Uniting Paternalistic, Modern Practices

Russian businesses offer some Soviet-era employee services as well as sound environmentalmap programs as they globalize

By Vera Kurochkina

If you ask American experts what they know about Russian CSR activities, the majority would probably answer “nothing.” This is not particularly surprising. And if the same question is asked in the European Union, which is geographically closer to Russia, the answer would still be the same. This is unsatisfactory and the following discussion is one of the steps toward informing people about Russia’s CSR expertise and how the country’s businesses are integrating into the global process of developing new CSR standards and practices.

Russian companies are becoming high-profile players in the global market. Despite the liquidity crisis, which began in the middle of last year and has disrupted the world’s economy, 2007 was a record year for IPOs in Russia, according to communications consultancy PBN Company in its “IPO Pioneers” survey. Judging by the volume of IPOs last year, the country has become a leader in Europe.

The survey found that Russian companies carried out 23 IPOs in 2007, totaling $29.4 billion. This volume exceeds the volume of IPOs from the other European countries. For example, companies from the United Kingdom have attracted almost $22 billion while companies from Germany have brought in $11 billion.

A research paper, “The Russians are Coming: Understanding Emerging Multinationals,” published by The Economist Intelligence Unit, supports this view, noting that Russia climbed to third from 12th in a ranking of the most favorable destinations for direct foreign investment. The report also indicates that globalization is influencing all types of Russian companies, from the state-owned giants to private corporations. These companies are undertaking major changes as part of implementing transparent, international management and corporate governance standards.

Globalization and efforts to integrate into the world economy are among the factors that are making Russian businesses take social responsibility into account, according to the Russian Union of Industrialists and Entrepreneurs (RSPP).

Another factor is companies’ searching for foreign partners and investors as part of IPO preparations. In 2004, RSPP approved the Social Charter of Russian Business as the basis for the sustainable development of independent and socially responsible companies.

In 2007, a new edition of the social charter was issued. It was aimed at achieving long-term economic and social results that take into account balancing the interests of shareholders, the state, employees, suppliers, consumers, public organizations, local communities and other parties.

Russian companies are now actively implementing modern industrial safety standards, environmental protection activities, and social investment practices as part of day-to-day operations. This process is going on at varied paces in different companies. But, it is noteworthy that 20 years ago, no one in Russia knew what CSR was.

During the Soviet Union era, social investments mainly consisted of providing social services to employees and the rest of the population. In 1990, almost 80 percent of Russian state enterprises owned and provided homes, sport and recreation centers, cultural centers, and other social infrastructure. In many towns, heat, water and electricity supply were connected with the engineering centers of enterprises, and they were, as a rule, subsiding local and municipal authorities.

Russian companies have successfully restructured social programs without serious social unrest. This experience can be useful for other countries undergoing similar transitions. Some Russian companies still subsidize employees’ expenses for recreation and own sport and cultural centers, offer apartments to employees, as well as provide financial aid to local communities to support local infrastructure maintenance and construction projects.

At the same time, modern models of corporate philanthropy and social investments are being actively developed, as well. This is an indication that Russian CSR practices today combine paternalistic and modern CSR models. Russian companies with a global presence actively apply the best practices.

The experience of United Company RUSAL, the world’s largest producer of aluminum and alumina, is illustrative, as CSR is at the core of the company’s growth and development strategy. In 2002, UC RUSAL became the first company in Russia to join the U.N. Global Compact Initiative. Understanding that climate change has become an issue of global concern, earlier this year the company joined the “U.N. Caring for Climate: the Business Leadership Platform” global initiative. Decreasing carbon emissions is one of the company’s key priorities.

UC RUSAL has already invested more than $1 billion in environmental protection initiatives since 2000 and is planning to invest more than $$1.4 billion from 2007 to 2013 in modernization efforts aimed to improve environmental protection.

The extensive modernization program will enable the company to achieve unified environmental protection standards across all of its plants and will decrease greenhouse gas emissions 1.5 times by 2015. UC RUSAL’s progress and activities are detailed in its CSR over the last several years.

UC RUSAL’s activities and practices are just a small part of the CSR trend at work at major Russian enterprises across the country. Increased awareness of our CSR activities and investments will definitely assist in improving the image of Russian companies and enhance the global reputation of Russian businesses.

Vera Kurochkina is Director of Public Relations at UC RUSAL. In addition to supervising external communications strategies, Kurochkina establishes cooperation ties with industrial and noncommercial associations, and is responsible for charity and social programs.

Posted April 24, 2008 in International