Current trends in the development of corporate social responsibility across Kazakhstan companies

Purpose – To analyses the results of some specific studies that were performed to demonstrate awareness of Kazakhstan business entities about corporate social responsibility and understanding of social responsibility by various stakeholders.

Methodology – This paper used systemic and integrated approaches; The empirical research base included an analysis of sociological studies of foreign and. domestic research centers as the SANDJ Research Center; Center for Legal Policy Research with the support of the British Embassy in Astana in 2015.

Originality/value – social responsibility in the modern world is perceived not only as a charity, but also as an effective activity that enhances the business reputation and capitalization of the company. The real policy of corporate social responsibility is not accepted unequivocally by the entire business community in Kazakhstan and in other countries of the world, but clear tendencies of institutionalizing this phenomenon as a social institution that is important for the prospects of stabilizing the political, socio-economic, socio-cultural interrelations of the state, business community and civil society.

Findings – The study has shown that the society understands now that only joint efforts of government, business and non-governmental organizations can create conditions for development of CRS ideas and principles in the country.

1. Introduction

The idea and concept of corporate social responsibility have come a long way toward being accepted worldwide. According to numerous studies, today the world’s biggest companies recognize more than ever the need to develop and implement CSR policies, while the most progressive nations try to support and encourage implementation of such policies [1]. Strange as it may seem, the crisis has stressed problems existing in the business sector and highlighted the need to renew confidence in companies by means of corporate social responsibility. For example, a study conducted in the European Union in 2013 showed that only slightly greater than half of EU countries population (51%) believes in companies’ positive influence upon the society, while 4 out of 10 people presume that companies produce negative effect upon it. At the same time, representatives of BRIC countries’ emerging economies believe in the positive role of companies; thus, 79% of Brazilians agree with this statement [2]. So, the role of corporate social responsibility as a tool to enhance confidence in business significantly increases. 

2.      Literature review

History and organizational models of corporate social responsibility

Over the last several decades, the business has grown aware of its responsibility for preservation of the environment, settlement of social and economic problems, improvement of quality of life in local communities, observance of human rights, fight against corruption and some other issues considered by society as critical. As a result, corporate social responsibility has gradually become a new business philosophy which helps companies to focus not only on profit, but also on public benefit and environmental stability.

During the 43rd World Economic Forum in Davos (2013) William W.George, Professor of Management Practice at Harvard Business School (USA), stated that the companies which focus on their capital only eventually go into liquidation and highlighted the importance of corporate social responsibility (CSR), a concept that started to develop in the late twenties of the last century in the USA.

The idea and concept of corporate social responsibility have come a long way toward being accepted worldwide. According to numerous studies, today the world’s biggest companies recognize more than ever the need to develop and implement CSR policies, while the most progressive nations try to support and encourage implementation of such policies [3].

Corporate social responsibility refers to “companies taking responsibility for their impact on society” (European Committee’s CSR Strategy, 2011-2014). According to the international social responsibility standard ISO 26000, a company is responsible for its impact on society in 7 ways, namely: administrative control, employment relationship, human rights, fair work practices, consumer relationships, environment, support and development of giants. It is not a certified standard though, which again highlights one of the most important principles of CSR: voluntary involvement. It means that a company is free to implement corporate social responsibility on a voluntary basis, but in a fair and transparent interaction with its stakeholders. Stakeholders include employees, state authorities, public organizations, universities, professional unions, local community, media, business associations and experts. They can make companies adopt corporate social responsibility policies by implementing occupational health and safety practices, signing collective agreements, preventing adverse environmental impact etc. In spite of their uniform understanding of CSR approaches and principles, each country and region has its distinctive features. It is closely related to the history, national and cultural aspects, political, economic and social development of a country and region as a whole [4].

Based on these characteristics, historically three CSR models were distinguished: American, European and Japanese (Asian). This list can now be extended by Latin American, African and BRICS (Brazil, Russia, India, China, South Africa) models.

The European model is characterized by the government’s active role and is subdivided to sub-models. For example, the Scandinavian countries use “business to government” model where businesses pay high taxes while government distributes them effectively [5].

The British model takes after US and European models, but also makes government and social institutions play important role in approval of stakeholders’ interests, promotes and encourages use of business best practices in public policies [6]. The US model is distinguished by philanthropic approach to corporate social responsibility: minimum government intervention in private business, systematic funding of various noncommercial organizations and funds, corporate volunteering (employees’ involvement in funds’ projects and programs) [7].

In the Japanese (Asian) model, government and traditions play an important role. Employees are loyal to their companies throughout their lives (life-long employment) and treat their team as “corporate family members”. A similar team spirit exists at the level of industrial groups which promote CSR in the country [8]. The African model’s distinctive feature is the requirement for companies to provide financial support (in some countries it is required by law) for implementation of antipoverty programs or other projects, according to the local community’s needs. In Latin American countries, CSR is widely known to public due to the efforts made by media, universities and non-governmental organizations. Considering the recent development of BRICS economies, one can identify specific features of CSR in these countries as well, they are strengthening of corporate governance, protection of the environment and welfare of employees [9]. 

3. Findings and discussion

In the CIS countries, corporate social responsibility has its own features: government, public institutions, expert organizations and media have minor influence on formation of CSR national policy, while international institutions and donors (UN, EU, embassies of European countries) play an important role in the development of CSR concept. It should be mentioned that at this moment CIS countries use regulatory instruments (laws, governmental decrees and programs) to make companies implement CRS. In the future the CIS sub-model may change to European model due to some political and economic integration processes, however it will take time.

Nonetheless, 13 major companies and 11 public organizations of Kazakhstan have already become parties to the UN Global Contract (hereinafter GC) (Figure 1).

Figure 1 – Companies – parties to the UN Global Contract (in 2013) 

As can be seen from the diagram, the leading country is Ukraine. As much as 55 Ukrainian companies are presented in GN at international scale. It should be noted that Ukraine companies already consider CSR as a competitive advantage and a part of their business strategies. Companies from Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan are not presented in the UN General Contract. Thirty five companies represent Belarus and 28 companies represent Russia [10].

Most companies believe that lack of statutory drivers is the main factor that prevents them from implementing CSR. In Russia, CSR is significantly promoted by business associations, state corporations and public organizations. Russian companies achieved considerable progress in preparation of nonfinancial reports: about half (46%) of 100 Russian largest companies prepare nonfinancial reports (in contrast, only 9 of 100 Ukrainian largest companies do the same). However, it is often the case that Russian companies’ CSR projects are of charitable nature only and in most cases are implemented at discretion of the company’s owner rather than as a part of corporate CSR strategy. Still, more and more initiatives and associations are being created each year. From year to year number of companies that provide nonfinancial reports according to the Global Reporting Initiative (GRI) increases, they report their performance in economic, social, environmental and other sectors. Recently, a draft manual for integrated reporting has been issued which demonstrates how to combine financial and nonfinancial performance in a single report.

Several major CSR studies were conducted in Kazakhstan. One of the first studies completed by UN dates back to 2008, while the latest was performed in 2013 by Sange Research Centre. It showed that over the last five years, awareness of business entities about CSR has increased by 3% (from 60% to 63%) only. 

Awareness of corporate social responsibility among companies

Awareness is one of the key factors for promotion of CSR principles. As we can see from the diagram, 63% of interviewees know about CSR (Fig.2).

Figure 2 – Awareness of Kazakhstan companies about corporate social responsibility, % 

Awareness depends significantly on business scale. All representatives of large-scale companies stated that they are aware of CSR concept (100%).

Figure 3 – Awareness of various-scale companies about CSR, % 

More than half (70%) of middle-scale companies have heard about CSR, while in small-scale companies this percentage is smaller (47%).

As can be seen from the above findings, small-scale businesses are least of all aware. The reasons are as follows: management is not interested in CSR; limited capacities of small-scale businesses (insufficient turnover, lack of CSR experience and practices, lack of legal literacy) prevent them from adopting CSR practices.

Understanding of CSR by business.

As far back as ten years ago many Kazakhstan companies understood social responsibility as compliance with law and implementation of social projects, but today they also see that it brings long-term success based on management of social and environmental risks and contribution to the country’s sustainable development. Thus, understanding of these processes improved a lot.

Figure 4 – Awareness of various-scale companies about CSR, % of companies that replied in the affirmative 

Most interviewees understand by CSR, first of all, implementation of social packages/programs and improvement of working conditions for employees (83%) by a company. Other items which they associate with CSR are charity support to community (59%), professional development and training of employees (54%), involvement in regional development projects (52%). Approximately the same number of interviewees associate CSR with implementation of environmental projects (40%) and ethical responsible attitude towards consumers (40%), partners (39%) and suppliers (35%). Less number of interviewees associate CSR with observance of shareholders’or investors’rights (31%), transparent provision of company information (30%) and fight against corruption (27%). Comparison with 2008 results indicate that implementation of social packages / programs and improvement of working conditions for employees remain the most popular association, and it even increased as compared with the previous study (68% in 2008 and 83% in 2013). There was also an increase in people mentioning involvement in regional development projects (42% and 52%), observance of shareholders’ or investors’ rights (15% and 31%), transparent provision of company information (15% and 30%).

We would like to note that regardless of business scale, CSR is first of all improvement of working conditions for employees and implementation of social packages / programs. The only difference is percentage of affirmative replies (small business – 78%, medium business – 83%, large scale – 89%). The fact that this association is most popular for business suggests that companies consider it important to be responsible towards their employees which in principle are the major factor for company’s development [11].

An analysis of CSR awareness among government agencies among respondents showed diversity of views: civil servants are of the opinion that officials aware of CSR, while representatives of business, the public were more restrained in positive assessments, in their opinion, in state structures there is:

• Insufficient deep understanding of the content side of CSR, mainly the restriction of charity; 
• understanding of CSR only in the circle of the upper echelons of power, among the top management, in structures that come into contact with the business (akims, business management, social protection, education, ecology) [12].

The study has shown that the society understands now that only joint efforts of government, business and non-governmental organizations can create conditions for development of CRS ideas and principles in the country. “Three parties should be involved. Government should provide all conditions for Kazakhstan companies to become socially responsible. Employees should be more proactive, take interest in various information and new developments. Managers should understand that implementation of CSR in a company is closely related to business principles”. 

4.      Conclusion

Filling of these gaps is a prerequisite for effective use of CSR tools in practice, growth of Kazakhstan business competitive power and sustainable development of the country.

The picture is completed by a more recent study performed by the Legal Policy Research Centre with the support of British Embassy in Astana in 2015. It was a case study analysis to understand the way 30 different companies in Kazakhstan (governmental, private, international) implement CSR practices [13]. The study has shown that the most popular CSR projects include provision of support to people in need and other charity projects; the second most frequent projects are provision of support for development of communities; the third ones are observance of consumer rights. Much rarer are the projects related to the protection of the environment, improvement of working conditions and corporate governance. There are no projects for observance of human rights and fair competition. It shows clear enough how top managers of Kazakhstan companies understand CSR goals and objectives [14].

Still, we should mention some positive trends in the development of corporate social responsibility in Kazakhstan:

First, it is supported by the President of Kazakhstan who made a relevant statement in 2008 at a forum in Zhezkazgan.

Second, the practice of nonfinancial reports becomes more popular;

Third, ISO 26000 CSR national standard was customized and adopted this year.

Forth, the National Chamber of Entrepreneurs has included CSR into its agenda and is beginning to promote CSR as a business tool.

Fifth, since Kazakhstan intends to enter the “elite economic club”, i.e. the Organization for Economic Cooperation and Development, CSR issues will be again and again raised and initiated at the highest level [15].

Over the last year, Kazakhstan has improved its position in the international Ease of doing business index from the 51st place in 2017 to the 36th place this year. The authorities currently investigate the basis for evaluation and explore whether strengthening of CSR can help Kazakhstan to improve its position further.

However, the experts’ opinions regarding whether CSR can become a driver for improvement of Kazakhstan position in Ease of doing business index vary. The Ministry of National Economy states that “the methodology (for evaluation of Doing Business positions) does not use CSR development indicator as a basis, and thus development of CSR cannot affect the country’s position in the index.” [16]

Atameken is more optimistic about the situation. They believe that the main reason for companies to become socially responsible is their commitment for long-term success. Responsible business is always stable, well-balanced and attractive, for investors as well. According to Atameken, many businessmen have already shown their active approach in implementation of social, educational, environmental projects. Now it is time to “support companies in their initiatives, systematically provide information and clarifications to them, build up this new experience, encourage private sector to demonstrate social and environmental responsibility” [17].

Such an approach can certainly help Kazakhstan to reach top positions in Doing Business index, regardless of the lack of CSR indicator in it. However, it would be better to focus not on the index, but on improvement of conditions where Kazakhstan companies operate today.

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