Corporate Social Investment (2006 - 2008)

Program Goal – to increase the local philanthropy activities of Armenia’s private sector.

In response to increasing public scrutiny and calls for heightened corporate social responsibility, many companies feel the need to illustrate their good governance practices by instituting highly visible philanthropy programs. In contrast to traditional charity actions, corporate social investment (CSI) incorporates the company’s mission, business plan, resources and philanthropic interests to simultaneously benefit the community and add value to the business.

In 2006, Eurasia Partnership Foundation (EPF) initiated a baseline assessment of the state of CSI in Armenia. Representatives of medium and large-sized companies in Armenia were included in the survey, which examined the current level of understanding of corporate social investment among Armenia’s private sector; trends in CSI practices among businesses; businesses’ primary motivations for engaging in CSI-related activities; as well as the primary obstacles to expanded CSI practices within the private sector.

According to the assessment’s findings, the current understanding of corporate social investment among business people in Armenia is very poor and there are only a small number of businesses that regularly engage in philanthropic activities. The majority of charitable contributions made by these businesses take the form of single-term, spontaneous donations and are not part of a long-term strategy that responds to both community needs and company goals. The assessment also found that businesspeople in Armenia have largely overlooked the role that NGOs can play in the implementation of CSI initiatives, and it revealed a lack of coordination between businesses’ philanthropic activities and the development initiatives of both civil society and government.

Eurasia Partnership Foundation is working to maximize the value of corporate social investment in Armenia by building the capacities of its partner businesses to develop CSI strategies; by providing networking opportunities for businesses in Armenia with CSI practitioners abroad; and by advocating for legislative changes that will support businesses’ corporate social investment activities.

Building Business Capacities

In August 2007, Eurasia Partnership Foundation convened over 25 representatives of Armenia’s business sector in Yerevan for a two-day workshop on Corporate Social Investment (CSI) practices led by experts from Russia, the United States and the United Kingdom. This event marked the launch of Eurasia Partnership Foundation’s program for the promotion of corporate social investment in Armenia. Businesses including Coca-Cola, Microsoft, Ashtarak-Kat, Synopsys, Arm-Swiss Bank and Aporia Mineral Waters participated in the workshop. Business representatives heard presentations on the experience of Russia’s business community in the CSI field, and independent experts from the United States and the United Kingdom shared case studies from the social investment practices of American and British corporations.

Following the workshop, Eurasia Partnership Foundation sponsored a study tour for six Armenian businesses and the Deputy Minister of Trade and Economic Development to Moscow, where they were given the opportunity to visit Russian companies active in corporate social investment and to learn from their experiences. Two companies, Ashtarak Kat and Arm-Swiss Bank, have already expressed an interest in working with Eurasia Partnership Foundation on the development of their corporate social investment strategies.

In the coming year, EPF will work to build the capacity of its partner businesses to develop and implement CSI strategies that respond to each company’s mission, business plan and philanthropic interests by offering them opportunities for in-depth consultations with experts in the field; by organizing network meetings in partnership with the American Chamber of Commerce in Armenia that will allow local businesses to learn from each others’ experiences implementing CSI programs; and by partnering with local businesses on the implementation of their CSI strategies. In 2008, Eurasia Partnership Foundation also plans to identify a local university in Yerevan, with which it will partner on the design and launch of a certificate course for Armenian business professionals in the field of CSI.

Policy Reform

Armenian legislation did not that period offer any tax incentives for businesses to engage in philanthropic activities. In 2008, EPF would initiate a comparative analysis of the legislative framework for CSI in Armenia and other countries and would work with the Ministry of Trade and Economic Development and its local business partners to advocate for amendments to existing legislation in Armenia that would support businesses’ corporate social investment activities

Increasing Public Awareness of CSI

Eurasia Partnership Foundation would work to increase media coverage of program activities in order to improve the public’s understanding of CSI. As part of this effort, EPF supported the participation of a journalist from a prominent local newspaper in the study tour to Moscow and had organized a series of press conferences to publicize the program.

Corporate Social Investment in Armenia 2006-2008: Changes in Attitudes

The terms Corporate Social Responsibility, Corporate Philanthropy, and Corporate Social Investment were unfamiliar to most in the Armenian business community just a few years ago. These concepts were already becoming better understood, and some pioneering Armenian businesses had already moved from one-time and ad-hoc charitable actions to more strategic social investment programs.

In 2006, Eurasia Partnership Foundation (EPF) conducted an assessment of philanthropic practices among medium to large-sized businesses that examined the role that NGO business partnerships can play in these activities. According to the assessment, the understanding of social investment among business people in Armenia was very poor. Responses to our survey suggest the share of social investment activities among businesses usually did not exceed 1% of turnover annually (3-5% of turnover is the standard in many countries). At the time of the assessment, charitable contributions by businesses took the form of social assistance in science, culture, public health, and education. These contributions, however, were mostly single-term and spontaneous, not part of a developed social investment strategy or part of a longer-term project.

Many of the businesspeople we interviewed in 2006 emphasized that one of the primary deterrents to social investment is the belief that these investments will not result in positive long-term change. EPF defines corporate social investment (CSI) as giving that has a significant social impact while simultaneously improving a business’ long-term competitive potential. In contrast to traditional charitable acts, corporate social investment incorporates a company’s mission, business plan, resources and philanthropic interests to simultaneously benefit the community and add value to the business.

A number of Armenian companies were ahead of their time in their CSI practices: The IT Company Synopsys Armenia established a charitable foundation which sponsors educational and initiatives, including engineering education in cooperation with major Armenian universities, and contests for students in IT; in this way the foundation benefits students and simultaneously serves as a tool supporting Synopsys’ R&D operations. Ashtarak Kat, one of the leading dairy companies, is dedicated to school, community and infrastructure development in the border areas where their milk processing units were located. Phillip Morris Armenia had shifted from humanitarian aid to development programs. In 2006, together with EPF, the company supported computer literacy courses for 41 hearing impaired children, as well as vocational training (in rug weaving) for students at a school for the hearing impaired.

Corporate Social Investment could have significant and enduring impact if done right. EPF believes that Armenian businesses have an important role to play in the development of the country. What is needed to make that a reality? In EPF’s view, further understanding of corporate social investment; extensive publicity of existing and emerging models of excellence in Armenia; better returns on social investments, reflected in real business indicators; and finally, a legislative framework which provides incentives for corporate giving.

EPF was working to present best practices from all over the world though a series of conferences and seminars, as well as working with businesses to design, implement, monitor and communicate their Corporate Social Investment programs.

Companies who were starting to engage in CSI could improve returns through developing more structured programs, and were striving to maximize returns to both the company and to the beneficiaries of these programs. Although CSI was still in its infancy in Armenia, already positive changes in attitudes were apparent.

The project in the Media

An article about EPF Corporate Social Investment project was published in the newsletter of the American Chamber of Commerce in Armenia (AmCham). Available here (page 27).