Mainstreaming corporate social responsibility in state-owned enterprises

Problem

Socially responsible business is slowly becoming the new norm. On the global scale, an increasing number of companies are acknowledging the fact that in order to retain a competitive edge, they must champion human rights, contribute to environmental and social goals, and play their part in the creation of happier societies. The United Nations defines corporate social responsibility (CSR) as a balance between economic, social and environmental dimensions in business activity.

An overview of scientific research suggests that the main benefits of CSR for companies are reduced costs and risks, profit maximization, competitive edge, reputational gains and synergic value creation (Crane et al. 2008). Furthermore, one of the key principles of share listing is the disclosure of information that includes CSR policy, corruption prevention initiatives and similar data (NASDAQ Baltic 2019a). According to experts, a company that bases its governance on CSR principles has an easier time lowering risks, cutting costs and improving financial performance (NASDAQ Baltic 2019b). The global trend is undeniable: investment based on environmental, social and governance factors (also known as socially responsible investment) in 2018 amounted to 20 billion dollars – that is, a quarter of all assets under management (Kell 2018).

The Lithuanian government has set the goal of mainstreaming CSR; however, CSR practices are not yet prevalent in state-owned enterprises (SOEs). Although some SOEs are well-advanced in applying CSR in their work, the majority of companies lags behind. For example, out of the 54 current Lithuanian SOEs, most do not publish sustainability reports. Due to this, 80 % of companies received a negative sustainability disclosure score in the 2017 Good Corporate Governance Index that evaluates Lithuanian SOEs. This represents the lowest rating out of all transparency and disclosure criteria evaluated.

It is worthwhile mentioning that, according to the latest data available, the aforementioned Index does not paint the full picture: sustainability (or CSR) is not evaluated qualitatively, and only aspects of disclosure are taken into consideration. This makes it difficult to evaluate the share of state-owned enterprises applying CSR principles in their work. Countries that are leaders in the field of CSR most commonly resort to comprehensive monitoring and mandatory disclosure to encourage the adoption of CSR. Another regularly used tool is a mechanism for the exchange of good practices among companies. The need for such a mechanism can be observed in Lithuania: CSR is still misunderstood as a hindrance to business activity, economic growth is pinned against social and environmental welfare, and CSR benefits are overlooked. The adoption of CSR practices in SOEs could help Lithuania reach its goals in becoming a more sustainable country and would help SOEs serve as an example to private businesses and wider society.

Crane, A. McWilliams, D. Matten, J. Moon, D. Seigel (Eds.). 2008. The Business Case for Corporate Social Responsibility. The Oxford Handbook on Corporate Social Responsibility (p. 83-112). Oxford University Press: Oxford.

Kell, George. 2018. The Remarkable Rise of ESG. Forbes.

NASDAQ Baltic. 2019a. NASDAQ Vilnius listinguojamų bendrovių valdysenos kodeksas.

NASDAQ Baltic. 2019b. Vilniaus vertybinių popierių biržoje listinguojamų bendrovių valdymo kodeksas su komentarais.

Goal

The main goal of the project is to help state-owned enterprises adopt corporate social responsibility principles and to ensure an effective system of CSR monitoring and evaluation.

Result

Participants

2018/19

Marta Misiulaitytė

2018/19

Agnė Buraitytė

2018/19

Eleonora Lekavičiūtė