Posted by: Arjan Tupan | 23 February 2011

Reporting on CSR to improve profitability and transparency

Opening the event ‘Why do companies report on CSR?’, moderator Romans Baumanis shared an experience he had some years ago with experimental theatre. During a festival in Moscow, a Russian company performed a piece in which an actor came up on stage, walking around stomping his boots and saying ‘What can I do alone?’. This continued for some time, until he was joined by another person, then another and another, until the stage was full of actors stomping their feet and saying ‘What can I do alone?’ to the point that the theatre was almost physically trembling. It seemed that the 10 organizing international chambers of commerce had taken a lesson from that performance when they joined forces to organize this event in which the Latvian Sustainability Index and companies with real and tangible experience in the positive effect of CSR on doing business in Latvia came on stage and showed what you can do together.

The first part of the evening was dedicated to the Latvian Sustainability Index. This year will be the second time companies can register for it and self-assess their CSR efforts. Last year, 70 companies joined in, with four main motivations: recognition and market advantage, learning more about CSR, self-appraisal and having an internationally understandable evaluation. The assessment will focus on five areas, with each their own weight in the final verdict: strategy (15%), market relations (20%), society (15%), labour issues (25%) and environment (25%). The main take-away of the presentation was the time-line for this year’s index, which is rather short. Registration has already opened and runs to 4 March. The Sustainability Index Institute will provide training to companies that need it, and that will be in the period from 17 February to 25 March. Registered companies can fill in the assessment between 4 March and the deadline is 25 March. Results will be published, and awards given, on 12 May. So if you are interested in having your company in the Sustainability Index, or want to do a self assessment, go to the webiste:

The Index is currently only open for businesses. But the question was raised why not also NGOs and state institutions could apply. Hopefully that will be an extension for next year.

More interesting was the panel discussion. Laura Mikelsone from Cemex, Harolds Bulmanis from Aldaris, Eduards Reneslacis from Electrolux and Gordon Fyfe from Coca-Cola Hellenic were the panelists, moderated by Romans Baumanis. As a warm-up, Mr Baumanis asked the panelists what CSR was really about, bringing out one of the biggest challenges in the field: finding common ground. In Latvia, but also in places with a higher CSR maturity, there’s always a discussion about definitions, and there just doesn’t seem to be a single definition that everybody can agree upon. The answers from the panel where a good illustration of that. If you look for a perfect definition, you’ll be lost. But there is definitely common ground. CSR, according to the panel, is about long term business performance. Maybe Mr Fyfe illustrated it best with his personal take. Some years ago he would have had two words for it: “window dressing”. Since he joined Coca-Cola Hellenic and got more experience with CSR in practice and how it affects a company, his two words have changed. Now, he says, they’re “common sense”.

With the definition question out of the way, the panelists were invited to discuss three main questions: ‘will CSR make a company more competitive?’, ‘what is the effect of a public reporting tool like the Sustainability Index?’ and ‘what is the effectiveness of reporting on CSR in today’s business environment in Latvia?’ The panelists all agreed that CSR will make your company more competitive. Not only is the number of companies and governments that have CSR as a requirement for business partners continuously increasing, a look at the facts, as Mr Bulmanis rightly pointed out, proves the point as well: recent research shows that companies with sound CSR strategies outperform their competitors without one in terms of profitability and shareholder value. On a global scale, 42% of consumers base their decisions on CSR activities of companies. And Latvia is not different than the rest of the world, according to Mr Bulmanis.

A tool like the Sustainability Index is seen as a valuable tool for finding areas for improvement, getting a better understanding in the long run and to improve the business climate in Latvia in general. It will bring more transparency to the economy, and will promote a more sustainable way of doing business.

The companies represented by the panelists all have some difficulty in translating their CSR activities into measurable results. When pressed for metrics, Laura Mikelsone from Cemex came with an interesting example: by improving the workplace conditions, providing training and improving health and safety procedures, Cemex has decreased the number of accidents in the plants, and consequently the number of injuries sustained by employees. A good example of how broad the field of CSR is, and how important it can be. Mr Bulmanis from Aldaris said that somethings were easy to measure, like the fuel efficiency gained from responsible driving trainings, but others were harder. Participating in the Great Cleanup, or Liela Talka, is something the company gladly does, but does not know how to measure. Still, the others agreed that this is an important yearly CSR event. So maybe not everything needs to be measured? Well, there’s more to that. Measuring the results of your CSR efforts is important to show to management, boards, shareholders and other stakeholders what the effects are. The earlier mentioned results, that companies with sound CSR strategies outperform their peers, would not have been possible to show without good metrics. The Great Cleanup is actually a good case for this. It is an important event for many Latvians, and companies that do not organize an activity around it, might have a lower degree of employee satisfaction, which might result in a higher turnover, which in turn might result in higher recruitment costs. Of course, if companies, boards and shareholders all agree that doing good is part of life, and don’t need convincing, measuring and reporting seems unnecessary. But if you can show positive results, it actually might help convince other companies in your operating environment, who now think CSR is just a costly matter they cannot afford. And that is exactly the type of proof that Latvian companies need to see.

Two other interesting questions were raised by the public. The first one was about CSR being common sense, and how there are so many examples of how it might be lost. Examples of businesses that take profit over ethical behavior. Mr Bulmanis had a great response to that. He mentioned last year’s oil spill and how it affected BP, but also asked who now hears about Union Carbide. After their incident in Bhopal in 1984, the company took a turn for the worst and finally got swallowed up by Dow Chemical. Both are examples of how CSR strategy, which could have prevented both incidents, is also about risk mitigation.

The other question also raised a good point. All panelists represented foreign owned companies, with mother companies in economies with longer traditions in CSR. Although they show how CSR also works in Latvia, it would have been interesting to hear the point of view of a Latvian owned company. According to Dace Avena, from the Sustainability Index, there were several Latvian owned companies in the Index last year. It would be good to hear from them next.

Unfortunately, the last question got lost in translation a bit. The panelists were asked whether they saw a move from corporate giving to corporate volunteering. This is a global trend, and it could well be that it is also showing in Latvia. All panelists agreed that their companies encouraged volunteering, with the Great Cleanup again as an example, but also the Coca-Cola Christmas Caravan.

In a little under 2 hours, the event proved to be an impactful sharing platform for knowledge on CSR. The high number of attendees showed that there is a lot of interest in the subject of CSR in Latvia. It was also good to see the international chambers of commerce successfully combining their powers to bring the topic on stage. Building on the closing remarks of moderator Romans Baumanis, who did a great job: there are many things to do and a long road to go to improve the business climate in Latvia, but this event was definitely a good step in the right direction.


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