How CSR can help businesses in Uzbekistan?
Why should companies or organisations in Uzbekistan care about CSR and strive to develop relevant strategies for their entities? Why it is important to engage in CSR when you are already doing well? Why practice accountability when your stakeholders are not even bothered or demand any transparency?
This would be a rhetorical question for companies in the West, but not for those operating within Central Asia and particularly in Uzbekistan. If we look at the motivational factors to adhere to CSR practices in Western countries, it is clear that one of the main purposes is to meet the rising demands of stakeholders. Companies engage in CSR in order to gain social legitimacy within the society they are operating. The situation is a bit different when it comes to Central Asia and Uzbekistan: there is a need for strong justification in order to promote CSR.
Although local businesses in Uzbekistan are involved in charities, care about employees and abide rules and regulations set out by the government they do not have a separate strategy for CSR. There is no strong stakeholder influence or supply chain requirements that would motivate them to engage in CSR. However, the situation will hopefully change when businesses realize the potential of CSR policies and see that it can actually bring economic and social benefits. So what are those benefits and how they can fit into the Uzbek business environment?
There are many long-run advantages of implementing CSR principles in business practices.
First, by trying to minimize the environmental footprint as a part of their CSR, businesses can reduce the costs of energy and resource consumption. Additionally, engaging in social problems can bring benefits such as good reputation that will help to increase the amount of sales. A good example will be a Unilever. Every sustainable action taken by this company works for its advantage. Unilever reduced its carbon emissions, limited the water usage and this, in turn, has decreased the amount of its utility bills. Unilever also increased the number of sales of their soap products by promoting sanitary norms and hygiene practices. These strategies can also be easily implemented in Uzbek business practice. Involving in social issues such as promoting the creation of proper ramps and paths for wheelchairs access, companies that produce or sell wheelchairs may gain benefits: when comfort is provided and it is easy to move around the city, a majority of disabled people would like to purchase the equipment. Uzbekistan has yet to become a wheelchair friendly country.
Second, CSR helps to improve the loyalty of employees and lower the absenteeism levels, making it easier to hire and retain employees. Google, for instance, lands on top of the Fortune’s list of “100 best companies to work for” for the six years in a row. Why? Well, who would not want to work for a company where you are provided free food, free beer and wine every Friday, free haircuts, laundry services, and parental leave for both parents? The company provides a safe workplace and employees can have unpaid leave for three months. Going further – Google offers 50% of the salary to spouses of deceased employees for ten years. Can it be implemented by Uzbek companies as well? For sure!
Third, by advertising their CSR, companies attract customers with social inclinations who would willingly pay more for a certain goods if they were produced by an ethical company. I have doubts that this could work in Uzbekistan. Well, at least for now. For example, Toms shoes donate one pair to those who are in need for every pair of shoes they sell. The concept itself is great as the founder Blake Mycoskie met the urge of those customers who want to feel good about their purchase by linking it to donation. And the company is doing great in terms of conducting responsible business while generating profit: already 400,000 shoes have been donated. Blake was successful with his idea as the majority of customers in the West are willing to pay more for a purchase if their expenditures partially help the society. Can we say the same in terms of a country where the average monthly salary is no more than US $125? Are people ready to buy a product for a higher price but serves for a better purpose or will they go with the same purchase for a cheaper price? Especially if you have 3 or more children to feed. That is the question that needs thorough research as unfortunately no such a study was conducted in Uzbekistan.
Fourth, CSR could be a strong tool for organisations to forestall possible customer boycotts and achieve market advantage among their rivals. Maybe for now it is not a concern for businesses in Uzbekistan as the majority of customers are not aware of their rights, however, things are changing fast and nowadays social activity is becoming more and more dynamic. So in near future companies would have to brace for social activities.
Fifth, companies with good CSR policies attract potential investors as they have a competitive advantage over their rivals with potent risk management strategies in this regard. That is the reason why investors or potential shareholders with high social preferences are attracted to the companies which are popular for their CSR agendas. Now, this is currently the question of the hour for local business in Uzbekistan. If Uzbek companies want to enhance their financial performance locally or at an international level, they have to attract ethical investors by following CSR principles and implementing them into their practices. To be able to achieve success on global market one should be engaged in CSR along with improving their economic, social and environmental standards.
At the same time, motives for implementing CSR principles into their practices could be different for large companies and for SMEs. Big organisations are more prone to public scrutiny and thus come under bigger pressure to practice CSR, besides they possess sufficient finances for that. But reputation is also crucially important for the small companies as they practice CSR to become more visible and can use CSR as relatively cheap PR instrument. It helps companies disseminate information about their activities and products.
It is pertinent to mention that whatever are the benefits of CSR, businesses should make sure that CSR policies are developed correctly and correspond to the certain company’s policy, otherwise there is a chance that those projects will fail. There are many other reasons why companies fail to implement or develop right CSR strategies: managers fail to engage stakeholders while developing a strategy, there are conflicts of interests, CSR policy is not integrated within the development plan of companies and failure of human resources to implement those CSR strategies.
Moreover, CSR should not be just a differentiation policy or tick – box exercise to improve the reputation, but bear a true value and reside in the core of the businesses. CSR should be a development tool to address issues such as poverty, human rights, health, education, child labour and etc. CSR policies of businesses should be based on local values, issues, and developmental problems. If we consider the fact that Uzbekistan, one of the most important players in Central Asia, is ranked 85th among 128 countries on the Social Progress Index in 2017 we see the urgency for proper CSR practices in order to improve this situation. The role of businesses in this is undeniably prominent.
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