Enhancing Competitiveness and Sustainable Development through CSR Exercise

Corporate social responsibility (CSR) is not a new subject but it still gives a touch of glamour to businesses, investors, consumers and the society. Vietnam Business Forum would like to introduce an article on related issues written by Dr Doan Duy Khuong- Vice President of VCCI, President of Vietnam Business
Council for Sustainable Development (VBCSD).

 

The second decade of the 21st century is witnessing a world of 3C that is on a quick tide of Change, driven by the development of market economy and science and technology. These very changes will bring both Challenge and Chance to us. It has never been in history that the future is filled with as many questions as now. It has never been in history that the future is dependent so much on what businesses, governments and civil societies do as now. The global financial crisis at the end of the last decade undermined the public trust in businesses and governments. In this period, it is definitely clear that rapidly and absolutely concerted actions are essential at different levels for different partners to restore confidence and cooperation and search for solutions to complicated matters that our societies are facing. Outcomes of these urgent actions will help establish necessary conditions to pursue global growth (usually pro-GDP growth) on a more sustainable roadmap.

 

English Prime Minister David Cameron said: "It's time we admitted that there's more to life than money, and it's time we focused not just on GDP, but on GWB (general well-being). Professor Paul Krugman, a Nobel economic winner in 2008 argued that “The core element of happiness is to be employed. In addition to generating stable incomes, employment makes a person confident and self-esteemed. Thus, it is necessary to create more jobs if [we want] to make the public happier.”

 

Thus, in the globalization trend, sustainable development is not only economic development but also the development and resolution of social and environmental problems.

 

CSR is not a new subject but it still gives a touch of glamour to businesses, investors, consumers and the society.

 

There are many different definitions about CSR. The World Business Council for Sustainable Development defines that "corporate social responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large." Businesses in pursuit of sustainable development must always abide by standards of environmental protection, gender equality, work safety, labour rights, fair salary payment, employee training and development, and community development.

 

Despite different interpretations, the number of companies in the world realizing economic benefits of CSR policies and measures is on the rise in the past decade. CSR commitments go beyond the desire for higher profit, and show that businesses are fully aware of their responsibilities to employees, customers, community and the environment. Many companies use CSR as a new business approach when they realize that it can help enhance the role of managers, improve financial situations, strengthen the motivation of staff, inspire customer loyalty, and bolster corporate reputation in the society.

 

Chances or challenges facing companies in the world as well as in Vietnam from the application of CSR are basically clear. CSR awareness of a company may be considered an index proportional to the success of that company on the path of development. Multinational corporations or powerful companies apply a set of rules outlining responsibilities of or proper practices (called code of conduct or code of ethics) and standards like SA8000, WRAP, ISO 14000 and GRI, and regard them as their commitments to the world. Titans are paying very much to become an ideal business model with a highly competitive system, sustainable development and more social responsibility. For example, Best Buy -an international retailer of consumer electronics and entertainment software, is very well-known for applying product recycling programme. Starbucks - an international coffee and coffeehouse chain with world-wide presence - has shared hands in many community activities. Google, the world’s largest internet search provider based in Googleplex, treats its employees as ‘gold’. In addition to guaranteeing the quality of life of employees, protecting environment, and developing products that create benefits for consumers and the environment, companies also set up funds and donate charity to contribute to the development of the society and community. Oil group Royal Dutch Shell established charity foundations, including the Early Learning Centre in South Africa to educate children and teach skills for adults. The World Bank (WB) and pharmaceutical company Merck launched an initiative to develop a US$50 million foundation which also includes donating Mectizan products to help 28 African countries to cure diseases. Billionaires like Bill Gates or Warren Buffett and their companies’ foundations significantly donated charity.

 

In developed countries, social responsibility expenses used for research and development are more than those for charity purposes although philanthropic money is not small at all. In conclusion, corporate social responsibility is playing an increasingly important role in the sustainable development of a company, the guarantee of effectiveness, the observance of laws and the exercise of the code of ethics in different economies.

 

In Vietnam, objectives of sustainable development are catching increasingly attention and becoming particularly urgent requirements. This is the first year Vietnam executes the Socioeconomic Development Strategy for the 2011-2020 period adopted at the 11th National Party Congress which highlights: “Rapid development in association with development sustainability, sustainable development is a cross-cutting requirement of the strategy”, and continues asserting:" Science and technology plays a driving role in the development of modern productive forces, protection of the natural resources and environment, improvement of productivity, quality, efficiency, growth and competitiveness of the economy.”

Corporate social responsibility in Vietnam is necessarily directed to the sustainability of the country. In recent years, together with renewal and opening up policy, proactive international economic integration has brought in impressive achievements in social and economic development, and basically changed the image of Vietnam on the international arena. Economic globalization is an objective trend that offers many development opportunities for countries, particularly sustaining high economic growth, efficiently using all resources, specially human resources, creating more jobs, better resolving social problems and improving people's lives. International economic integration is the combined process of cooperation and competition, and of chance and challenge. One of challenges is to implement the corporate social responsibility which primarily involves in some labour and environmental contents through a set of rules called ‘Code of Conduct’.

 

In the globalization trend that draws on more aggressive competition, each economy or company must continuously enhance its competitiveness where the competitiveness of human resources particularly plays an important role. Vietnam, which has a large workforce and holds comparative advantages in labour-intensive industries like textile, footwear, seafood and handicraft, feels the importance of attracting foreign investments and expanding exports. The question “whether a business should actively invest in social responsibility or just focus on profitability?" continues existing and mentioning in business programmes of companies.

 

Large corporations see that there is no difference between the two because behaving the society responsibly will bring in future prosperity. But, small and medium enterprises (SMEs) are not able to achieve certifications stated in the Code of Ethics and hardly carry out corporate social responsibility effectively. So, should SMEs exercise CSR? The answer is “Yes!” because companies skipping CSR may be less competitive in approaching international markets, especially developed ones. Implementing CSR for the medium and long terms will achieve the following benefits: lower costs, more revenue, higher brand value, less job quit, higher productivity and higher possibility of success in approaching new markets. According to a research by the Vietnam Institute of Labour and Social Affairs, more than 24 textile and footwear companies said that CSR programmes helped them increase revenues by 25 percent, labour productivity rise from VND34.2 million to VND35.8 million per worker a year, and export shipments increase from 94 percent to 97 percent. Apart from economic outcomes, companies also benefit from their better images with customers, satisfactions of employees, and attraction of highly skilled labourers.

 

Probably, during the process of such competition and sustainable development, corporate social responsibility will focus on two trends:

In the context of globalization, Vietnamese enterprises always take the social environment into their production and business activities. The world is paying more attention to elements that encourage companies to behave responsibly, particularly their responsibilities to improving social relations, environment, ethics and corporate culture. Investors usually take more care of fundamental factors like macroeconomic, national governance and corporate prestige which is usually referred to developed markets with high standards. Hence, executing corporate social responsibility by upgrading labour standards can result to economic benefits, and harmonious balance of economic and social objectives. And, they will thus improve their brand names.

 

CSR in Vietnam is strongly translated into result-based and law-compliance aspects. The country necessarily honours companies that tend to introduce additional criteria relating to social and environmental issues. In 2005, Vietnam launched the “CSR Award” for companies with outstanding sustainable development results in the process of international integration. This merit was jointly organised by the Vietnam Chamber of Commerce and Industry (VCCI), the Ministry of Labour, War Invalids and Social Affairs (MoLISA), the Ministry of Industry and Trade, the Vietnam Apparel and Textile Association, the Vietnam Footwear Association, etc. Some businesspeople use their companies’ images when they do charity. Some companies have added CSR to their business strategies, e.g. Vinamilk with the “six million cups of milk for Vietnamese children” or Dutch Lady with “Đèn đom đóm” (Firefly Light), which are strongly supported by the society and consumers. Many companies and businesspeople also give aids to victims of natural disasters like flooding. However, the implementation of CSR in Vietnam is still relatively difficult. Firstly, the understanding of companies about CSR is incomplete and they merely think that the work is defined to charities which are sourced from their profits while they do not know that CSR must be integrated within their business plans. The second difficulty is that implementing CSR means applying codes of conduct imported from other countries where material conditions are better than in Vietnam. In the meantime, companies lack financial resources and techniques to realize CSR standards, especially small and medium enterprises which are the majority in Vietnam. Furthermore, we lack policies, laws and standard systems that fit our social and technical levels to carry out CSR. Corporate social responsibility is an integral part of a company in developed nations but it is a hard job in Vietnam where CSR is a forcible action or the charitable heart of business leaders. These are two completely different business concepts.

 

The sustainable development requires great efforts of the Government, social organizations, consumers, scientists and especially business communities. Being fully aware of this matter and executing the Government’s Agenda 21, with the support of the business community, VCCI founded the Vietnam Business Council for Sustainable Development in the fourth quarter of 2010. One of basic contents of the council is to help improve competitiveness and sustainable development [of Vietnamese companies] by carrying out CSR.

 

By executing corporate social responsibility in the context of global economic integration, we will add another C letter to the vivid picture of the world (4C) in global economic integration: 3C (Change, Challenge and Chance) + 1C (CSR).