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CORPORATE SOCIAL RESPONSIBILITY
The Business Case for Sustainable Development
Corporate Social Responsibility (CSR) is "the commitment of business
to contribute to sustainable economic development, working with
employees, their families, the local community and society at large
to improve their quality of life, in ways that are both good for
business and good for development".1 As part of their core business
principles, companies that are committed to sustainable development
adopt high standards in areas that include environmental protection,
gender equity, working conditions, employee benefits, capacity
development and community development.
Businesses can demonstrate corporate responsibility by obtaining any
of a number of internationally recognized credentials and codes of
conduct (CoCs); indeed, a small number of Vietnamese companies have
already done so.2 However, SMEs that cannot access and/or afford such
certification can still reap tangible business benefits by adopting
CSR standards.
CSR in Vietnam
CSR is a relatively new
concept in Vietnam, and thus, implementation has been limited to
date. According to recent World Bank research, barriers to CSR
implementation include: 1) lack of awareness of the concept; 2)
production inefficiencies that result from implementing multiple
CoCs at once; 3) lack of financial and technical resources to
implement CSR standards (particularly true for SMEs); 4) confusion
that arises due to differences between the national Labor Code and
CoCs; and 5) national regulations that impede CoC implementation.3
Given all these
difficulties, should Vietnamese SMEs be concerned about CSR, and if
so, why? The answer is YES, because consumers, investors,
policymakers and non-governmental organizations (NGOs) around the
world are becoming increasingly concerned about the impact of
globalization on workers' rights, the environment and community
welfare. Companies that do not adhere to CSR standards could find
themselves shut out of international markets.
The business case for
CSR
Companies around the world
that engage in CSR achieve benefits that include cost savings,
higher revenue, a better image, lower staff turnover, increased
productivity and access to new markets. Some examples are presented
below to help Vietnamese SMEs better understand how they can
implement CSR standards for their own economic benefit as well as
for the environment and the community.
Reduce costs and
increase productivity
Businesses can save money
by committing to cleaner production. One example is a large paper
producer in Poland, which saved approximately US $12 million over
five years by installing new equipment which reduced water use by
7%, and water and air pollutants by 70% and 87% respectively.
Effective human resource management can also cut costs and boost
productivity considerably. Fair wages, a clean and safe work
environment, training opportunities, and health and education
benefits can all help make a company more profitable by increasing
productivity, reducing absences and lowering costs of recruiting and
training new staff.
Increase revenues
Investment that supports
local economic growth can lead to a better qualified pool of labor,
cheaper and more reliable suppliers, and ultimately, to increased
revenues. For example, Hindustan Lever, a subsidiary of Unilever in
India, was operating at only 50% capacity and incurring significant
losses because of inadequate supplies of milk. To combat this, the
company established an integrated program to help farmers increase
milk production. This included training farmers in animal husbandry,
improving basic infrastructure and setting up committees to organize
local suppliers. As a result of these efforts, milk-supplying
villages increased from six to more than 400. With production
matching capacity, Hindustan Lever has become Unilever's most
profitable enterprise in India.
For many companies,
obtaining a credential that demonstrates social responsibility can
generate higher revenues. Aserradero San Martin, a Bolivian logging
and wood producer, was able to access the North American market
where prices are 10-15% higher after the company obtained Forestry
Stewardship Council certification.
Enhance reputation
There can be significant
benefits to brand value and reputation for companies that are
environmentally and socially responsible. An enhanced reputation can
help build sales, attract capital and business partners, and recruit
and retain employees. Multi-nationals such as The Body Shop (a
UK-based producer of skin and hair care products) and Swedish
furniture retailer IKEA are good examples of this. Both are
well-known not only as suppliers of affordable, quality products,
but also as good corporate citizens who are concerned about the
environment and social welfare.
Attract and retain
quality labor
A quality workforce is
crucial for a business that wants to achieve high productivity and
product quality. In emerging markets where there are often large
pools of workers but few quality workers, attracting and retaining
well-qualified, committed workers can be a significant challenge.
Employers who offer their workers fair wages and benefits, training,
healthcare and a clean working environment are much more likely to
attract and retain good staff.
Grupo M, a large textile
producer in the Dominican Republic, provides subsidized transport,
day care centers, medical and dental services for employees and
their families, as well as training and salaries that are double the
country's minimum wage. Rather than worry about the costs of these
investments, the company's founder and president considers it smart
business: "everything that we give to our workers gets returned to
us in terms of efficiency, quality, loyalty and innovation."
Examples from Vietnam
In recent years, a small
number of Vietnamese companies have implemented CSR programs, mostly
at the request of buyers. A recent MOLISA survey of 24 garment and
shoe producers found that CSR implementation has helped the
companies increase sales by 25%, increase productivity from 34.2 to
35.8 million VND/laborer/year, and increase total exports from 94%
to 97%.4 Surveyed companies also said they benefited from a better
image with customers and the ability to attract and retain high
quality staff.
(1) As defined on the web page of the
Private Sector Development Group of the World Bank/IFC. See website
www.worldbank.org/privatesector/csr/index.htm. Sustainability, which
encompasses the principles of CSR, is a corporate priority of IFC.
The international examples highlighted throughout this bulletin are
from Developing Value: The Business Case for Sustainability in
Emerging Markets, SustainAbility and IFC, 2002. Additional
information on IFC's approach to sustainable business can be found
at www.ifc.org/sustainability.
(2) Well-known examples include SA8000 (focusing on labor standards
in manufacturing), WRAP (Worldwide Responsible Apparel Production),
FSC (Forestry Stewardship Council), and ISO14001 (prescribes
corporate environmental management systems). Large multinational
companies like Nike, Timberland, Gap, IKEA, etc. often have their
own codes.
(3) Twose, Nigel and Rao, Tara. Strengthening Developing Country
Governments' Engagement with CSR: Conclusions and Recommendations
from Technical Assistance in Vietnam. World Bank, 2003.
(4) Dao Quang Vinh, et. al. Summary report of CSR in the garment and
footwear sectors, ILSSA, 2003. |
