Where responsible business is concerned, Ukraine is caught between looking to Russia and to the west
Ukrainian firms historically look to Russia for ideas. But the appearances of multi-national firms, often with US or EU presence, means western ideas about responsible business are now being propagated in Ukraine.
The arrival a couple of years ago of the UN Global Compact has also been a catalyst for progress, and corporate profits may keep flowing, at least in the short term, to fund such interest in responsible business. Ukraine’s economy grew 7 per cent in 2007 and the largely domestic-funded financial boom looks set to continue.
Corruption, however, remains a barrier to efficient business progress. Other obstacles include skills shortages, badly planned tax regimes and outdated regulation. The country’s media may be increasingly vibrant, especially compared with Russia’s, but as elsewhere in central and eastern Europe, independent local non-governmental organisations are few and far between.
Political intervention is the area of biggest difference between Russia and Ukraine on responsible business. In 2003 Russian president Vladimir Putin told Russian companies that their licence to operate would depend on staying out of politics and getting involved in tackling important social issues. This has led in part to the recent increase in Russian corporate social reporting.
Ukraine’s political chaos has meant little pressure from the government on social responsibility. Hence a different, more voluntary, western ethical business ethos has begun to take hold.
Signs of action
Intel, the chip-maker, is applauded by many Ukrainian responsibility-watchers. The company, which wins awards worldwide for its ethics practices, has a partnership with the UN Development Programme to use technology to educate both youth leaders and teachers about managing social projects.
Another firm known as a leader in Ukraine’s limited field is TetraPak, the Swedish packaging giant, for its work in encouraging recycling. Other firms that are highlighted by Ukraine experts as undertaking varying degrees of what might be termed corporate responsibility include Coca-Cola, Microsoft, oil firm TNK-BP, mobile operators KyivStar and MTS, and cosmetics group Avon.
Aids is a big issue in Ukraine – UNAids estimates that 410,000 Ukrainians, or 1.4 per cent of adults aged 15 to 49, live with the virus. Interpipe, a Ukrainian steel tubes firm, has gained plaudits for its initiative on Aids awareness and education. Industrial Union of Donbass, another big heavy industry firm, is also taking a keen interest in tackling HIV. British American Tobacco recently produced its first report on the topic in the country.
The company that is mentioned most in corporate responsibility circles is System Capital Management. The company is the country’s largest, combining mining and power generation with new technology and finance. The firm is huge, owning more than 100 businesses with 160,000 employees. SCM was the first Ukrainian firm to report results using International Financial Reporting Standards.
SCM’s director of international and investor relations, Jock Mendoza-Wilson, says addressing basic health and safety issues ignored in Soviet times is a key area for Ukraine’s big domestic industrial firms. The company is currently working on its first social report, to be published later this year. Mendoza-Wilson describes the environment as an “emerging issue” in Ukraine.
The signs are, from these examples, that Ukrainian firms are beginning to understand their potential role in tackling social problems. For now, meeting basic standards of corporate governance and financial transparency, and understanding how responsible business links with core business, remain Ukraine’s biggest ethical business challenges.