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The importance of CSR - Mizzima Business Weekly interviews Vicky Bowman
In an interview with Mizzima Business Weekly’s Geoffrey Goddard, Executive Director of the Myanmar Centre for Responsible Development, Vicky Bowman, was asked to define corporate social responsibility and explain what a company gains from embracing the philosophy.
Corporate social responsibility is “the responsibility of enterprises for their impacts on society”. Companies have positive impacts – they create jobs, and sell products which satisfy customers. But businesses can also have negative impacts on human rights – for example if their beauty products harm people, or their mine pollutes the water supply. And if they engage in bribery, they have a negative impact on society as a whole.
If a company understands what its negative impacts can be, accepts that it is responsible for them, and tries to reduce them, it will be more likely to have a positive reputation with its customers, its employees and its other stakeholders. It will avoid making the sort of mistakes which can lose it customers or shareholders, get it sued in court, or lead to demonstrators outside its fence. If a company does not address its negative impacts, it could lose its legal or social licence to operate and get closed down.
Then there is the ‘going beyond’ aspect of CSR, the bit that Michael Porter calls ‘shared value’. It’s about making a social investment which isn’t just philanthropy that makes you feel good and maybe gets you a bit of press coverage when you open the primary school you donated. If you are a mine in a remote region, you know that the best way to get the local community to support you is to employ them, for example as drivers or security guards. But none of them can read as there is no school there. So building a school and investing in education makes sense even if the payoff for the investment may not come for ten years.
What are the biggest challenges to persuading a company in Myanmar to accept CSR?
In principle, I find Myanmar companies say they want to be responsible. It is consistent with Buddhist and other philosophies. The problem is that it can cost them more money, like paying a fair wage, keeping your workers from having accidents, making sure that your products are safe. They are worried that it will make them uncompetitive, particularly along with all the other factors they have to struggle with in Myanmar like the power supply and redtape.
In other countries, there are laws which are enforced and this puts pressure on companies to be responsible. Or there are shareholders or an active media that scrutinises the company’s behaviour. In Myanmar, most of that doesn’t apply. Companies are generally family owned, so there is no shareholder pressure. The media is getting stronger, but it still isn’t able to hold companies to account. And there are few environmental, labour and safety laws, and those which there are, aren’t understood or enforced. And on top of that, there are the bad habits of the last decades, like corruption, and a lack of transparency of fair competition which are hard to eradicate. It isn’t yet understood as bribery to give a minister a golf set or an official an iPad, or arrange for him to go to Singapore. In Britain or Australia, a company would have a code of conduct which would ban such ‘gifts’ which could even land a business executive in jail.
What are the main factors that motivate companies in Myanmar to embrace CSR?
There are several factors. Local businesses are mostly embracing the reforms and want to demonstrate that they are a part of them. Many businesses have wanted to act more responsibly for years, but the system hasn’t encouraged it. But one of the key factors is that foreign partners who are under intense scrutiny when doing business here, particularly when it comes to corruption and respecting human rights, need to be confident that their business partners – whether it is their suppliers, or their JV partners – are following the same rules.
Currently there are very few companies here that the major multinationals feel comfortable working with, whether it’s because their garment factories pay very low wages, or because the construction company doesn’t have an understanding of what ‘business integrity’ or global anti-corruption standards are, and doesn’t have a mechanism for enforcing it. The Myanmar companies that demonstrate to the garment retailer or the oil company that they ‘get it’ will get the business and then others will follow and source from them too.
Of the Myanmar companies that have adopted CSR, in what ways has it changed the way they operate?
It depends. Companies where their employees have formed trade unions now need to work with the union leaders to resolve problems. Some employers are doing this. Some are not. Some companies are making more effort to understand the concerns of the communities in which they operate. They realise they need to talk to them about their business plans and if necessary adapt those plans.
What structural changes does a company need to make if it adopts the CSR philosophy?
At the moment many companies still don’t have a department which works on CSR, and it is left to the CEO or sometimes the HR manager. Companies need to appoint someone qualified to think about the stakeholders the company has and whose human rights they have an impact on, and to be sufficiently senior to persuade the management and operational side of the business to change the way they do business, if necessary. And they need to put mechanisms in place, so that their customers, or neighbours, or employees can raise complaints easily and get a quick response.
What is the cost of embracing CSR? How does a company measure the benefits, in money terms and in performance terms, of embracing CSR?
There is a cost, because it requires senior management time to work out what to do and to communicate that to the workforce. Sometimes it requires additional spending, for example changing building plans to avoid damaging a cultural site, or training local people to work for the company when maybe it would be cheaper and easier to import labour from elsewhere. But it is an investment in obtaining and retaining the social licence to operate. The benefits are very difficult to measure because they come from avoiding blockades and demonstrations, court cases, etc. You can only really measure the cost of getting it wrong – lost time while your mine is closed, legal bills for your oil spill or court challenge, or getting your dam stopped half-way through construction due to public opposition. Benefits also come from developing intelligent strategic CSR programmes which grow your market, like soap companies teaching children in schools how to wash their hands, or publishers running adult literacy programmes.
What does a company that has adopted CSR stand for that it did not stand for before it embraced the philosophy?
It shows they recognise that they have a responsibility to society which extends beyond making a profit, no matter what the cost. It shows that they realise that their negative social and environmental impacts have a cost to others, and they should do what they can to reduce that cost, even if it will eat into their short-term profits to do so.
How would Myanmar benefit if more companies embraced CSR?
Myanmar lacks both a solid legal framework to protect the environment, workers and communities. The government lacks the capability to enforce the few laws that do exist. If companies behave responsibly without being forced by officials to do so, they will be helping to build a Myanmar in which investment and economic growth is sustainable and avoids negative effects. If they don’t embrace this, and prefer to take advantage of weak governance to make a quick buck in the short-term, the country will suffer, but in the long term, the company may too.
This Article first appeared in the April 10, 2014 edition of Mizzima Business Weekly.
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