CSR has become the buzz word for companies all over the world and Cambodia is no exception.
UNIDO describes Corporate Social Responsibility (CSR) as a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders. CSR is generally understood as being the way through which a company achieves a balance of economic, environmental and social imperatives (“Triple-Bottom-Line- Approach”), while at the same time addressing the expectations of shareholders and stakeholders.
This has had possible implications on the Cambodian economy as CSR concepts and activities have had a paradigm shift over a relatively short period of time.
One of the benefits of driving CSR programs is respect and reputation for companies that carry them out. Reputation as a responsible business can lead to competitive advantage. For instance, companies favour suppliers who have responsible policies. These policies are the reflection of a company’s mission.
CSR initiatives get favourable support from investors who are more likely to back a reputable business. Moreover, government authorities often encourage companies to increase their CSR initiatives. This, in turn, leads to good relationships that smoothen business conducts and better promote pubic, private sector partnerships (PPP).
The CSR trend is catching on in Cambodia, particularly in the multinational sectors such as banking, telecommunication and insurance sector. Furthermore, even large local entities as well as small and medium enterprises and manufacturers are raising their CSR initiatives, which has served as a magnet to attracts foreign customers who favour companies with good business practices.
Companies have demonstrated their commitment to CSR by supporting education, health and sustainable living. Successful CSR programs improve financial returns through enhanced brand image and awareness, premium pricing and reduced risk. In addition, a successful CSR programme is one which will be sustainable in the long run and not just one off, as in the case of charity.
According to a survey by Ernst and Young, CSR initiatives are able to generate returns of 45 percent on investment.
Funds on CSR initiatives are usually not termed as business expenses, thus they are not taxable and companies benefit through tax incentives.
For instance, the government had announced an array of tax incentives for small and medium enterprises late last year. The government was convinced that the tax incentives will enhance competitiveness and create more jobs for Cambodians.
In fact, paddy rice, corn, beans and pepper producers have shown that tax incentives helped to boost competitiveness in their respective fields.
In addition, the World Bank’s report: “Innovation, Technology and Entrepreneurship Global Practice Policy 2013” said tax incentives allow companies to focus on research and development.
Tax incentives also play an important role for the growth of a company. In the long run, companies will be able to enjoy additional funds for the business to improve cash flow. This also leads to the ability to compete in wider or international markets and embark on wider CSR campaigns.
Corporations will be able to use the advantage of tax incentives by investing in more manpower and improving business operations. It also opens up opportunities for additional development and skills.
While the government has previously granted huge tax incentives of up to 50 percent – to companies listed on the Cambodia Securities Exchange (CSX), experts say a similar model could also be applied to companies that participate in CSR initiatives.
Ultimately, CSR initiatives give rise to win-win situations that benefit the community. It brings forth a positive effect to the economy and environment while companies enjoy better revenue and reputation.