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Twenty years after Communism, what opportunities does corporate responsibility offer stakeholders in Central and Eastern Europe?

In a week’s time I’ll be in Bulgaria speaking at a conference on corporate responsibility. Then just over a week later in Budapest at a similar gig.

It seems an appropriate time, exactly twenty years on from the fall of the Berlin Wall and the Soviet Union, to consider what role responsible business can play in what we now call Central and Eastern Europe.

In the last couple of years I’ve been in Moscow, Warsaw, Kiev, Prague and Bratislava meeting business executives, NGOs and government figures and discussing corporate responsibility.

It’s been hard to know what to say at some events. The operating environment for large companies is so dramatically different from the UK that I sometimes wonder what I, with my focus on the big western MNCs and UK companies, can bring to the party.

So at events in Central and Eastern Europe I generally try and focus on two areas: Best practice and lessons from the experience of big western firms, and an overview of EU trends that might impact the Central and Eastern European region.

Looking at the stats 20 years after the fall of the Berlin wall, it seems corporate responsibility does indeed have an important role of play in many eastern European nations.

In a recent Pew Research Center survey, when they asked 1000 Hungarians 720 said life was better under communism.

That 72% is highest in the region, by quite a long way, but in other countries 50% or even a little more thought the same when asked the question about what capitalism had done for them.

So trust in business, and markets, is low in places, and struggling for a majority vote in many other countries in the region.

One common refrain I have heard, from Hungary and Ukraine to Poland to Russia, is that there is a deep societal suspicion of anyone with money.

This is not so much envy, it seems, as a lack of belief that anyone rich could have became so in an honest fashion.

This makes it harder for business folks who got rich in the 90’s to legitimise themselves through philanthropy, even if they have the best intentions.

Victor Pinchuk in Ukraine and Roman Abramovich in Russia are two examples of billionaires who have gone beyond the actions of many of their peers in philantrophy. Pinchuk largely in Kiev and Abramovich in Chukotka, the province in Siberia where he was governor until 2008. Have these actions improved their reputations? Perhaps in the west, but at home it’s hard to say, given the above. Did they do all this just for better reputations? Actually I think it goes deeper than that, but there may be some that disagree.

To consider what CR can do for companies in the region, I think you have to break it down into what both domestic and international companies can do, since they are different.

International firms can bring overseas expertise, technology and knowledge transfer, secondments abroad, big global community values, strategies and budgets, and where appropriate lobby for things in the interest of local stakeholders, such as better education or healthcare systems. They can fund the spreading of international standards and best practice, in a variety of ways.

Domestic firms, on the other hand, have a more intrinsic connection with the country.

They know the challenges of growth and success more than anyone, and can help, for example, local entrepreneurs and smaller businesses gain capital, credibility and capacity.

They can help governments pinpoint specific problems that hold back people from realising their potential, without having to necessarily take on the problem themselves with a small philanthropic programme, as happens currently.

Clearly, bearing in the mind the Pew center’s numbers, there is a huge opportunity for companies to contribute to convincing local stakeholders that capitalism can bring greater benefits than communism.

Companies that get involved, like Orange in Slovakia, Interpipe and TetraPak in Ukraine, and Danone in Poland, will surely benefit in the medium to long term. (I offer these names as examples of companies undertaking interesting CSR work in the region in the last few years)

As the global recession eases at some point in the future, job creation in the region will come first.

But being seen to actively contribute to tackling key social and environmental problems (by supporting institutions, for example) will be incredibly important for companies in Central and Eastern Europe in future.

Companies can also lead the way in cleaner manufacturing, retailing and distribution. They can help raise levels of environmental awareness in consumers, which is badly needed. Environmental expectations and standards are only going one way in Europe, after all.

The era of CSR as philanthropy, which didn’t work anyhow (particularly in Central and Eastern Europe), is over. The paradigm of giving back because you ‘took’ in the first place, is defunct.

The new expectations are that you act ethically all the time, including when people are not watching.

Because sooner or later, they will be, in both western and eastern Europe, along with most other places.

And as a race, we’re getting better at spotting corporate frauds, and rewarding authenticity.

I’m looking forward to adding some further posts after my upcoming trips to Sofia and Budapest.

2 Comments

  1. ART

    Great post! I enjoy your articles and always look forward to a next one!

    Speaking of local companies' CSR in "post-communist" countries…
    Many of the former Soviet republics are too far away from real democracy and industries are extremely monopolic.
    How do you think ethical and responsible business can become a a must, if due to monopoly there is no competition in the market so people can't boycott a brand because it is not responsible?
    A big problem in Caucasus.
    Thanks.

  2. Hi Art.

    Great question. How can it CR become a 'must' under those circumstances?

    You've nailed a key point there. I'm afraid it will simply take time, effort, better economics and societal institutions for this to happen.

    I read a paper once, and that argued the environmental awareness of Swedes in the 1960s was mainly due to increased leisure time to spend outdoors, once economic growth allowed this.

    That seems credible. But of course no-one wants to wait that long. That will take a while in some CEE nations.

    I am hopeful that technology will speed things up a lot. As connectivity to the internet and handheld devices that facilitate quick communication spread, that should help accelerate change. It has already begun…

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