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RIA Novosti
November 29, 2004
SOCIAL RESPONSIBILITY OF RUSSIAN BUSINESSES

MOSCOW, (RIA Novosti economic commentator Nina Kulikova) - The public discourse on the social responsibility of Russian business began after President Putin set eliminating poverty as a goal in a May 2003 speech. Unfortunately, despite the authorities' attempts to define Russian businessmen's social responsibilities and the numerous discussions about the topic among businessmen, citizens and bureaucrats, Russia still does not have a clear understanding of corporate social responsibility.

Some people's interpretation of a business's social responsibility is that a business should pay taxes and create new jobs, while others view a business's social responsibility as paying taxes and developing the social sphere in region where the business is located. For a long time, the prevailing assumption was that companies should satisfy the requests of local authorities. In addition, many people associate the social responsibility with charity. In April 2004, Finance Minister Alexei Kudrin officially defined corporate social responsibility as the direct payment of all taxes as opposed to through offshore subsidiaries, then charity, and finally support for political forces interested in the development of the country, in other words, political loyalty.

This issue became a topic of discussion again at the Congress of the Russian Union of Industrialists and Entrepreneurs (RUIE) on November 18. Speaking at the congress, Mr. Putin emphasized the importance of the social responsibility of Russian businesses and reiterated the importance of paying taxes. He also noted that the state expected Russian businesses to increase their investments in social projects, science, education and the development of the so-called "human factor." Mr. Putin also said large state transportation, energy supply and near-border infrastructure reinforcement projects were potential areas for Russian businesses to participate in. Essentially these projects are the development of partnerships between the state and private businesses. The authorities plan to create the necessary legislative base for such partnership as they consider these projects to be socially important.

In contrast to the mid-1990s, when the state was weak and business dominated many aspects of life in Russia, the state recovered most of its positions and became the leading political player in the country. This change is reflected in the partial transfer of social responsibility from the state to private business.

In general, Russian companies, especially those that operate on western markets, are interested in being socially responsible. However, the entrepreneurs complain about the lack of state institutions necessary for the development of corporate social responsibility. Executive Director of the Managers Association Sergei Litovchenko said, "No matter what we attempt do in the sphere of corporate social responsibility, we immediately encounter the inefficiency of the state apparatus and civil services. Accordingly, until we somehow solve these problems, we will never move beyond theoretical discussions."

Some business consider the invitation to participate in large economic projects to be a situation where the state determines the tasks and the business makes investments according to state's recommendations wishes. Many of them refuse to relinquish their freedom to invest in whatever they want. National Investment Council President Alexander Lebedev said the Kremlin had a stringent policy in relation to private business, while appealing to businesses to assume larger social responsibility and expand their involvement in state projects that are unprofitable or impractical due to their excessive politicization.

At the same time, many experts believe that the current level of corporate social responsibility is rather low. During the reforms, Russian businesses somewhat neglected their social role. A state's civilized economy is largely determined by the willingness of businesses to assume social responsibility. Nobody questions that one of businesses' primary social responsibilities is to pay taxes and create jobs. Businesses that ignore the demands of the society become unstable and vulnerable. Therefore, the state has been recently attempt to remind Russian businesses of their social role. Businessmen seem to be willing to accept some of the suggestions but strongly oppose others.

The RUIE congress adopted the "Social Charter of Russian Business," which outlines the social mission of Russian businesses. According to the document, Russian businesses' social mission is the sustainable development of independent and responsible companies, which meet the long-term economic interests of business and that guarantee the social stability, safety and prosperity of citizens, environmental protection and the observance of human rights. RUIE head Arkady Volskiy said the priority areas of corporate social responsibility included the creation of new jobs, increasing wages and the development of a vocational and technical training system.

Russian's have a different opinion about the social mission envisioned by Russian businessmen. According to polls conducted by VTsIOM this year, 61% of Russians believe that businesses need to increase their level of social responsibility. Only 37% of the respondents emphasized economic effectiveness. Fifty-eight percent of Russians expect businessmen to create more jobs, which coincides with the businessmen's vision. However, 56.6% of Russians believe that business, not the state, must be responsible for the health care system, and 41.6% insist that businesses solve social problems in the regions, particularly by providing financial support to the most vulnerable social groups.

Clearly, there is no mutual understanding of the social responsibility partnership model yet. Businesses are rather reluctant to accept the proposals from the government, and the public is unsatisfied with the what Russian businessmen have envisioned. The majority of Russians have no chance to take part in the creation of the concept.

According to Center for Political Technologies head Igor Bunin, the issue of corporate social responsibility can only be solved through the modernization of state institutions and the creation of civil institutions to monitor the interaction between businesses and the state.