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INVESTING IN RESPONSIBLE BUSINESS

Corporate social responsibility – investing a little today for a good reputation tomorrow

BY CHRISTOPHER LARTER
Senior consultant
Hill & Knowlton Egypt

Last autumn, the Economist Group held a seminar in Cairo to promote corporate social responsibility (CSR), a global practice still in its infancy in Egypt. Although some multinationals and local companies have commenced CSR programs, at best the reaction locally has been one of little understanding towards the practice.

Within the increasingly competitive globalized environment, the process whereby companies give away money to good causes has been superceded to a large extent by CSR, which is a more strategic tool that ties donations of money, time and in-kind gifts to defined business goals and desired benefits. Simply put, CSR is an open and transparent business practice based on ethical values and respect for employees, communities and the environment. It’s a voluntary practice designed to deliver sustainable value to society at large as well as to shareholders.

Companies develop a concrete policy on CSR so that giving is sustained and carefully planned to have the greatest impact. After all, CSR serves as the foundation of a company’s reputation, which can determine whether investors will invest, recruits will join, and whether journalists and legislators give you the benefit of the doubt.

A 2003 Campaign Report on European CSR Excellence stated that although the notion and practice of CSR in the former communist states of Europe is neither as deeply engrained nor as widespread as in other parts of the continent, a momentum has been building and is set to continue. The report goes on to say that previously, “governments believed their role to be the direct deliverers of all things essential to the well-being of citizens – health and education, essential services such as water and sanitation, environmental protection, security and pensions, for example. The introduction of new actors in society – private business and civil society organizations, international agencies and a free media – created new dynamics and eventually a new sense that the governmental role and extent of responsibility would have to change... there are signs of new thinking and practice.”

A similar change of thinking and practice is under way in Egypt, where the duty of social responsibility is falling increasingly upon the private sector. If so, it is likely to benefit many: from employees to charities, from NGOs to local government, to your business practice itself.

So why adopt a CSR program? It’s worth taking a look at Europe, where companies which for decades believed that they had a long tradition of engaging with their stakeholders, found themselves facing a loudening of voices from environmental and social interest groups. In response, bold executives started advocating a move from “shareholder” to “stakeholder” business models, and companies started hiring “stakeholder managers.” Today, almost every sector in every country has introduced stakeholder engagement into their business strategies, as it is strongly believed that ignoring your stakeholders leaves you more exposed to controversies that may stem from your business operations.

In a 2003 World Bank business survey, 80 percent of companies surveyed said that they looked at the CSR performance of potential partners before closing a deal. Some 81 percent said they were involved in partnerships with local government or civil society. World Bank president James Wolfensohn goes on to say that, “Corporate sustainability includes recognition of the leadership role that the private sector must take in ensuring social progress, improved equity, higher living standards and stewardship for the environment.”

A good reputation can go a long way. Recently, a multinational company required damage limitation following a negative article that appeared in an Egyptian tabloid concerning the company’s business practices in Egypt. It so happened that the company had been visited earlier by a sales representative who was seeking advertising for his tabloid. Uninterested, the company politely turned away the sales rep. A week later, a malicious article appeared in his paper that attacked the company.

Although the company was entirely in the right and is now taking legal action, in the eyes of the consumer the damage was done. It was therefore immediately important to hold interviews with the press to address the company’s sound responsibility to its Egyptian employees and to the general public. Yet all this could probably have been avoided if the company was running a CSR program, which would have already ensured its credibility and reputation in the market.

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