies with existing CSR records do not provide evidence of
understanding CSR concept as such. SMEs are a potential target for promotion of CSR since
it is reasonable to expect that in medium term a good part of economy in BiH will be in the
hands of these companies.
Companies in BiH can be actively involved in different fields. “Private investors represent
key to emerging market”153 thus companies can play crucial role in attracting foreign
investment. Business in BiH can play central role in helping employment of vulnerable
groups, investing in communities where these groups are situated, adapting transparent
153
Wold Bank. 2005. <www. worldbank.org>
68
practices that will prevent violation of human rights pertaining to these groups. Initiatives can
be promoted to increase understanding across cultures, faiths and communities – including
encouragement of managers and employees to visit community projects, places of worship
and institutions of minority groups. Also, companies have significant communications
capacity to promote clear messages in this area. This can make a significant difference
regarding tolerance, harmony and community relations.
Private sector in Bosnia can also go up against “brain drain” by providing better
opportunities to youth and young professional employment and accordingly preserve human
resource and development in BiH. Support for programs assisting youth and education is
particularly important, as these can strike at the heart of alienation and disaffection and reduce
risk of anti-social, violent and criminal behavior. Moreover, Global Compact in BiH decided
to initially gather BiH companies to stand against corruption which is evident problem in BiH
creating obstacle for good governance, poverty reduction and also development of CSR.
Some argue that it is too early for development of CSR in BiH. It should go in line with
EU integration and follow principle of Lisbon strategy. Accordingly, it shall include
promotion of further structural reforms, reduce in labor rigidities and harmonization of
employment and work procedures with EU standards, fight grey economy, development of
high-quality and efficient educational and vocational systems, employment procedures which
will enable employers to pay social and pension benefits etc. In addition it intends to allow the
market to operate by reducing government interference and lowering the ratio between
government expenditure and GDP, to strengthen State-level capacity in the field of
environment etc. The priorities of CSR development to be linked with EU partnership
priorities.
Partnership with NGOs can initially help companies to understand their role in
community development and empowerment. There is no established culture for NGOs and
companies in BiH to cooperate together on the basis of mutual vision and interest. NGOs are
seeing companies as source of funds rather then an equal partner. Companies are seeing
NGOs namely as prolonged hand of international community or mainly humanitarian
organizations. There are few examples when NGOs and companies managed to establish
successful partnership and worked alongside existing governmental programs. In the research
conducted by CPCD it is apparent that companies are still very much devoted to having State
taking care of social problems, and NGO sector as responsible to join the State in that
endeavor. However, through partnership this can be changed toward prosperity and shared
ownership over pro-poor development.
69
CSR has to be regarded as a strategy. It takes time for a company to earn the trust of a
community. Therefore, a company with a short-term perspective will be less likely to make
CSR as its strategy. Companies that have a longer-term perspective, however, may be more
willing to wait for the benefits from CSR. Nonetheless, it is impossible to expect BiH
companies to become fully socially responsible at once or to be self-regulated. Companies
also have to be supported in this process with direct or indirect measures and strategies. State
should work to change legal regulations as it is necessary to regulate legal framework within
which CSR activities are implemented, mostly tax deduction system. Initiatives like GC or
IRC program should serve as learning and meeting platform for companies and other
stakeholders to exchange best practice, to build strategies and attract foreign investments. As
the initial steps, projects that encourage and empower companies to adopt different standards
are also important. Sarajevo Chamber of Commerce Ethical Code of Codex and ECD
Corporative Governance Code have to become everyday reality to many companies and not
seen as luxury of large business.
“Academic institutions can and should play valuable role in creating solid knowledge
base about CSR. Media as a key factor in promotion of CSR should be strengthened as it is
necessary to establish coherent strategic and long-term promotion of CSR of all actors in
society through constant education of journalists, promotion of their research and animation
of key people and decision-makers in media”154. BiH should also partner with neighboring
countries as situation related to CSR is very similar.
Costumers are very often main basis of companies’ responsible behavior. “The
important point here is that this ‘responsibility’ should not be viewed as a matter to be
decided solely by corporate managers, shareholders and government. Consumers, as well as
workers and others, "vote" in the various markets in which firms transact business. So if it
produces profits, as this car probably will, it's socially responsible. If it doesn't, people don't
want to pay the price. In other words, they've "voted" against it -- society doesn't want it”155.
Accordingly, second hypothesis has been confirmed. Customers in BiH do not make their
choices when buying a product/service based on companies CSR record/strategy. Research
showed that 42% of BiH citizens said that when shopping, they only care about the price and
the quality of the product. Many of them emphasize importance of CSR but not in terms of
influencing their purchasing habits. But this does not mean that consumers worry more about
154
Ibid, IRC regional conference. Minutes.
“A test of the socially responsible consumer”. Ideoblog. (November 28th, 2004). 2005.
<http://busmovie.typepad.com/ideoblog/2004/11/a_test_of_the_s.html>
155
70
getting the lowest price than about anything else. In similar surveys with consumers, i.e.
Crawford and Mathews, it is found that consumers care more about getting "fair and honest"
prices than about getting the lowest price. However, it is only an attitude that can be tailored
by empowering costumers and by deepening their awareness on CSR.
It was also expected that BiH citizens will perceive CSR in relation to payment of social
benefits and taxes or sponsorships of cultural and sport events. Philanthropic and other
components are also recognized. However, one - third of respondents agree that there are no
socially responsible companies in BiH. Bearing in mind very negative image of private sector,
accentuated by the different media, it is reasonable that so many citizens disapprovingly
observe reputation of private sector. Yet existing CSR efforts are not documented and
published in a transparent manner. Therefore, public promotion of CSR activities is required.
Socially responsible companies are mainly perceived by BiH citizens as companies that are
determined to build better image and retain costumers. There is also view that socially
responsible companies wants to satisfy its employees and build better relationships among
them.
New knowledge and debates in combination with minimum of effort and dialogue with
stakeholders will create possibility of progress in the area of CSR in BiH. Certain knowledge
base has be developed in BiH and therefore more focused researches should be conducted in
the areas such as policy and business environment that support CSR, customers’ and
employees’ behavior in relation to CSR, CSR and SMEs. However, writing policy papers that
can contribute or lead to a concrete action would be more beneficial in terms of upgrading
existing or building new CSR activities or practices.
It will take much hard work to develop a comprehensive approach tailored to BiH
current and future situation. However, partnerships and good scope of joint activities
including government, civil society and private sector can contribute the most.
71
7
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78
8 Annexes
79
Annex 1 CSR snapshots
„Our commitment is to invest time,
expertise and resources to provide
economic opportunity,improve the quality of life
and foster good will in our communities
through locally relevant initiatives“
Coca Cola HBC (social responsibilty report 2004)
"THE MAGIC OF EVERYDAY MOMENTSTM" CAMPAIGN LAUNCHED TO SHOW
PARENTS THE POWER OF EVERYDAY INTERACTIONS WITH YOUNG
CHILDREN FILLS NEED IDENTIFIED BY PARENTS. „Just like you we care about
how your kids feels“, Johonson&Johonson campaign for children and parents
MCDonald's CSR
McDonald's® and Ronald McDonald House
Charities® Donate $400,000 to Namaste Charter School in Chicago
McDonald's and Ronald McDonald House Charities (RMHC®) have presented the Namaste
Charter School in Chicago with a check for $400,000 to further support the school's
holistic approach to education, which integrates physical fitness and nutrition as core
components of its rigorous academic curriculum.
80
By displaying their involvement with the world, Nike tries to create a more
positive image that will hopefully be more appealing. Nike uses this image of
giving back since it may show that Nike is going outside of their business
responsibilities and making an effort to help less fortunate people around the
globe.
SHELL Benefit Communities
Wherever we work, we are part of a local community. We will constantly look for
appropriate ways to contribute to the general well being of the community and the
broader societies who grant our license to operate.
Education & Scholarships
Providing Canadian students with the tools for lifelong learning is important to Shell and critical
to the success of our company and our country.
Supporting the Environment
Finding solutions for today’s environmental challenges requires the commitment and shared
ideas of all Canadians.
Shell People in the Community
At Shell, we believe it is important to recognize and support the volunteer efforts of our
employees, retirees and marketing partners.
Supporting Aboriginal Communities
Shell funds education and cross-cultural awareness initiatives that benefit Aboriginal
communities near our facilities or our exploration interests. We also support national programs
such as those by the National Aboriginal Achievement Foundation.
Shell Foundation
The Shell Foundation supports efforts to achieve a balance between economic growth, care for
the environment and equitable social development - the goal of sustainable development.
Living Up to Our Commitments
Examples of Shell Canada’s performance in providing benefits to communities.
81
Annex 2 Chi square values, Basic Attitude Customer Survey
All respondents
First question
1,96661E-72
Second question
Third question
2,64411E-33
3,99898E-57
Categories
1. Q.
2. Q.
3. Q.
Entity
Settlement
type
Age
Education
Gender
6,13461E-84
4,10938E-76
1,83486E-74
2,18666E-79
2,07108E-73
1,17341E-44
2,75566E-37
1,35569E-34
1,78092E-38
7,39211E-35
1,02984E-67
8,71259E-64
6,47996E-56
1,81253E-54
3,0315E-57
82