Corporate Social Responsibility helps enterprises to maintain sustainable development as well as create competitive advantage
Foreign Investment: Why do Vietnamese enterprises need to apply CSR ? Are there any regulations or standard they have to comply to export to American and EU markets ?
Mr Florian Beranek: “You should never cut down more trees in the woods than trees are growing if you don’t want to run out of trees one day!” This simple but true definition of sustainable thinking has to be considered when you think about the future of world economy – from the simple farmer up to the Big Players. Using just your common sense – which widely has to be rediscovered – it becomes obvious that this basic rule of sustainable thinking does not apply exclusively to the use of resources:
If you want skilled and motivated workers – treat them well and with respect.
If you want satisfied and regular clients – meet their needs and take their concerns serious.
If you want to grow in your community – engage with it actively.
If you want a future for your kids – keep the environment clean.
If you want your ideas respected – respect the ones from others.
And finally if you want to have sustainable economic success just follow this basic and thousands of years old way of thinking. CSR is nothing new – it’s just another name of knowledge our successful grandfathers already had.
In the case of Vietnam there is another important driver to speed up the process of proactive CSR implementation: For long years Vietnam has been a “low cost producer”. But now it is shifting towards a mid income country. In other words low prices will not longer be the killer-argument to sell – other issues will gain more importance such as environmental impact, product safety, social compliance, legal compliance, community engagement, etc.
The increasing number of regulations and standards already reflects these topics. SA8000, ISO14001, OHSAS18001, BSCI, WRAP are probably the best known ones in Vietnam beside the large number of buyers requirements (often called Code of Conduct) and technical regulations such as REACH, RoHs, GS, etc. This, especially for SMEs, unmanageable variety of requirements is today’s major obstacle for companies to work actively on their CSR performance. On November 1st 2010 ISO published the Guideline for Social Responsibility ISO 26000. This will bring an end to that patchwork and will deliver a practicable framework even for small enterprises how to get a strategic CSR approach.
To facilitate a step-by-step CSR implementation our current EU-funded project is providing substantial assistance to SMEs throughout the next years. The close cooperation mainly between UNIDO and VCCI allows a great outreach to all relevant stakeholders. In particular the program is in line with the national agenda of VCCI’s department SDforB (Sustainable Development for Business) and allows generating valuable synergies.
What are the benefits and disadvantage in implementing CSR ?
Let me start with the two most common obstacles we hear when it comes to CSR implementation: “We have no money for this!” and “We have no time to do it!”. The lack of money is mainly a result of too aggressive pricing policy, inefficient use of resources and problems with the quality (both product and staff). The lack of time is frequently a consequence of the financial pressure – running behind new contracts, too tight timelines, insufficient planning, unreliable suppliers, etc. All this leads to a company that cannot breath anymore. “Reacting” becomes the common way of day-by-day business, sometimes it appears as an inevitable vicious cycle. In order to break this cycle a company has to invest time and just little money.
For a long period low price was the one and only credo in order to be successful – mainly as an exporter. But today international buyers are demanding more social and environmental compliance from their producers. They start already to ask for active community engagement, for anti-corruption mechanisms, for data-protection, etc. In order to meet these requirements in future a company will have to deal with all these topics. Not to deal with it as a “nice to have” – they have to deal with as a business case. So the benefit for those enterprises is a significant improvement of their competitiveness.
With the economic circumstances in Asia, how the regional enterprises implementing CSR ?
Some weeks ago the Chinese Primeminister said that in order to maintain the economy growing it is inevitable to improve significantly research, innovation and brand-building. All these three topics require a new sight on how to do business. One has to have a look at the so-called “soft facts”: trust, credibility, creativity, team-spirit, image, workplace ambient, work-life-balance, etc. So a holistic CSR implementation will play an important role. Today the requirements for export are the driver to invest in CSR – but tomorrow the demand will come from the really huge domestic Asian markets. Local consumers will be the new number one driver. And who is not starting to think about CSR in time will miss an opportunity or even loose his business. CSR is not an over-night change of technology it is an continuous process. This process just has to be initiated by the first self-reflection. This is probably the most difficult step …and this step does not cost any money just some creativity and time. So Corporate Social Responsibility should rather be seen as Corporate Social Opportunity.
Starting from the basics such as environment and labour issues, or energy consumption and strong exploitation of natural resources... but for the most SMEs in Vietam, how they can apply CSR effectively on the limited budget ? Any Vietnamese or international case study/good practices ?
Once more let me stress that initiating CSR as a continuous improvement process needs little to no additional money. What is needed are time, willingness and a basic capacity to analyze the current situation. We should try our best to get companies from “have to” towards “want to”. In order to obtain this goal supporting and encouraging activities from Government, financial institutions, international organizations and buyers are necessary. CSR is a process of small steps. And if an entrepreneur sees the result it will encourage him to proceed to the next step.
An example for a successful approach are activities related to work-place organization like the 5-S System. The time invested pays back in higher productivity, less accidents, higher quality and less losses. Very often this system also leads to a significant improvement of the production process itself.
Finally, how to make it into law, should we have any legal remedies to force all Vietnamese enterprises to comply ?
In general there are high quality laws and regulation in place when it comes to labour and environment. However the awareness and compliance amongst especially the SMEs are still quite low. I consider strengthening the role of the domestic consumer of high importance as well as the consideration of the principles of sustainable consumption and production in public procurement. So the role of the lawmaker is not only focused on direct intervention but also on creating and supporting new demands on the domestic market. This also will avoid the business sector from being divided into the “good” exporters and the “bad” domestic producers.
(The Foreign Investment)
Corporate Social Responsibility (CSR) – An opportunity for Vietnamese Business
An increasing number of foreign companies is adopting CSR into their core business strategies. Most of Vietnamese enterprises, mainly SMEs, however suffer from a lack of awareness and knowledge regarding the opportunities and benefits a holistic CSR approach can bring to them. To have an overview on this issue, SG Times had an interview with Mr. Florian Beranek, UNIDO Chief Technical Advisor on CSR for a long term European Union funded CSR project in Vietnam.
According to definition CSR can be described as the commitment from enterprises to base their business activities on a balanced economic, social and environmental performance. This behavior is widely known as the “Triple Bottom Line Approach” and will benefit both enterprises and society. Activities like charity definitely bring some positive effects but could be even more effective as part of an overall CSR strategy. This is the way to turn responsibilities into opportunities – but what is needed?
SGTimes Online: What do you think about the awareness of Vietnamese enterprises on CSR?
Mr. Florian Beranek: Up to now we found a quite significant gap between the big-players and the dominating group of SMEs. The reason might be found in the lack of opportunities to get in closer direct contact with international markets and networks. SME owners are facing a hard time because of pricing pressure and low value added. This steady pressure impedes them from developing new strategies, new products and new markets. Due to the efforts of the government and international projects on one hand and the strict requirements of international buyers on the other hand however the awareness in terms of labor and environment related issues is rising. But sustainable development is not based on these two issues only. One has to consider all related topics as equal part of the game in order to achieve a balanced triple bottom line.
Our current project, which is lead by UNIDO and VCCI in cooperation with another seven national and international partners, is focusing on this, let’s call it holistic, approach. We encourage and guide SMEs to discover the opportunities of strategic CSR on both the global and the domestic market. Therefore it is important to consider topics like labor conditions, workplace safety, environmental protection, diversity management, consumer concerns, intellectual property rights, community development, fair operating practices, … as essential part of a sustainable business strategy.
Fortunately an increasing number of entrepreneurs is recognizing that the time has come to work proactively on new markets, higher value added and innovation predicting that low cost of labor might not remain the #1 criterion anymore.
But nevertheless awareness and the ability to see and work on the “big picture” are still to be improved significantly. To achieve this ambitious goal a broad approach engaging with all relevant stakeholders will be necessary in order to turn responsibilities into opportunities. Complying with future economic, social and environmental requirements is the key for the nation’s development. And doing so is not a question of a company’s size – it works for everybody.
In order to enhance CSR performance amongst Vietnamese companies what are the necessary conditions they should have?
As CSR is an integrated model it will be necessary to initiate a working multi-stakeholder dialogue, establish and facilitate networks and convince entrepreneurs of the importance to invest time in it. The “investment” of time will give them the opportunity to move out of day-by-day for a moment and discover the big picture of their core business. This initially is the most important step.
Beside this networking and sharing experiences will improve both awareness and know-how. In order to facilitate these network governmental authorities, business associations and international partners are already offering a large number of initiatives – so guiding SMEs to find the best solution is critical. And finally an ongoing multi-stakeholder dialogue has to be established which shall be support also by the media.
All these efforts should lead to an improved recognition of CSR - away from a burden towards new opportunities.
How can one evaluate the effectiveness of implementing CSR?
As CSR is a holistic approach it is quite hard to evaluate the financial result of an isolated activity. Just remember what Henry Ford once said: “I know that 50% of my money spent on marketing is for the birds, but nobody can tell me which 50%!”
However, there are strong evidence to be found in various financial indicators like consumer’s satisfaction, number of complaints, days of absence, energy consumption, amount of waste, productivity and so on. To benchmark these indicators the Global Reporting Initiative (GRI) has published an indicator set which today is used by a large number of companies worldwide. How to work with GRI will be part of our project’s activites.
Another important indicator is the “value” of the brand, which is an immaterial asset of a company. So as soon as a company starts to establish or to foster its own brand soft-facts as public recognition will become a major topic. Generally one can say that the higher the brand value the more important CSR becomes in order to protect the brand. And probably developing brands can be one of the ways for Vietnamese companies to get a higher value added into their business.
Which role CSR plays in the success of enterprises?
Starting with the basics – environment and labor: Saving energy and resources is cutting costs. Creating good, safe and healthy working conditions helps to keep and attract skilled employees, which finally contributes to the company’s public image.
But one of the most important reasons of implementing an overall CSR strategy is the fact that you move from reacting to acting! Don’t wait until something happens or somebody is requiring it overnight. Analyze your processes, define the impacts and identify the people involved – and you get the big picture which shows risks and opportunities before something can harm your business seriously. So control the risks and take these opportunities.
Considering these positive effects CSR is much more than a “nice to have”, it is a necessity for sustainable business success. From the smallest tailor around the corner to the billion-dollar multinational company.