2020-2025: The Challenge of Corporate Social Responsibility in Central Asia

At a time when Central Asia, and particularly Uzbekistan, is benefiting from an unprecedented liberalization movement opening large opportunities for international companies, Corporate Social Responsibility shall be a north star for any company interested in gaining a long and sustainable marketshare in the area.

However, many questions arise such as:

• Why should companies or organisations in Uzbekistan care about Corporate Social Responsibility (CSR) and strive to develop relevant strategies for their entities?

• Why it is important to engage in CSR when you are already doing well?

• Why practice accountability when your stakeholders are not even bothered or demand any transparency?

This would be a rhetorical question for companies in the West, but not for those operating within Central Asia. If we look at the motivational factors to adhere to CSR practices in Western countries, it is clear that one of the main purposes is to meet the rising demands of stakeholders. Companies engage in CSR in order to gain social legitimacy within the society they are operating. The situation is a bit different when it comes to Central Asia and Uzbekistan: so far there is a need for strong justification in order to promote CSR, however a pro-active approach towards Corporate Social Responsibility could lead companies to establish sustainable partnerships with local stakeholders.

Many local businesses in Uzbekistan are already involved in charities, care about employees and abide rules and regulations set out by the government. However the lack of clearly established separate strategy for CSR is a weak point in their efforts. Despite the lack of strong stakeholder influence or supply chain requirements that would motivate companies to engage in CSR, the situation is already changing in the light economic and social benefits that a Corporate Social Responsibility can bring. The second milestone it to make fits those benefits into the Uzbek business environment.

What are the long-run advantages of implementing CSR principles in business practices in Central Asia:

1. First, by trying to minimize the environmental footprint as a part of their CSR, businesses can reduce the costs of energy and resource consumption. Additionally, engaging in social problems can bring benefits such as good reputation that will help to increase the amount of sales. Such strategies can be easily implemented in Central Asian business practices.

2. Second, CSR helps to improve the loyalty of employees and lower the absenteeism levels, making it easier to attract, hire and retain talents. Google, for instance, lands on top of the Fortune’s list of “100 best companies to work for” for the six years in a row. Why? Well, who would not want to work for a company where you are provided free food, free beer and wine every Friday, free haircuts, laundry services, parental leave for both parents, and many other advantages? Similar advantages could be easily implemented for companies operating in Central Asia, granting them an outstanding reputation in the area.

3. Third, by advertising their CSR, companies attract customers with social inclinations who would willingly pay more for a certain goods if they were produced by an ethical company. Such scheme would works perfectly within Central Asian Countries which have a long traditions of ethics and social values.

4. Fourth, CSR could be a strong tool for organisations to forestall possible customer boycotts and achieve market advantage among their rivals. nNowadays social activity is becoming more and more dynamic and highly appreciated in post-USSR countries. So in near future companies shall brace for social activities.

5. Fifth, companies with good CSR policies attract potential investors as they have a competitive advantage over their rivals with potent risk management strategies in this regard. That is the reason why investors or potential shareholders with high social preferences are attracted to the companies which are popular for their CSR agendas.

6. Sixth, Central Asian economies are highly linked with government interference, having a strong CSR helps in building long-term relations with the country and shows respect towards the flourishing economies in the area.

At the same time, motives for implementing CSR principles into their practices could be different for large companies, for SMEs, and even for recently-implemented companies. Big organisations are more prone to public scrutiny and thus come under bigger pressure to practice CSR, besides they possess sufficient finances for that.  But reputation is also crucially important for the small companies as they practice CSR to become more visible and can use CSR as cost-effective Public Relations instrument. It further helps companies disseminate information about their activities and products, and operates as a virtuous circle.

Lastly, CSR should not be just a differentiation policy or tick – box exercise to improve the reputation, but bear a true value and reside in the core of the businesses. CSR should be a development tool to address issues such as poverty, human rights, health, education, child labour and etc. CSR policies of businesses should be based on local values, issues, and developmental problems. If we consider the fact that Uzbekistan, one of the most important players in Central Asia, is ranked 100th among 128 countries on the Social Progress Index in 2019 we see the urgency for proper CSR practices in order to improve this situation. The role of businesses in this is undeniably prominent.

Central Asia Consulting helps companies in establishing and implementing tailor-made Corporate Social Responsibility strategies in Central Asia, and particularly in Uzbekistan.