«RUSSIA`S INTEGRATION INTO THE WORLD ECONOMY: THE NEW PARADIGMS OF THE ECONOMIC CULTURE ИНТЕГРАЦИЯ РОССИИ В МИРОВУЮ ЭКОНОМИКУ: НОВЫЕ ПАРАДИГМЫ ЭКОНОМИЧЕСКОЙ КУЛЬТУРЫ ...»
EUREPGAP decided not to compete with the other standards but to limit itself to the Pre-Farm Gate level as here EUREPGAP could gain its unique competitive position supporting also all activities of quality assurance initiatives at the Post-Farm Gate level. The interaction between the different QA initiatives had been visualised on a chart of Jrgen Matern, Metro, Germany during an EurepGAP-workshop, which is still used in many seminars (figure 3).
Figure 3: Interaction between different QA Initiatives To be able to finance a control-system, worldwide synergy effects were taken into account. From the demand-size not only European retailers but also companies from Asia or the USA joined. Due to that fact “EUREPGAP” was re-labled to “GlobalGAP”(see Figure 4) Figure 4: National Technical Working Groups GlobalGAP Institutionalized Drivers Similar to the approach applied when establishing Orgainvent, also in the case of the Good Agricultural Practice, the EHI Retail Institute a spin off of this workshop took place creating an independent company with the name of “FoodPlus” to give stakeholders from around the world the possibility to contribute and to share the impact onto the standards for fruit and vegetables democratically.
Differently to the strategy and tactical steps of crisis-management in the meatindustry, the pro-active activities of the fruit and vegetable EHI/GlobalGAP-team refer mainly to back-stage operations. No necessity was perceived to go public.
Environmental Retail Management Having been involved via Orgainvent and FoodPlus in many conferences about “Green Marketing” in the beginning of this century, it suddenly became clear that due to the danger of the change of the world climate many EHI-pilot-activities, for example, from the 80ies like “optimizing packaging” now became “main-stream” thinking.
A virtual Network Environmental aspects are too complex to be handled by one institute only even when acting as a co-ordinator. Furthermore, in many facets of this topic, like CO2-footprint or others, specialists have a higher reputation and budget at their disposal compared to the EHI. However, EHI was successful in positioning itself as a worldwide catalyst “for retail innovation” again. But also here again it is not yet clear how “environmental action” can be defined or measured and how far action A perhaps counteracts action B. For example: organic beef is claimed to be more environmental – but it needs additional space (up to 50 percent) for breeding.
Another point of discussion would be action C (beef from Argentina) versus action D (for example beef locally sourced in Europe). There are pro and con from lots of controversial stakeholders – as well on the level of agriculture, on the level of processing, on the level of packaging, as on the level of logistics. Even many a definition claiming what is sustainable or what is environmental are not yet agreed on. Therefore, organizationally not a company, but a virtual network open for discussion for everybody was created to help to increase transparency about actions taken and to build bridges to interdisciplinary aspects.
Benchmark Flow Chart To be able to monitor and to cluster activities of the Total Supply Chain, similarly to the flow-chart of tracking/tracing cows and beef, components like agriculture, processing, packaging, transport, depots/outlets, in-store technologies, or promotions were listed and published in a newly created Homepage www.europeanretail-academy.org/ERM.
Having applied the method of a quantitative descriptive survey, a questionnaire was sent out first to 20 retailers with the demand to fill in that chart estimating in how far their total efforts for the environment (100 percent) could be split into the separate steps of the flow-chart. The first six returns were then again published on that Homepage. The publication of the results (without disclosing the companies) is one way to create awareness. Companies see the estimates from competitors and compare it with their own efforts. By this, reflection and the unlocking of creativity could be stimulated.
(depots/outlets) fitting/processing The intention is to enlarge the panel and to repeat the questions over the time period of several years. Readers of this paper are explicitly called and invited to participate in this survey. The first result of the awareness creating activity was a Round Table of EHI Retail Institute for energy saving measures to build retail outlets.
EHI decided to speed-up the process by annual awards.
Corporate Social Responsibility While tracing/tracking as well as good agricultural practice should be seen as the very basics of food-security and, therefore, remain out of the field of competition among retailers or wholesalers, the more complex Environmental Retail Management provides a strategic and tactical scope to look for best practices under a different focus. There might be communities created on bio-/organic food, others on fair-trade, some of regional sourcing and others of global sourcing reflecting different thinking of the consumers.
All could be measured/benchmarked by comparing the underlying philosophy with operative activities. The keyword is “Corporate Social Responsibility”.
There are at least three factors which have led to the situation of higher levels of awareness for Corporate Social Responsibility (CSR):
The society is changing. Environment becomes a globally accepted topic.
The sourcing of products has changed from local/regional partners to global partners.
The size and professionalism of retail has changed.
The retailers, due to the size of their top-ranking players, their technology and the globalization of the big companies are able to be the driver for international standards from a technical and ethical viewpoint watched by the society which keeps an eye on the Corporate Social Responsibility of the big players.
Taken the size of retail-companies, the concentration within Western Europe but also in the US and Asia has reached tremendous dimensions. In Germany, for example, the Top 5 players in 1980 had an aggregate market-share of 26.3 percent. In the year 2010 this market share had risen to over 80 percent.
To understand the retail business, one might compare the annual turnover of the US retailer WalMart with the GNP of Switzerland. They are both of the same size but WalMart’s turnover is growing quicker than the GNP of Switzerland. In the last years, top globalizing retailers had achieved double-digit-growth rates (Figure 8).
Figure 8: Growth rate (percentage) from 2003-2004) Partly, this market domination derives from the power of technology used by the big players.
The increase of power of retail in relations to the suppliers can be seen by the chart “Power Chess-Board” (Hallier., 1995b; 1998a; 1999; Westerman, 1997) (Figure 9).
Figure 9: The Empowerment of Retail by Marketing-Tools On the time-axis (t) in the 50ies /60ies of the 20th century, the branded goods industry was dominating the atomistic retail. In the 80ies, due to the increasing size of the demand side and the concentration of retail and national penetration or even internationalization, retailers reversed the trend and became the “rule-setters”. This trend was enhanced by the fall of the ‘Iron Curtain’, which supported the growth of the top retail players in the West which, in addition, acted as a technical driving force for the East (Huppert, 1997). An indicator for the power of international retailers penetrating the Eastern markets is the fact, that in Poland ten years after the reunification of Eastern and Western Europe, there was no longer a Polish retailer in the Top Ten Food Chains (figure 10).
Relating to the former socialist territories still being in transition, Western Corporate Social Responsibility activities are suggested to facilitate political and monetary participation of the Eastern partners in the wealth creation in these countries (Hallier, 2000b).
ConclusionThis pragmatic case study portrayed the activities and contributions of EHI to retail innovation from 1951 until today. The case study reflects that timely and proactive entrepreneurial answers to urgent societal and environmental problems, for example, food security and quality triggered by global animal deseases, can make a significant change. It shows, for example, to business students how entrepreneurial spirit and visions can, finally, materialize in a variety of business ventures ranging from company creations, spin offs to networks. The case study also reflects a gradual development from national to international engagement increasingly integrating international partner organizations and synergizing their diverse contributions. It calls for systems and cluster thinking of the overall global supply chain which could be seen as a precondition that intiatives on a business level can even ignite political decision makers on a European level. Relating to the strategy of Corporate Social Responsibility, the author appeals to participate in a global survey which documents the various contributions of retailers to the environment. Due to their increasing market power and influence, especially, large retailers might be able to give a most valuable contribution in this respect. Pointing to developments in Eastern Europe these Corporate Social Responsibility should also be driven by the intention to contribute to increased levels of wealth and living standards of Eastern European consumers.
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SOCIAL ENTREPRENEURSHIP: A NEW PARADIGM THAT CAN HELP
CYPRUS TO ADDRESS ITS CHALLENGES
СОЦИАЛЬНОЕ ПРЕДПРИНИМАТЕЛЬСТВО: НОВАЯ ПАРАДИГМА,
КОТОРАЯ МОЖЕТ ПОМОЧЬ КИПРУ РЕШИТЬ ПРОБЛЕМЫВ статье обсуждаются социальные и экологические проблемы Кипра (безработица и бесполезное использование электрического и электронного оборудования) и рассматривается, как социальные предприниматели решают эти проблемы в других странах на примере случаев Acta Vista, Job Factory и Recycla Chile. Статья развивает идею начальной концептуализации социального предпринимательства, которая может быть принята для локального решения этих проблем. Рекомендуемая модель использует подход тройного итога (the Triple Bottom Line) с синхронным введением экологического и социального факторов как основных задач и с финансовой устойчивостью, усиленной со стороны сети системы поддержки правительственных, муниципальных и частных партнерств. Исследование также предоставляет понимание терминов социального предпринимательства и социального предпринимателя и проливает свет на историческое развитие этой сферы через обзор литературы.
The paper discusses social and environmental challenges in Cyprus (unemployment and waste of electrical and electronic equipment) and examines how social entrepreneurs address these issues in other countries through the cases of Acta Vista, Job Factory, and Recycla Chile. It develops an initial conceptualization of social entrepreneurship that can be adopted to address those issues locally. The recommended model utilises the Triple Bottom Line approach with a synchronous implementation of the environmental and societal factors as primary goals and with its financial sustainability strengthened through a network support system of government, municipal, and private partnerships. The study also provides an understanding of the terms of social entrepreneurship and social entrepreneur and sheds light onto the historical development of the field through literature review.
Keywords: Social Entrepreneurship, Cyprus
1. IntroductionGeorge Isaias Ms(Econ) founder, director,Synthesis Center for Research & Education Ltd., Cyprus Hans Ruediger Kaufmann, PhD, University of Nicosia Associate Professor, Vice-President of the EuroMed Research Business Institute (EMBRI) The Republic of Cyprus is an island state situated in the north-eastern part of the Mediterranean Sea, with a population estimated at 803,200 inhabitants.
(Demographic Report, 2009) Shortly after its independence from British rule in 1960, the country had faced serious political issues, with its peak the Turkish military invasion of 1974 which resulted in the occupation of the northern part of the island by Turkish troops and the de facto division of the island along ethnic lines; a declaration of independence in the north by Turkish Cypriots has been declared illegal by the international community and the government of the Republic of Cyprus is considered the legal representative of the island although its effective controls lies only with the southern part inhabited mostly by Greek Cypriots. Cyprus became a member of the European Union in 2004. The political problem of Cyprus (lasting almost for 40 years) has been affecting the human and property rights of the people of the island (nearly one third of the population are refugees); thus, any other issues, social or environmental, have been hidden or sidelined; the rapid development of the economy and the conditions of near full employment that have existed for a lengthy period of time have also provided a good opportunity for a cover up of other main issues.
2. Literature review The field of social entrepreneurship as we know it today started to develop as a result of the work of Bill Drayton and Ashoka, the organisation which Dayton founded in 1980. As a result of his work to spread the concept, today, several thousand people refer to themselves as social entrepreneurs. But what is social entrepreneurship and who is a social entrepreneur? One point, that is clearly evident in the field of Social Entrepreneurship, is that there are neither clear nor comprehensive definitions. Martin & Osberg (2007) cite this lack of consensus on social entrepreneurship to argue that “it’s time for a more rigorous definition.” (p.29) As scholars and practitioners of the field debate the terms, they offer a great spectrum of definitions for social entrepreneurs, which can be grouped into three groups (a) social reformers or activists (b) third-sector leaders and (c) business entrepreneurs with a social mission. Even so, in this grouping, the boundaries are not clearly set, as social activist maybe also third-sector leader or a business entrepreneur with a social mission.
Drayton coined social entrepreneurship to “describe individuals who combine the pragmatic and results-oriented methods of a business entrepreneur with the goals of a social reformer.” (US News, 2005) Ashoka describes social entrepreneurs “as individuals with innovative solutions to society’s most pressing social problems.
They are ambitious and persistent, tackling major social issues and offering new ideas for wide-scale change.” (Ashoka, 2011) Drayton’s and Ashoka’s definitions of the term “entrepreneur” is a broad one and includes pioneers for social change such as Maria Montessori, Florence Nightingale, and Jean Monnet; thus, the meaning attributed to social entrepreneur is one of a social reformer, change-maker or social activist.
This idea is also expressed by David Bornstein who believes that social entrepreneurs have existed throughout history: “St. Francis of Assisi would qualify as a social entrepreneur having built multiple organisations that advanced changes in his field.” (Bornstein, 2007, p.3) The perception of “social entrepreneur” as an agent of change and reformer is also shared by the Skoll Foundation, another organisation working in the field, which defines social entrepreneurs as “society’s change agents, creators of innovations that disrupt the status quo and transform our world for the better.” (Skoll, 2011) Refering to humanitarian objectives, Martin & Osberg (2007) define the social entrepreneur as “someone who targets an unfortunate but stable equilibrium that causes the neglect, marginalization, or suffering of a segment of humanity; who brings to bear on this situation his or her inspiration, direct action, creativity, courage, and fortitude;
and who aims for and ultimately affects the establishment of a new stable equilibrium that secures permanent benefit for the targeted group and society at large.” (p.39) Yet this definition leaves out the environmental goals of social entrepreneurship which is evident in many of the works of social entrepreneurs.
Thus, it is important to note that the term “social” refers to social or environmental issues.
A second perception of social entrepreneurship is one which relates the term with the voluntary and non-for-profit sector. In fact, a large amount of organisations which define themselves as social enterprises lie within this scope of definition. In this context, social entrepreneurship is concerned with the application of business and management skills in running the voluntary or non-for-profit organisation.
Martin & Osberg (2007) are in support of distinguishing the field from social activism or social service provision, and thus, propose starting the definition with “entrepreneurship.” Social Enterprise UK, the UK national body for social enterprises, follows this “entrepreneurial” scope of social entrepreneurship by defining social enterprises as “businesses trading for social and environmental purposes.” In social enterprises the social or environmental objective is central to their operation. (Social Enterprise UK, 2011) Taking into account these approaches along with the definitions of previous authors and practitioners of the field, we define social entrepreneurs as business entrepreneurs who primarily aim to further social or environmental goals. Social entrepreneurship is defined as the work of a social entrepreneur. These definitions for a social entrepreneur and social entrepreneurship are to be followed in this study.
3. The power of Social Entrepreneurship to address Social Challenges The view that social entrepreneurship is and can be a force for social and global change has been supported by a number of organisations which work to further develop the field (such as Ashoka, Skoll Foundation, Schwab) but also by thousands of social entrepreneurs around the world. Bornstein (2007) believes that “the field of social entrepreneurship has the potential to galvanise major changes across society. (p. xv) Until recently, it would have been difficult to advocate solutions to social or environmental problems through social entrepreneurship; the field was in its infancy and social entrepreneurs were faced sceptically by society regarding at their motives and the potential of social enterprises to succeed. This scepticism is still to be felt by many social entrepreneurs around the world; however, today there is a plethora of success stories of social entrepreneurship which can empower social entrepreneurs to make their cases heard.
The success story of Grameen Bank In the mid 1970s, Muhammad Yunus wanted to help the poor people in the village of Jobra in his native Bangladesh who were left out from conventional banking system and had to rely on loans from money-lenders to purchase materials for their trade. The money lenders were charging interest rates as high as 10 percent per week, in essence creating conditions of dependency and enslavement. Yunus lent the amount of $27 to 42 people to pay off their loans to money-lenders and was surprised by the happiness and the difference this small action brought to them. He also confirmed what he intuitively knew—that the perception that poor people do not pay their loans and which the banks rely on is not true. That small, first move gave rise to microfinance and the establishment of the Grameen Bank in 1983. Since then, Grameen has grown enormously: Today, the bank’s total amount of borrowers is 8. million, 96 percent of women; recovery rate is 96.53 per cent; the average loan in the 12 month period October 2010 – September 2011 was US $ 121.64 million.
(Grameen, 2011) In 2006, Yunus and Grameen Bank were jointly awarded the Nobel Peace Prize "for their efforts to create economic and social development from below."(2011) Their success gave a momentum to the social entrepreneurship movement and led to the creation and the success of many other social enterprises. In fact, today the field of social entrepreneurship is full of successful cases of social entrepreneurship that can serve as models and benefit other areas of the world. One of these areas that can benefit from these cases in order to address its own social and environmental challenges is Cyprus.
4. Social & Environmental Challenges in Cyprus The recent global economic crisis which started to affect Cyprus as of along with the obligations of the Republic to meet EU directives is making Cyprus, slowly yet firmly, to realize other important issues, whether they are social or environmental: a rising unemployment, immigration and integration issues, and environmental issues to name but a few. In fact, for the first time, the deteriorating economic situation has been indicated as the biggest problem by respondents (59%) bypassing the political problem (53%).
Current Employment Situation Cyprus has enjoyed conditions of near full employment for many years. As early as December 2008, a public official has said to the authors of this paper that work inclusion enterprises were not in need in Cyprus as the country had no unemployment problem. Two and a half years later, the picture is completely different. The jobless rate has continued to climb, reaching 7.6 in June 2011 (up from a 6.5 a year earlier, and double from a mere 3.8% in October 2008. (Eurostat, 2008;
2011) A review of the unemployment situation (Table 1) in Cyprus since reveals the magnitude of the problem in the current three year period, 2008–2011.
Table 1: Unemployment in Cyprus (January 2000 – June 2011) Source: European Central Bank (Statistical Data Warehouse) The biggest unemployment problem is faced by young people aged 25 and below with unemployment at 20.6% with males facing higher challenges in entering the labour market as male unemployment is 22,2% compared to 19,1% for women (Statistical Service, 2011).
Prospects of Employment The prospects of the Cyprus employment situation improving any time soon are gloomy. Firstly, the economic situation is expected to worsen; IMF expects not only that the Cypriot economy will remain stagnating in 2011 but will also shrink by one percent in 2012. (CBS 2011) Another factor for pessimism is the inability of the state to control illegal immigration as it cannot exercise effective control of its borders due to the division of the island. Thus, it is more likely that more illegal immigrants will enter its work force as cheap labour, particularly from nearby countries facing violence and political turmoil, such as Syria. Thirdly, workers from EU countries, such as Greece, may seek to enter the Cypriot labour market due to the deterioration of their economic conditions; in fact, a worsening of Greece’s economy can cause a flood of Greek workers into Cyprus due to the close links of the two countries. Due to all these factors, the employment situation is expected to remain a real challenge for both the Cypriot government and the society.
Cases of Social Enterprises addressing Employment Issues Acta Vista (France) and Job Factory (Switzerland) are two social enterprises that are in business in order to provide employment opportunities.
1. Acta Vista, France France faces a similar unemployment problem as Cyprus; unemployment stood at 9.9% in June of 2011 (Eurostat, 2011). This high unemployment means that underqualified people live under difficult economic conditions and will rely on public support to survive.
The company addresses the unemployment situation by employing people between the ages of 18 to 65, including those excluded from society, recent immigrants and unemployed seniors. They work at its work sites to restore and maintain cultural heritage sites. Their employment allows them not only to gain professional experience but also to integrate into society.
Acta Vista provides them with a work contract with a maximum duration of months. Their staffs analyze the financial, health, housing and professional situation of employees and provide the necessary support; they also help them to transition into long term employment in another company when their contract expires. The number of direct beneficiaries is 350 per year.
2. Job Factory Basel AG, Switzerland According to the company’s estimates, Swiss unemployment among 15-24 is estimated at 9% when one takes into account unregistered, unemployed youth. The youth unemployment ends up with most youth ending up receiving social welfare benefits with possible tragic consequences for their further development and for society as a whole.
Job Factory addresses the situation by offering a second chance in the job market for teenagers and young adults who have had a rough start and provide them with the necessary qualifications.
Every year, Job Factory offers unemployed young people a six-month internship in areas such as printing, computer, manufacturing of kitchen furniture, guitar manufacturing, packaging, to name just a few. 80 percent of trainees successfully complete their internships and find an apprenticeship, a job or pursue further education. The number of direct beneficiaries is 300 per year.
Environmental Issues One of the many environmental issues Cyprus faces is the waste of electrical and electronic equipment. The global seriousness of the problem is indicated by the fact that it accounts for 70% of overall toxic waste although it represents only 2% of trash in landfills. Waste electrical and electronic equipment (WEEE) is now one of the fastest-developing waste streams (Eurostat WEEE, 2011).
EU legislation has in force two relevant directives. Directive 2002/95/EC limits the use of hazardous substances in electrical and electronic equipment, and directive 2002/96/EC, which promotes the collection and recycling of such equipment. The legislation asks for the development of collection schemes where consumers can return their used e-waste free of charge. These schemes aim to increase the recycling and/or re-use of such products (EC Environment, 2011).
Despite EU legislation, only one third of electrical and electronic waste in the European Union is reported as separately collected and appropriately treated. A part of the other two thirds is potentially still going to landfills and to sub-standard treatment sites in or outside the European Union posing environmental and health risks (2011).
Current WEEE Situation Although Cyprus has transposed the WEEE Directive into Cyprus law, the amount of WEEE collected in Cyprus from private households for 2008 (year with latest available data) was only 2.8 kg per person, far lower than the 4kg established with even the previous standards whilst the WEEE collected in Sweden was 14.8kg, in Ireland 9.0kg and Bulgaria 5.1kg (Eurostat WEEE, 2011).
The situation for Cyprus can get worse as the European Commission raises the targets even higher. As the collection target of 4 kg per person per year does not properly reflect the amount of Waste of Electrical and Electronic Equipment or WEEE arising in individual Member States, the European Commission is in the process of proposing higher mandatory collection targets. The target will equal to 65% of the average weight of electrical and electronic equipment placed on the market over the two previous years in each Member State (EC Environment, 2011).
This means that member States like Cyprus with a high consumption of electrical and electronic equipment would have more ambitious collection targets under the new directive, and Cyprus will have a lot of work to do to meet the new targets.
Case of Social Enterprise addressing WEEE One of a successful social enterprises working to address the issue of waste of electrical and electronic waste is Recycla Chile.
Chile is characterised by inadequate and out of date legal frameworks, nonexistent or inadequate collection systems, logistic support systems and other services severely constrain the implementation of sustainable and efficient solutions concerning electronic waste.
To address the issue, Recycla Chile established a system to recycle electronic appliances in an environmental way. The company has set up efficient processes to receive, collect and store electronic equipment and appliances. The waste is classified, separated and disassembled; and hazardous waste is separated according to toxicity levels and sent to hazardous waste disposal centres; the non-ferrous metals including copper, aluminium and stainless steel are processed in a similar manner.
The company compacts and stores materials in containers for export to ISO compliant smelters. It also exports recycled metals to Europe. One other innovation of the company is that its employees are former prison inmates, thus offering green job opportunities for vulnerable people in the country.
5. Triple Bottom Line Model for Social Enterprises Unlike traditional businesses which seek to maximize profits, social enterprises are more able to pursue and implement a Triple Bottom Line model (also called the three Ps: People - for social-, Planet - for ecological- and Profit - for financial).
Coined by John Elkington, triple bottom line (TBL) aims at developing a new framework from measuring performance beyond the common profit measures (Slaper & Hall, 2011). TBL incorporates three performance indicators: social, ecological (or environmental) and financial; thus it is clear that TBL differs from traditional frameworks as it includes environmental and social measures. In essence what TBL measures is “the impact of an organisation’s activities on the world (Savitz 2006, p.
There are obvious challenges to putting the TBL into practice which relate to measuring each of the three categories: finding applicable data and calculating a project or policy’s contribution to sustainability (Slaper & Hall 2011). Yet although data may not be precise and the measurement in accounting terms will need further accounting indicators to extract, the application of TBL in a social enterprise and the general benefits it creates can be clearly seen.
Recycla Chile, for example, has implemented a triple bottom line business model by creating environmental, social and financial value. Environmental value (Planet) is created by the amount of the recycling electronic waste is saving the environment from. Social value (People) is created by providing opportunities to those in vulnerable situations by recruiting a labour force from former inmates and providing them a second chance in the workplace and society. Economic value (Profit) is created through the appropriate use of market and management tools to achieve financial sustainability (profit is a means to financial sustainability and not as a goal in itself).
Similarly, Acta Vista achieves the TBL by providing opportunities to unemployment (People), preserving built and natural, cultural heritage (Planet), and by achieving its financial sustainability (Profit).
6. Developing a Network Support System As social entrepreneurs are in business to further social and environmental aims, with profits as means towards this end, their success depends on the development and effective use of a support network system.
Government Support Social entrepreneurs clearly need public and government support and the government should be more willing to offer it. After all, social entrepreneurs are undertaking a task that has been traditionally perceived as the responsibility of the state and their work is freeing the state from responsibilities and resources. Most importantly, the state’s support will strengthen social enterprises and their chances for sustainability, which can enable them to address the social or environmental issues more effectively; thus, saving the state from more resources and funds. It is at the interest of the state to support social enterprises and should lend its support especially at the start-up phase when is needed most by providing funding and/or lines of credit, as acquiring funding is by far the biggest challenge social entrepreneurs face.
Acquiring funding for social enterprises in countries, such as Cyprus, where the understanding of social enterprises is limited becomes a real challenge. In a recent interview with one of the authors, the founder of a new and innovative social enterprise in Cyprus active in the field of environmental preservation, said that he had to get personal loans to start his business; not only did he receive no government support, but each bank he had contacted for a company loan turned his request down.
There are many steps the government can take to help social entrepreneurs and the sector. Some of them are the following:
• Provide funding for start-up social enterprises and/or provide a bank guarantee for the company’s initial loan • Develop business incubators for social enterprises or provide social enterprises with facilities and support in existing business incubators • Establish legislation framework for social enterprises, separate from commercial companies or non-for-profit companies • Adopt and implement EU legislation that gives social enterprises priority Municipal Authorities The support of local governments and municipal authorities towards social entrepreneurs is gaining momentum as a method for strengthening communities and addressing social issues (Korosec and Berman, 2006; Baker 2011;). In a study conducted with municipal authorities, Korosec and Berman (2006) have identified four main types of support that municipal governments provide to social enterprises:
(a) raising awareness of social programmes, (b) assistance to acquire resources (c) coordination with other organisations and (d) helping with the implementation of programmes.
By lending support and partnering with social enterprises, which are willing to take the lead to address social issues in their communities, the Cypriot municipalities will provide far more efficient solutions to their jurisdictions. These social enterprises can provide a number of services, such as home care of elderly people, social inclusion programmes to immigrants and families at disadvantage, to name just a few. Municipal authorities can support the creation of social enterprises and engage in trade with them but avoid engaging in practices where they undertake to lead the management of social enterprises; the management of the social enterprise can be best bestowed to individual who holds the vision of the enterprise and the necessary management skills. Examples of municipalities which started social enterprises because of available EU funding do not provide successful examples as their lives were cut short once the funding was ended.
Private Support: CSR and CSV Companies with Corporate Social Responsibility (CSR) policies can play an important role in the network support system and actively sought out as they intent to contribute to the well being of society. In their expanded societal role, companies will want to address social and environmental issues in planned and effective ways. Thus, they can choose to implement actions in partnership with the companies whose primary aim is to address social and environmental needs: the social enterprises.
Social enterprises should be preferred as they are in a position to scale up far more quickly than third sector organisations or social programmes, which often are unable to grow and become self-sustaining and whose life can quickly terminated when funding runs out.
Porter and Kramer (2011) advocate the transition from CSR to a more advanced stage of social responsibility: the Creating Shared Value (CSV). They argue for a new mind-set in which societal issues are at the business core and not outside. In essence, CSV is about creating economic value in a way that also creates value for society by addressing its needs and challenges.
Companies with an awareness of their social obligations, whether following a CSR or an advanced CSV model, can choose to invest in the community by supporting either the start up of new social enterprises or support existing ones. This support can be in the form of selecting to trade with social enterprises, funding some of their activities, or helping them grow through their know-how. Any support social enterprises receive, will help their growth, will make their growth sustainable, and will lead to sustainable solutions to social and environmental issues.
7. The Social Enterprise Model The recommended model for a social enterprise derived from the literature review can be a conceptual basis for Cyprus to address the social and environmental challenges. The conceptualization uses the Triple Bottom Line model as a role model; one that simultaneously and equally addresses the Social (or People) and Environmental (or Planet) aims.
NETWORK SUPPORT SYSTEM
GOVERNMENT MUNICIPALITIES PRIVATE – CSR & CSVAn example is the hypothetical Company AZ. Company AZ is an environmental company that aims to address both the environmental problem of the Waste of Electrical and Electronic Equipment in Cyprus (thus, addressing the Environmental factor or Planet) but also simultaneously the issue of unemployment (the Societal factor or People) by becoming a work integration company, meaning that it will be providing work experience and skills to those less fortunate. These, will not just be “green jobs” but jobs for empowerment with a specific period of time, so more people in vulnerable situations can also get a chance to work and benefit.
Company AZ will have to address the financial factor (Profit), by having a business activity (trading good and services) so to achieve and maintain its economic sustainability.
The company will also utilise a Network Support System, where it builds partnerships with government, municipal, and the private sector. Its Network Support System can become its clients and partner as the enterprise helps to address social and environmental issues. AZ can be the company contracted to pick up and process WEEE from the municipal districts. The government can also support AZ projects on “People” through European funding programmes which it co-funds, such as the European Social Fund. To enhance its sustainability, Company AZ can also develop a portfolio of social and environmental projects and receive the support of private sector by engaging companies which have policies of CSR or CSV.
8. Conclusion Cyprus’ social and environmental challenges have surfaced quite recently because of the worsening economic conditions and the obligations of the country to meet EU directives. Although the development of the field of social entrepreneurship is new, it does have a plethora of success stories where Cyprus can draw from to address those issues. The case of Acta Vista, Job Factory, and Recycla Chile are only some of examples of social enterprises that can be transferred to or modelled in Cyprus on issues of employment and environmental preservation. The proposed model for Cyprus is based on a “Triple Bottom Line” approach, aiming at environmental, societal, and sustainability goals. The model involves a synchronous environmental and societal aim; where unemployment is addressed through the simultaneous preservation of the environment, and where its sustainability utilizes a network support system of public, municipal, private stakeholders to receive public support, build customer base, and create partnerships with companies with social awareness, whether they follow Corporate Social Responsibility (CSR) or policies of Creating Social Value (CSV).
Ashoka. 2011. What is a Social Entrepreneur? Retrieved from http://ashoka.org/social_entrepreneur Baker, M. Saphira. 2011. Effective Partnerships: How local governments and nonprofits can work together for large-scale community change. Stanford Social Innovation Review. Winter.
Bornstein, David. 2007. How to Change the World. Oxford University Press Bornstein, David and Susan Davis. 2010. Social Entrepreneurship: What Everyone Needs to Know. Oxford University Press CBS News. 2011. “IMF: Cyprus growth flat in 2011, to shrink in 2012.” http://www.cbsnews.com/stories/2011/10/12/ap/business/main20119112.shtml Demographic Report. 2009. Republic of Cyprus, Statistical Service, Series II, Report European Central Bank, Statistical Data Warehouse, Retrieved from http://sdw.ecb.europa.eu/quickview.do?SERIES_KEY=132.STS.M.CY.S.UNEH.RT T000.4.000&periodSortOrder=ASC Eurostat News release, 2011. 124/2011 - 31 August 2011. Retrieved from http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/3-31082011-BP/EN/3BP-EN.PDF Eurostat News release, 2008. 167/2008 - 28 November. Retrieved from http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/3-28112008-BP/EN/3BP-EN.PDF European Commission Environment. 2011. Recast of the WEEE Directive.
Retrieved from http://ec.europa.eu/environment/waste/weee/index_en.htm Eurostat. WEEE Key Statistics and Data. 2011. Retrieved from http://epp.eurostat.ec.europa.eu/portal/page/portal/waste/documents/WEEEmap_0.pd Grameen Bank 2011. About us. Retrieved from http://www.grameeninfo.org/index.php?option=com_content&task=view&id=197&Itemid= Korosec, L. Ronnie and Evan M. Berman. 2006. Municipal Support for Social Entrepreneurship. Public Administration Review 66 (3): Martin, L. Roger and Sally Osberg. Spring 2007. Social Entrepreneurship: The Case for Definition. Stanford Social Innovation Review, pp. 29-39.
Porter, E. Michael and Mark R. Kramer. 2011. Creating Shared Value.
Harvard Business Review. January 2011. Retrieved from http://hbr.org/2011/01/thebig-idea-creating-shared-value/ar/pr Savitz, A.W. and K. Weber. 2006. The Triple Bottom Line: How Today’s Best-Run Companies Are Achieving Economic, Social and Environmental Success— and How You Can Too. Jossey-Bass Skoll Foundationhttp://www.skollfoundation.org/about/. 2011. About.
Retrieved from http://www.skollfoundation.org/about/ Social Enterprise UK. What is Social Enterprise? Retrieved from http://www.socialenterprise.org.uk/ Slaper, F. Timothy and Tanya J. Hall. 2011. The Triple Bottom Line: What Is It and How Does It Work? Volume 86, No. Statistical Service. 2011. Labour Force Survey Main Results, 2nd Quarter.
http://www.mof.gov.cy/mof/cystat/statistics.nsf/labour_32main_en/labour_32main_e n?OpenForm&sub=1&sel=2&e=&highlight=unemployment http://www.usnews.com/usnews/news/articles/051031/31drayton.htm 1. The cases of Acta Vista, Job Factory, Recycla are retrieved from the Schwab Foundation website: http://www.schwabfound.org/sf/index.htm 2. All internet sources were retrieved between October 14 – 30/10/
RUSSIA ACCESSION TO WTO AND ITS INFLUENCE ON TRANSITION
OF RUSSIAN LEGAL SYSTEM
ВСТУПЛЕНИЕ РОССИИ В ВТО И КАК ЭТО ОТРАЗИТСЯ НА
РОССИЙСКОМ ЗАКОНОДАТЕЛЬСТВЕIntroduction The Russian Federation is a country undergoing a profound transition, initiated in the final period of the Soviet Union. The purpose of a process is not only the construction of the constitutional grounds of the state, but also its adaptation to the functioning of the global economic system. Russia's systemic transition, as an research issue, is the subject of political science, economic or social analysis.
The results of transition process, however, are usually assessed through the prism of political changes and at the level of economic indicators. Less frequently the subject of research covers changes of substantive law, conditioning the proper functioning of the transforming economy. Changes in the legal system, are part of the process of Russia's systemic transformation, and their shape is not only important in terms of internal policy, but also in terms of Russian participation in the international system. Integrating the countries in international organizations, especially those of an economic character, sometimes even implies the need for changes in the acceding country's legal system, and at least some of its areas. External factor, that significantly influences the nature and course of changes in Russian legislation, is the process of accession to the World Trade Organization. The efforts of Russia's accession to the WTO are usually analyzed in the perspective of political and economic effects resulting from potential membership. Doing research on the process of accession of the Russian Federation to the World Trade Organization it is worth to investigate its legal consequences, which are identifiable despite the fact that formal negotiations are still in progress2.
1. Regulations related to trade policy Legislation allowing Russia to conduct trade policy, passed significant evolution over last 20 years, and especially during the 90s. With the approved changes, it became possible to replace the state monopoly in foreign trade, with the free market principles, that enabled Russia to operate in the global economy.
Evolution of the Russian legal basis related to trade policy ( for tariff and non-tariff measures), were both motivated by the overall objective of integration of Russia into Dr Szymon Karda, Instytut Stosunkw Midzynarodowych WDiNP UW ul. urawia 4, 00- Warszawa, tel. +48 22 55 M. Peter, Russia and the WTO. Comparative analysis of Russian and WTO law, Baden-Baden 2004.
the global economy, as well as a specific political objective – accession to the World Trade Organization.
Russia systematically lowered and reduced the number of tariff rates, while maintaining their high levels only in the most critical national economy areas (automotive, aerospace, minerals). A key element of the systemic changes in this area, was the adoption of a new Customs Code1, that meets basic standards of legal regulations in force in the WTO system.
Russian law also contains extensive provisions relating to the use of non-tariff trade policy measures, both those directly affecting the volume of import and export, as well as those that affect the trade flows in an indirect way. Regarding the first group, which includes mainly anti-dumping, countervailing and safeguard measures, Russian law retains virtually full compliance with WTO law2. Many regulations have been literally translated and introduced to the internal legislation of the Russian Federation.
Russian legislator also undertook intensive efforts to regulate the terms and conditions of use of non-tariff measures, indirectly affecting international trade. Of key importance was the adoption of the Law on technical regulation3 relating to the use of technical barriers to trade and sanitary and phytosanitary measures, which retains the general compliance with the WTO. The new law, replacing a number of legal acts relating to the sphere of technical regulation, is important to the whole legal system. This creates opportunities for the simplification of compliance, the accelerated turnover of funds; increase the competitiveness of production; increase the investment attractiveness of the Russian economy and increase the transparency of technical regulations. It should be emphasized that the content of the regulation included many vague wording that may give rise to significant problems of interpretation, important for their practical application.
One of the problematic issues is the adaptation of Russian regulations to the content of WTO plurateral agreements related to government procurement4 and to trade in civil aircraft5. Adherence to these agreements is optional in nature, but in the course of negotiations, Russia was suggested to put forward the appropriate claim adjustment in this regard.
Analyzing Russian sources of law in these areas, it can be stated, that they are generally in compliance with the WTO law, however some doubts relate to how will these rules work in practices. This applies to both the present situation and future, in terms of the expected membership of the WTO.
Federal law, Customs code, Law No 61-FZ, 28 May 2003.
Federal law on safeguards, antidumping and compensation measures regarding the import of products, Law No 165-FZ.
Federal law on technical barriers to trade, Law No 184-FZ, 27 December 2002.
The plurilateral Agreement on Government Procurement (GPA), http://www.wto.org/english/docs_e/legal_e/gpr-94_01_e.htm.
The plurilateral Agreement on Trade in Civil Aircraft, http://www.wto.org/english/tratop_e/civair_e/civair_e.htm.
2. Regulations related to services Rating adjustment of Russian legal system to regulations of GATS Agreement is not clear. One of the main reasons is the specificity of the accession negotiations in this area and limited access to official arrangements adopted by the parties, in the course of Russia's bilateral talks with individual members of the Working Group.
The system of national law of the Russian Federation, namely the regulations related to the services sector, are often characterized as overly liberal. It is emphasized that in addition to services in the following sectors: financial (sub-sector of banking and insurance services sub-sector) and transport, the Russian legal system generally does not provide for limitations on market access for foreign service providers. This indicates even that in some areas such as foreign exchange control, import of equipment for the provision of services or the credit system, internal regulations for foreign service providers are much more favorable than the relevant regulations applicable to providers in other countries to Russian entrepreneurs.
It should be noted that even in those areas in which Russia agreed to establish a commitment to liberalization, without limitation, still remains the possibility of hindering the operation of foreign companies in the market, through strict application of rules of domestic law, in relation to quality of service requirements, or the protection of consumer rights. In addition, it should be noted that many - very important from the Russian point of view - of sub-sectors of services, were excluded from the negotiations on the liberalization of market access. This includes such areas as mining, processing and transportation of raw materials (especially energy), rail and air transport services carried out in the ports (except those related to the work of loading and unloading), and airports.
Although WTO rules imply the need to adapt a number of national regulations related to GATS Agreement, it does not impose radical changes in legislation concerning the conditions and the pursuit of economic activity. Number of issues related specifically to public-law aspects of business activity, remains outside the sphere of interest in the WTO, thereby leaving the legislative discretion to Member States.
After all, the consequences for the Russian service sector, resulting from WTO membership, will be significant. Their concrete dimension, however, will depend not only on the content of the course adopted in the process of negotiating agreements, but primarily from practices of Russian authorities. Their decisions in fact, will set the actual degree of freedom to provide services in the territory of the Russian Federation.
Besides, if the Russian service sector will grow only on the basis of national resources, while reducing the inflow of foreign capital or foreign service providers, then there is a serious risk that it will stand out significantly in terms of quality, from development of the service sector in international trade. On the other hand, does not seem reasonable to question the right to conduct - within a reasonable - protectionist policies in these sectors of the Russian economy, which are less competitive (transport, insurance, banking).
3. Regulations related to intellectual property The Russian system of intellectual property protection, as it was created after the fall of the Soviet Union, passed a significant evolution over the last 18 years, both in terms of substantive law and procedural. The changes affected not only the substantive content of the standards, but also recognition of regulatory system (the legislation on the protection of intellectual property in selected sectors was replace by the codification of intellectual property protection under Part IV of the Civil Code of the Russian Federation1).
Currently, the Russian system of intellectual property protection, despite some differences as to the taxonomy of standards operating within the national legislation, retains in general compliance with the provisions of the TRIPS, both in terms of substantive law (the law of copyright and related rights, industrial property) and procedural rights (measures of intellectual property protection under civil, administrative and criminal procedures,). Entry into force of Part IV of the Civil Code of the Russian Federation led to lively discussions among the Russian jurisprudence. Given the shortcomings of the regulation and doubts about the compatibility of some of its provisions with the content of international law obligations, it must be concluded that most of the analyzed provisions are compatible with the TRIPS Agreement. However appreciating the legislative achievements, we must be aware of existing gaps and shortcomings, and the inconsistencies in the internal system of civil law.
Russian alignment with the standards provided in the regulations of the TRIPS Agreement, can positively affect the functioning of domestic environment, but also abroad - taking up and pursuing the activities in Russia. This is particularly important in the implementation of innovative solutions, which the Russian Federation, as a country in transition, desperately needs. Adequate level of protection of intellectual property also supports the inflow of capital in the form of direct investment and technology transfer and know-how. Innovation in turn is only possible with an effective system of intellectual property protection, giving a guarantee to protect the rights of both domestic and foreign entities.
Regulations of the TRIPS Agreement establish the need for balance in the legal affairs, the interests of owners of intellectual property rights and interests of "consumers" of the results of intellectual activity. The realization of this purpose in the legal system of the Russian Federation is not easy. It should be noted that the current shape of regulation creates a good starting point for building an effective system of intellectual property protection.
The effectiveness of regulation in relation to intellectual property protection depends both on the efficiency of the state apparatus of the Russian Federation, as well as to significant extent on the level of legal culture of society. It seems that in the case of Russia, the process of change in this respect will be most difficult to perform.
Federal Law No 230-FZ, Civil Code of the Russian Federation Part IV, 18 December 2006.
4. Customs union and WTO accession An important aspect of negotiating WTO membership conditions, mainly related to the fixing of tariffs, is the question of the creation of regional integration groupings involving Russia. The agreement of the GATT-94 contains two formal requirements relating to WTO members, who are also participants of the regional integration structures. First of all, the standards of a regional group need to maintain regulatory compliance with multilateral system of international trade under the WTO.
Second of all, the progressive removal of trade barriers between members of the regional group should also be extended - in the application of Most Favoured Treatment - on other WTO members.
Customs Union1, that is being formed since 1998 and then establishment in 2001 the Eurasian Economic Community (EEC), created a new perspective that shaped the Russian negotiations with WTO. It is indicated that all the CIS countries, which tended in recent years to become a WTO member, should cooperate to achieve a common goal. In 2002, there was even a joint statement made by the member states of the Eurasian Economic Community, on the need of consultations and developing an agreed position on accession to the WTO. After the accession to WTO, all the above mentioned countries will have to change the principles on which the existing co-operation takes place. This may be particularly acute for Russia. In practice, the consultations on these matters were intensively carried out in 2002-2006, both at the meetings of Heads of State and meetings at the level of Heads of Member State governments. Considering the fact that 80% of exports of the three above mentioned countries goes to the markets of countries outside EEC, mainly to the EU, China, USA, (which, as WTO members maintain many barriers to market access) remaining outside the WTO impedes the development of trade relations with them in the symmetric basis.
It should also be noted that on 9th June 2009 during the economic summit held in St. Petersburg, Russian Prime Minister Vladimir Putin has announced that it does not exclude the possibility of joining the WTO as a customs union together with Kazakhstan and Belarus. In practice this would mean to start negotiations from scratch, and a person acting on behalf of the three states the Commission would be functioning as one of the bodies of the customs union. Customs union formed Creation of the regional integration structures within the CIS space (by the Russian initiative) dates back to mid-90s.
On 6 January 1995 Russia and Belarus signed the Agreement on customs union (joined also by Kazakhstan and Kyrgyzstan). On 29 March 1996 quadripartite agreement was signed to deepen integration in the economic and humanitarian spheres. In 1997 customs union agreement was supplemented by the Agreement on common non-tariff measures to create a customs union and the Protocol on international trade negotiations of the States Parties accession process to the World Trade Organization. In 1998, the organisation was joined by Tajikistan, and on 26 February all states signed the Agreement on customs union and common economic space. Concluded in 1999, the contract stipulated a simplification of control procedures at borders, the basics of creating a common customs tariff, set rules for the application of safeguard measures in trade, and provided measures for deepening cooperation between national financial and monetary systems. In practice, however, an ambitious plan to create a common economic space could not be achieved. Russia continued its efforts to deepen integration within the designated group of countries, and on October 2000 the Agreement Establishing the Eurasian Economic Community was signed in Astana. In addition Uzbekistan joined the organisation in 2006 and the three countries were given observer status (Armenia, Moldova and Ukraine). Е. И. Пивовар, Постсоветское пространство: альтернативы интеграции, Издательство: Алетейя, pp. 85-88.
between Russia, Belarus and Kazakhstan came into existence on 1st January 2010, and formally begun to function from 1st July 2011, so if the negotiating States were going to join together, this would mean a postponement of accession talks. Besides, it is worth noting that so far none of the customs union has acceded the WTO.
European Union is to some extent an exception. However in this case we are dealing with an original membership of the EU countries themselves, and somehow additional membership of the EU that – according to Common Trade Policy - acts on behalf of the EU Member States. Furthermore, negotiating the membership in the WTO by the whole customs union could rise a number of technical problems, such as the question of agreeing negotiating positions. Past experience indicates that it is very difficult to coordinate the cooperation of several ministries within one country. The prospect of reconciliation positions of the three countries can not therefore hope to accelerate the course of the talks. In a completely different note uttered at the beginning of July 2009, President D. Medvedev, stressed the need to continue negotiations in the individual formula, allowing us to conclude that the idea of joining WTO as a customs union may be regarded rather as an element of negotiation tactics and an attempt to exert pressure on the major WTO members to accelerate the pace of the final talks with Russia. In practice, when it comes to the Member States EEC, there has never been a comprehensive overview of potential benefits and losses resulting from their accession to the WTO, and there are several shortcomings in terms of information policy at the WTO and the ongoing negotiation processes in individual countries. Information is often served in a sparse or are derived from international sources.
It is also stressed that WTO membership - regardless of whether acquired individually or collectively - is not in contradiction with the possibilities of developing regional cooperation within the CIS and other structures set up for life in post-Soviet space. Sometimes there are even some references that after obtaining WTO membership by Russia, Kazakhstan and Belarus, political arguments which play a key role in the effectiveness of the integration of all structures, may be replaced by purely economic ones.
Recent information related to accession talks allows us to conclude that Russia, Kazakhstan and Belarus will continue their individual negotiations with World Trade Organisation.
5. Concluding remarks Maintaining the stability of global order requires the engagement of all major countries of the world. From this perspective, Russia's participation in international cooperation institutions, is something not only desirable but even necessary.
However, this requires willingness from the Russian elite to respect the rules, which are worked out by members of the "international community", which in turn implies the need for appropriate internal changes.
Systemic transition in Russia, with particular emphasis on the legal system, is a process that is still ongoing. An important role in the course played and still play external conditions. The declared aim of integrating Russia into the global economy, were not always implemented. However, it seems advisable to say that the Russian Federation, in particular its legal system, are subject to systematic change. Their direction is not correlated in all areas of the world's dominant political-systemic model of development, but the example of China shows clearly that this is not at all a condition sine qua non for successful accession to the WTO trading system.
Analyzing the importance of Russia's accession process to the WTO, one can notice a significant impact that the WTO regulations have had on changes in the Russian legal system. This is most evident in those areas that correspond to the scope of the content standards, which make up the law of the WTO. Sectoral changes in Russian economic law, both public and private sectors, influence the shape and functioning of the Russia’s economic system. Changes in legal basis can thus be regarded as an extremely important part of the systemic transition of the Russian Federation.
Regardless of the problems and shortcomings associated with the process of change, Russia is no longer the same country, which was after the collapse of the Soviet Union. A. slund even says that the main objective of Russia's systemic transition - the transformation from a centrally planned economy to free market economy - has been achieved1. The difficulties in implementing free market principles are often connected with the remains of post-communist thinking, still present among people living in Russia and other former socialists states. Changing the mindset of individuals and social groups living in Russia, is much more serious challenge than the transition of the legal system. Since on Russians themselves depends how far they will be able to implement the standards programmed into the national legal system, in particular those by which Russia will be able to be seen as a reliable and predictable global economic system participant.
A. Aslund, How Capitalism Was Built? The Transformation of Central and Eastern Europe, Russia and Central Asia, Cambridge University Press, 2007.
CORPORATE RESPONSIBILITY – CREATING SHARED VALUES
КОРПРАТИВНАЯ ОТВЕТСТВЕННОСТЬ – СОЗДАНИЕ ОБЩИХ
ЦЕННОСТЕЙВ рамках экологической экономической теории, корпоративная ответственность имеет дело с перспективами устойчивого развития бизнеса.
Это относится к приведению субъектов бизнеса к ответственности за свои намерения и действия, ставя цели и принимая меры помимо нормативных требований и максимизации процентов для акционеров. Кажется, пришло время вернуться к самому фундаментальному вопросу: «Какова роль бизнеса?»
и «Какая она будет в будущем?». Эта статья предлагает обзор корпоративной ответственности, краткую презентацию текущего состояния корпоративной ответственности. Она опирается на понятие корпоративного управления в соответствии с так называемым подходом «Тройного итога», где устойчивое корпоративное поведение управляется с помощью экономических, экологических и социальных ценностей в целях удовлетворения различных потребностей заинтересованных лиц на основе целостного подхода, направленного на устойчивое развитие.
As a part of environmental economic theory, Corporate Responsibility (CR) deals with business perspectives of sustainable development. It refers to holding business actors accountable for their intents and actions, setting objectives and taking actions above and beyond regulatory compliance and interest maximization for shareholders. It seems time to revisit the most fundamental question, ‘what is the role of the businesses’ and what could it be in the future?’ This chapter offers a CR overview, a brief presentation of current CR. It builds on the notion of corporate governance according to the so called “the triple bottom line”, where sustainable corporate conduct is managed with economic, environmental and social values in mind, in order to address various stakeholder needs from a holistic perspective aimed at sustainable development.
Key words: Corporate Social Responsibility, public private partnership, shared values, triple bottom line Cecilia Mark-Herbert, Julia Rotter, Ashkan Pakseresht, Department of Economics, Swedish University of Agricultural Sciences, Uppsala, Sweden, www.slu.se The triple bottom line and its application areas The term “triple bottom line” was coined by John Elkington in an attempt to create a new language to express what was perceived as an inevitable expansion of existing corporate models, from purely economic values to economic values as a part of managing sustainable conduct. This new model has three value grounds:
economic, environmental and social aspects of value creation –with ambitions to embrace the corporate sustainability objectives expressed in the Bruntland Report (UNWCED, 1987).
Since 1994 the use of the triple bottom line in academic literature that deals with sustainability issues has drastically increased – and so has the number of (graphical) interpretations of the model (Figure 1).
Figure 1. Illustrations of the triple bottom line (with inspiration from These illustrations are just a few examples to show how the triple bottom line offers various interpretations, giving priority to one of the value grounds or making them equal in importance, emphasizing a common denominator (a shared part) and regarding these dimensions as conditions or outcomes. Independent of how the model is illustrated, it adds dimensions to a one-dimensional short perspective economic model. One might refer to the triple bottom line as a process of transition – from an old to a new paradigm (Table 1) where each of the dimensions in these paradigms reflects implicit corporate ambitions.
(with minor modifications from Elkington, 2004,3) Life cycle technology Focused on products Focused on functions Elkington (2004) argues that businesses will lead the “cultural revolution” and the fact that it is businesses, rather than governments and non-governmental organizations, NGOs, that drive these processes does not make it easier. Yet, this revolution is further triggered by external factors such as continuous globalization, deregulation as well as societal pressures, where it is important for business to be flexible and open to change. Each of these dimensions for change is explained below (Ibid.).
Competition forces corporate needs to differentiate, to stand out and offer something different compared to their competitors (Porter & Linde, 1995; Louche, Idowu & Filho, 2010). It may lead to advantages for businesses and organizations that perceive opportunities in being accountable and willing to “educate the market” thereby creating new markets. In some cases, the existing consumer awareness has already created a business opportunity that offers a first mover advantages.
Changes in values are associated with increased understanding of problems, conditions and outcomes (Epstein, 2008; Mamic, 2005). Consumers worldwide are showing an increased concern for challenges associated with sustainability and these values are expressed in, for example, changes in purchasing behavior and expectations of corporate conduct. This can be seen in the consumer behavior where they find firms with community involvement more trustworthy, likable and prefer to purchase (Keller and Aaker, 1998).
If CR is regarded as being accountable, the value of taking responsibility would benefit a wide set of stakeholders; employees in that their working environment meaningful, fair and safe, local communities may receive financial support through corporate philanthropy, business partners images are boosted and consumers are offered a concept that is associated with added (soft) values (Louche et al., 2010). Recent studies indicate that more than 70% of end-users were likely to purchase products from companies that have deeper commitment to a cause that they supported and around 90% of respondents would switch from ordinary brand to the comparable one if the latter brand associated with good cause (Cone, 2006).
Communication Increased expectations on transparency have implications on communication at large, especially for governmental agencies, NGOs and corporations (Grayson & Hodges, 2004; Kandachar & Halme, 2008). Technical advancements (for example, mobile/smart phones, surveillance systems and internet tools) enable individuals to transfer information not just more efficiently but also instantaneously.
For organizations, the internet is becoming an increasingly important platform as a communication channel that carries both challenges and opportunities for reinveting relationships with internal and external stakeholders. Especially, emerging social media platforms such as twitter and face-book, are shaping the way individuals interact and exchange information. Therefore, current research agendas are directed at understanding how social media and internet platforms change the interaction between corporations and civil society, what are the risks and potentials and how will these interactions will shape the future, especially within the CR domain.
Corporations are faced with needs to communicate their priorities, commitments and activities in various forms of more or less voluntary disclosures. A recent example would be the BP oil leak in the Mexican gulf. The corporate conduct was mercilessly scrutinized, giving support to the local communities that were affected by the corporate misconduct.
Partnership Various forms of alliances, collaboration between businesses and other actors (businesses, NGOs and transnational organizations) are expressions of an increased stakeholder dialogue. Corporations realize that they can benefit from the synergy by accessing external resources – and in return offer other resources of which they claim ownership (Rotter & zbek, 2010). Organizations that once saw themselves as sworn enemies (businesses and NGOs) increasingly find opportunities in collaboration by seeking to create win- win situations (outcomes that benefit both corporations and NGOs). Yet, these alliances may cause blurred roles between corporations and NGOs that may offer opportunities as well as conflicts and challenges in finding balances and remaining true to organizational values and their identities.
Life cycle technology Rethinking corporate value creation refers to focusing on what the consumer needs, especially on the function of a product, from a cradle-to-grave perspective (Rainey, 2006).
`Time is money – and the corporate world is quick in responding to changes, for example, on the stock market, in news from various media coverage and when market investigations indicate alternating consumer preferences. The systems and tools developed to report annually, quarterly, monthly, weekly, daily and even on an hourly basis give opportunities to respond with little time notice. Production systems, such as “just in time” and “LEAN” are developed with flexibility and efficient resource use in mind. By contrast the notion of sustainability is a long term objective where evaluations of corporate conduct require long time perspectives and development of additional indicators for sustainable conduct (Mark-Herbert & Rorarius, 2009).
Corporate governance Corporate operations are managed by a Chief Executive Officer and a shared responsibility with a board for strategic issue. The objectives for the board is expressed in a so called owners directive that in itself may constitute limitations to work in accordance with the triple bottom line if it exclusively focuses on the financial output and the interests of the shareholders (Elkington, 2004). However, in the last decades corporate efforts are showing an increase in the use of codes and standards to address responsibility issues (Lepzinger, 2010; Malmborg, 2003; Mamic 2005). These codes and standards take a wider stakeholder group interest in mind, and they serve as guidance in daily operations as well as in long-term strategic management. In this respect, Human Resource (HR) management also becomes a prominent issue, as the competences and values lie with the individuals that direct, align and represent the organization on all levels. HR in the context of CR is especially crucial as it sets, integrates and executes the agenda and vision of the corporation.
These seven areas of transitions, offering opportunities for development, may appear unproblematic, as “the way to go”, but each of these dimensions are associated with challenges where old and familiar ways of doing things seems like a safe way to go compared to the unknown path towards sustainability through corporate responsibility, CR. This shift in paradigm may be regarded as a “cultural revolution” and is accelerated by continuous globalization, deregulation and increasing social pressures driven by media and other stakeholders. The hypothesis that it is corporations, rather than governments and non-governmental organizations (NGOs) that should drive these shifting processes does not make it easier for corporations. However, it opens a window of first-mover opportunities, where during their development and internationalization process corporations can play an important role as a change agent, by envisioning the concept of the triple bottom line.
What could be the future role for businesses?
Businesses, regardless of industry and size, are active members of society, which is reflected by context bound visions, social realities and operations in accordance with regulations. The traditional (old) view of the role of businesses objectives is to maximize the profit (Friedman, 1970). Milton Friedman believed that increasing profit for shareholders is the sole responsibility of the firm. He argued that, by creating economic value (maximizing return on investments) social wealth is provided. In this view, businesses generate more job opportunities, customer satisfaction, and more taxes contribute to societal values.
A more modern view of what the corporate identity entails includes a vast number of objectives above and beyond that of making profit (Svenskt Nringsliv, 2004,6):
• Supplying goods and services that customers need/ want • Creating jobs for customers, suppliers, distributors and employees • Continually developing new goods, services and processes • Investing in new technologies and in the skills of employees • Building up and spreading international standards, e.g. for environmental practices.
• Spreading “good practice” in different areas, such as in the environment These objectives hold corporations accountable for creating value and acting responsibly. The notion of corporate responsibility (CR) refers to engaging in continuous stakeholder dialogues and new ways to evaluate corporate performance (financially, socially and environmentally). It is a delicate management challenge for businesses that attempt to balance the interests of a vast number of stakeholders (for example, shareholders, customers, suppliers, employers, local communities, civil society and Non-Governmental Organizations), as this is sometimes conflicting with local law in terms short-term profit maximization for the shareholders. A map of these interests is presented in Figure 2.
The corporate responsibility landscape offers an overview that suggests geographical spheres for corporate value creation. The model makes sense. It is hard to argue against the corporate roles in developing internal codes of conduct, or in a larger context taking responsibilities in arenas of global challenges like climate change. Most CR engagements are simply being a good neighbour, maintaining their license to operate or giving back something to society. But in addition, business can influence the industry or as McElhaney (2008, 22) put it: “to be a beacon to others”.
A good example of industrial influence through innovative corporate conduct can be seen on the case of the Body Shop or the American ice-cream company Ben & Jerry’s (http://www.benjerry.com/). Both companies can be considered pioneers in the way they embrace added values, beyond exclusive profit maximization, even though their approach varies greatly. Yet, what both companies have in common, is that there values lie at the core of the corporate identity and are therefore part of their grand management strategy.
World Transform multiple industries Industry Community Company Figure 2. A corporate responsibility landscape (McElhaney, 2008, 230).
Corporations are expected to change towards a world view where employees should be regarded as assets not as costs and success measured in terms of outcomes for all stakeholders involved. Shareholders have no interest in the corporations beyond interest returns, which soon will not be enough for a corporation to solely exist on, as it has to realize that it depends on more stakeholders (Porter & Linde, 1995; Porter & Kramer 2011). In a modern management perspective corporations and society are intertwined entities with mutual dependencies, driven by both perceived opportunities and challenges of all sorts.
Corporate Responsibility, being accountable, what’s the problem?
Corporate (Social) Responsibility has many facets and it is still difficult to measure in economic terms. With an increased number of choices, come an increased number of problems that could arise from these choices, which makes the concept of CR diffuse. Yet, it still implies a multitude of opportunities for companies to explore and exploit, where improved stakeholder dialogue lies at the heart of being accountable. As most of CR activities are voluntary, the company has the opportunity to actively engage and show their commitment towards society, which could lead to added-value in their products and services through enhanced corporate image, leading to a shared value (Porter & Kramer, 2011). But the question arises, how far in the supply (value) chain; should the organization be accountable (Welford & Frost 2006), in other words show responsibility?
The fuzzy lines around the concept of corporate responsibility (CR), especially in terms of accountability, has unfortunately resulted in companies misusing or being presented as misusing the concept of CR as part of their green-washing agendas and has therefore violated the trust of their stakeholders (Mark-Herbert & von Schantz, 2007). Trust in the corporate world relies to a large extend on reputation and corporate image. CR is closely linked to the code of conduct, which represents a sort of a voluntary ‘contract’ that a corporation forms with its stakeholders, where a breach is considered a breach of trust. A code of conduct is therefore a powerful way of communicating the imprint of the corporate identity. Consequently, it is becoming increasingly important that companies are truly committed and show ethical values, that they walk their talk, so to speak in order to continue to attract all kinds of stakeholders that are vital for a business’ survival, such as investors, consumers, employees, etc. One way to underpin commitment is to formalize processes through a certification process. A certification refers to a third party assessment (Malmborg & Mark-Herbert, 2010), which is believed to enhance transparency and trustworthiness as a response to societies demand due to the forces of globalization and lack of trust towards corporations.
Corporate governance that embraces the triple bottom line is associated with challenging management decisions. The long term perspectives and objectives of sustainability do not match the operative tools that support strategic management decisions. Legal institutional systems and pressures specific stakeholder groups may also cause sub-optimizing decisions for short term gain (Mark-Herbert & Rorarius, 2009). Working actively with CR aimed at sustainable business development is not about philanthropy or charity work. It is about daily decisions - creating competitive advantage in shaded values, redefining productivity in a value chain, and building trust.
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