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Corporate Social Responsibility in Russia: A matter of tangible value (An analysis of CSR in the case of Yota)

An essay for Global Citizenship and Corporate Social Responsibility course (Module B)

By Maxim Peskin MIB, Greenwich cohort

Hult International Business School London, UK

While corporate social responsibility (CSR) has become a global imperative for every business, developing nations frequently display patterns of CSR initiatives and strategies which are significantly different from those of the Western world (Jamali & Neville, 2011). Given their abundance, variety and complexity, emerging economies' approaches to CSR cannot always be effectively analysed or assessed from the solitary standpoint of established business cultures, such as the Anglo-American or Rhineland ethical systems (United Nations, 2007: 2).

Instead, a locally focused and culturally and institutionally sensitive view is increasingly being called for; however, moral relativism remains a crucial hazard associated with this perspective (Donaldson, 1996). On the other hand, recent research suggests that businesses in developing economies are more willing to disclose their CSR activities and provide reports conforming to emerging global standards than companies operating in developed countries (Baskin, 2006, as cited in Visser, 2008). Although the sheer desire to report is obviously not a measure of actual commitment to CSR, nor of the efficiency of CSR initiatives the companies undertake, this evidence apparently implies that finding a balance between local considerations and global demands is quite feasible in practice.

The concept of balance is central to this essay. It pursues a double purpose: first, to provide some insight into what the structure of this balance might be, specifically in the case of CSR in Russia; second, to employ these balanced optics to analyse the actions of Yota, which provide a prominent example of CSR activities of a Russian business.

Tumultuous economic development of the 1990s and early 2000s prompted most Russian companies to favour straightforward strategies like expansive growth or import substitution; arguably, this led to a certain degree of disregard towards complex business intangibles like ethics or long-term partnerships. Other notable factors that have shaped the business climate include a peculiar and deep-rooted moral system (for example, the notions of responsibility and obligation in Russian business admittedly mirror those of the mafia discourse), outdated business legislation and almost non-existent, completely corrupt enforcement (see the article by Shleifer and Treisman (2005), the paper by Fey and Shekshnia (2010) and the guidelines by the Independent Directors Association (2004) for starkly contrasting views of these issues). As a result, little attention has been paid to CSR until very recently; even the basic ideas still remain largely misunderstood. Three misconceptions about CSR appear to be most popular with the business public: it is regarded as an additional local or regional tax, as a variety of bribery or greasing certain officials or simply as a synonym for corporate philanthropy or sponsorship.

The first two attitudes are typically engrained into the cultural perspective of Russian SMEs; these approaches are often regarded by entrepreneurs as well as the society at large as a significant improvement over more candid corruption practices of the previous decade (Paneyakh, 2008). More the point, the distinction between bribery and sponsorship might become hazy in Russia, as evidenced by the Transneft case. In the first half of 2011, Transneft, the state-owned oil transportation monopolist, transferred over 80 million US dollars, or roughly 80% of its total CSR spending during that period, to an obscure charity directed by the head of the Department of Presidential Affairs (a structural unit of the Administration of the President of Russia). Moreover, this information was not disclosed by the company willingly but only following a direct ruling of the court; the standard practice before that, at least for Transneft, was to only release the total sum spent on CSR this year (Gavshina, 2011). Transneft case is by no means unique or exceptional for Russian business context, which suggests that to properly assess CSR initiatives and practices of Russian companies one should inexorably dissect the general ethics of the companys behaviour and also carefully examine whether a particular CSR initiative creates actual value for the society and/or community. Both aspects are considered in detail in a model developed by Porter and Kramer (2006). The authors of this model assert a strategic viewpoint focusing on interdependencies between the business and society and the need for business to maintain a long-term dynamic perspective; this adds further value to the model in this particular case since most Russian companies manifest a narrow, short-term, tactical outlook in their CSR activities, even if they claim to be development-oriented and socially concerned (Gontmacher, 2004).

Nevertheless, the concept of corporate social responsibility as an integral part of business strategy, related both to core values of the company and its patterns of execution, is gaining more and more followers among Russian businesses. A notable case is presented by Yota, a regional wireless broadband network operator headquartered in Saint Petersburg. Founded in 2008, the company became the nations first WiMax operator; in late 2011 the first commercial LTE network in Russia was launched (Yota, 2011), strengthening Yotas position as core innovator in 4G mobile communication technologies. Although the company does not provide detailed financial information, their current customer base of 700,000 (Yota, 2012) suggests a rough estimate of 80 to 120 million US dollars in annual revenue. As a minor player in burgeoning telecom market and a successful innovative start-up, highly dependent on capabilities in both technology and design, Yota identifies its key stakeholders to be the state, competitors and substitute service providers (i.e. mobile network and broadband operators), service users and members of the general public who share the companys passion about combining modern design and technology.

The relationship with the latter groups is crucial for Yota since they represent existing and prospective customers, possible brand network agents or ambassadors, potential partners or employees who share primary values of the company and last but not least a rich and diverse source of creative ideas. As a start-up, Yota also identifies that managing complex breakthrough information and transforming it into knowledge is one of its core competencies.

The challenge therefore is to link the two in a strategic and meaningful way, forging a sustainable and valuable CSR initiative. In 2010, similar reasoning prompted Yota to support the creation and become a principal partner of Strelka Institute for Media, Architecture and Design an educational facility in Moscow which is dedicated to developing new perspectives on critical issues in contemporary Russia (Strelka Institute, 2011a). This vision translates into full- and part-time postgraduate programs as well as hosting numerous open lectures, debates and other public events chiefly devoted to modern design, urban studies, technology development and social problems of the digital age. Strelka Institute played a fundamental role in making public lectures fashionable in Moscow: a trend that has by now evolved into a massive self-sustaining subculture, with thousands of young creative people regularly attending lectures and workshops both related to their sphere of work and addressing some totally different subject. Strelka Institute graduates have suggested a wide range of innovative solutions in such areas as public space, design, energy efficiency and so on (Strelka Institute, 2011b); with the actual discourse in constant flux, this years programs are focused on urban culture, regional development, sensory strategies for the city, etc.

Yota is indeed committed to its partnership with Strelka Institute: not only is the project endorsed fully by the corporate board, but also the founder of Yota, Mr Adonyev, is a member of Strelka Institutes board of trustees (steering committee). This strategic relationship is truly mutual: another founding member of Strelka Institute (and also a trustee), the editor-in-chief of Russias leading entertainment magazine Afisha, Mr Oskolkov-Tsentsiper, has been appointed VP Strategic Communication and Brand Development of Yota in 2011 (Strelka Institute, 2012).

The intensity and fruitfulness of interaction between Yota and Strelka Institute is probably not unprecedented even in the context of modern Russian business, let alone on the global CSR stage. However, this case remains a rare example of a sustainable partnership between business and society that seeks integration and value not just responsibility and atonement. By combining competencies and values with a pragmatic strategic approach, both parties have gained substantial tangible benefits. It can be concluded that Yotas social strategy is a clear indication that CSR can be implemented into corporate strategy: a case worth studying further, and in much bigger detail.

References: Baskin, J. (2006) Corporate Responsibility in Emerging Markets. Journal of Corporate Citizenship 24 (1): 29-47 Donaldson, T. (1996) Values in Tension: Ethics Away From Home. Harvard Business Review 74 (5): 48-62 Fey, C. & Shekshnia, S. (2010) Ten Key Commandments for Doing Business in Russia [online] http://www.sseru.org/materials/articles/key%20commandments%2024.pdf [accessed 19 January 2012] Gavshina, O. (2011) [No secrets] [online] [Vedomosti] 27 July 2011 http://www.vedomosti.ru/newspaper/article/264577/nikakih_sekretov [accessed 22 January 2012] Gontmacher, E. (2004) [Social responsibility of business] [online] [Strategy of Russia] 1 (3) http://sr.fondedin.ru/new/fullnews_arch_to.php?subaction=showfull&id=1078958256&archive=1078960200&star t_from=&ucat=14& [accessed 22 January 2012] Independent Directors Association and The Russian Institute of Directors (2004) Business Ethics: Guidelines for Russian Companies [online] http://www.ita.doc.gov/goodgovernance/adobe/IDARIDBusEthicsGuidelinesEng.pdf [accessed 19 January 2012] Jamali, D. & Neville, B. (2011) Convergence Versus Divergence of CSR in Developing Countries: An Embedded Multi-layered Institutional Lens. Journal of Business Ethics 102 (4): 599-621 Paneyakh, E. (2008) [The Rules of the Game for a Russian Entrepreneur]. KoLibri Porter, M. & Kramer, M. (2006) Strategy and Society. Harvard Business Review 84 (12): 56-68 Shleifer, A. & Treisman, D. (2005) A Normal Country: Russia After Communism. Journal of Economic Perspectives 19(1): 151-174 Strelka Institute for Media, Architecture and Design (2011a) Vision [online] http://strelkainstitute.com/en/#url=/en/idea [accessed 22 January 2012] Strelka Institute for Media, Architecture and Design (2011b) Alumni [online] http://strelkainstitute.com/en/#url=/en/alumni [accessed 23 January 2012] Strelka Institute for Media, Architecture and Design (2012) Trustees [online] http://strelkainstitute.com/en/#url=/en/idea/steering-committee [accessed 23 January 2012] United Nations (2007) CSR and Developing Countries: What Scope for Government Action? [online] Sustainable Development Innovation Briefs 1 http://www.un.org/esa/sustdev/publications/innovationbriefs/no1.pdf [accessed 19 January 2012] Visser, W. (2008) Corporate Social Responsibility in Developing Countries. In: Crane, A., McWilliams, A., Matten, D., Moon, J. & Siegel, D. (eds.) The Oxford Handbook of Corporate Social Responsibility. Oxford University Press, 473499 Yota (2011) Yota LTE [Yota Launched the First LTE Network in Russia] [online] http://www.yota.ru/ru/info/news/details/?ID=363361 [accessed 22 January 2012] Yota (2012) [About us] [online] http://www.yota.ru/ru/info/main/ [accessed 22 January 2012]