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Maksim Kaznacheyev. Development issues of corporate social responsibility in Kazakhstan

An important component in the process of creating an efficient market economy and democratic society is a dialogue among the government, business and civil society. Current global trends show a growing contribution of business to solving problems of sustainable economic development. In Kazakhstan, the practice of business participation in the development of society is poorly defined. The stage of development of corporate social responsibility (CSR) can be identified as a start.

In general, CSR is a concept according to which organizations consider the interests of society and take responsibility for the impact of their activities on customers, suppliers, employees, shareholders, local communities and other interested parties (stakeholders) of the public sphere.

Currently, the majority of private businesses (especially large businesses) are not ready to take responsibility for increasing their corporate social responsibility towards the society for the further improvement of the well-being of the population. Moreover, not all enterprises engaged in CSR are its genuine supporters.

Many Kazakhstan enterprises carry out CSR unknowingly, and among those carrying out CSR in practice, there is a fairly high proportion of businesses that implement it not due to internal motivation, but under the pressure of circumstances. Often local authorities are forcing businesses to solve social problems of the regions in which they operate. The practice of signing memorandums of social responsibility between local authorities and large enterprises in the region is not always voluntary for enterprises.

The current level of understanding and attitudes towards CSR is not sufficient for a wide involvement of enterprises in the practice of social responsibility. Often corporate social responsibility is identified as PR and / or advertising.

Some think that corporate social responsibility is frivolous and unworthy of the attention of senior management of large companies, or underestimate the potential gains from CSR and think only of the associated costs and expenses.

All of these misconceptions occur mainly due to the underestimation of the objective factors that underlie in the foundation of the corporate social responsibility and the potential benefits of its use.

Kazakhstan business community needs a clear understanding of all the advantages and disadvantages of active participation in the corporate culture, they need to consider CSR as a strategic investment and opportunity, not only as a formal obligation.

The key factors that impede enterprises from participation in solving social problems are:

  • misunderstanding of what CSR is. Neither the government nor enterprises have a clear understanding of what that term really means;
  • lack of financial resources as the reason for not participating in CSR. Enterprises do not want to invest in something that will not benefit in short and mid terms;
  • the argument that social projects are “government’s functions”;
  • insufficient state support for businesses involved in corporate social responsibility;
  • low level of business culture;
  • lack of efficiency and competitiveness of many enterprises, their unattractiveness for local and foreign investors;
  • weak legislation, which does not provide incentives for social activities;
  • inability to control the use of funds allocated for CSR;
  • non-transparency of financial reporting and, as a consequence, corruption in the reporting system.

For the further development of CSR in Kazakhstan it is important to stimulate it. Government should support enterprises that actively follow and implement corporate social responsibility. New Kazakhstan companies operate in conditions of high economic risk, insufficient legislative base, and government’s financial interest in their business.

These conditions rarely contribute to the formation of a strong corporate culture, but, despite this, the most forward-thinking leaders try to create in their companies a microclimate that facilitates establishment and development of corporate culture and management.

The highest priority areas for social investment, both in short and in long term can be investments in infrastructure and regional development, including environmental protection, support for vulnerable groups, education and health.

The current system of corporate social responsibility that includes regular preparation of social non-financial reports improves transparency of the business and allows to justify its profitability. In contrast, the absence of transparency does not allow enterprises to become adequately priced on the market. This is especially true for Kazakhstan mining and metallurgical enterprises and fuel-energy complexes.

Thus, the improvements of corporate governance should be implemented in the following areas:

  1. Clarification of what CSR is and what it provides in the long term. In order to do that it is essential to focus on the relation of CSR to core activities of the enterprises and provide opportunities for more inclusive decision-making process concerning the principles and priorities of CSR.
  2. Effective organization management (linking their own interests and abilities to the interests and needs of society).
  3. Legislative standardization of corporate behavior that will regulates its main principles.
  4. Formation of a new system of corporate relations that will cover the entire process of production.
  5. Establishment of higher requirements for information and financial transparency of organizations. Greater transparency helps to build trust and gain support from all interested parties.

Enterprises need support to develop their social practices. One of the main needs of the business is the need for training, forums and workshops. A fuller coverage of national experience would enable enterprises to better adopt advanced models of social behavior. Media should be more involved in the promotion of social responsibility.

Enterprises’ understanding of CSR as an advantage in competitiveness may be a key to the future development of CSR practices in Kazakhstan. Expectations of a positive image are also a good incentive for enterprises to implement socially-oriented business.