Corporate Social Responsibility in Istria County



International Conference ICES2006

»Transitional Challenges of EU Integration and Globalization«

October 9-10, 2008, Sarajevo

Corporate Social Responsibility in Istria County

MSc Mauro Dujmović

University of Juraj Dobrila Pula

mdujmov@efpu.hr

MSc Dean Sinković, MBA

University of Juraj Dobrila Pula

dsinkov@efpu.hr

Aljoša Vitasović, BSc

University of Juraj Dobrila Pula

avitasov@efpu.hr

Abstract

This article explores the dynamics of the discourse and practice of corporate social responsibility (CSR) in Istria County. It shows how the cultural and socioeconomic influence the way ideas are raised, the kinds of questions considered relevant, and the sorts of solutions conceived as desirable and possible. Furthermore, the article traces how expectations and practices evolve as a result of various social and economic factors within the region and, increasingly, as a result of global influences such as, the international practices of multinational companies, nongovernmental organization. The article closes with reflections about what can be learned from the experience with CSR and how to stimulate and apply such cross-border learning.

Keywords: CSR in Istria; sponsorship; donations ; social innovation; social responsibility, civil organization

Introduction

Corporate social responsibility (CSR) is the most dynamic, complex and challenging subject at the moment that employers are faced with and it is one of the most sensible and critical factors of the overall business. Encouraged by the decline of communism and the flow of capital, goods and services across the borders business has become a global institution. The public requires an active role of corporations in the construction of better life and living conditions globally as well as locally. Croatia as well as Istrian County have became a part of this global trend.

Although, there is no unique definition for CSR the notion in general relates to dedication of companies towards ethical conducts and contribution to the economical development, demonstrating respects for people, communities, societies and environment. In brief CSR establishes a connection between global trends and ecological management and sustainable development. The way CSR is conceived and implemented in Istrian county today is affected by the international practice, by the international practices of multinational companies, by nongovernmental organizations.

This article reviews a range of factors internal to the local culture of Istrian county that have accepted the way CSR has been understood.

In the process of Croatian entering the European Union, it is of utmost importance for the Istrian County’s companies to actively resume responsibility in order to improve communities in which they operate as well as global society and the overall quality of life. Companies’ reputation and their revenue are at stake if the potential consumers have a negative perception of their social responsibility.

A Brief Overview of CSR

CSR has been the subject of many disscussions from different sources. This section outlines the main conceptual viewpoints that emerge out of this profuse literature. CSR includes different types of social obligations: (a) economic obligations (be productive and economically viable), (b) legal and ethical obligations (follow the law and acknowledged values and norms), and (c) philanthropic obligations (proactively give back to society). CSR as stakeholder obligation relates to four main categories: (a) organizational (e.g., employees, customers, shareholders, suppliers), (b) community (e.g., local residents, special interest groups), (c) regulatory (e.g., municipalities, regulatory systems), and (d) media stakeholders. CSR as ethics driven. The views of CSR as either a social or a stakeholder obligation. The view of CSR as obligation fails to provide normative criteria to evaluate the extent to which actual business practices can or cannot be considered as socially responsible CSR as managerial processes. We have same definitions which CSR as managerial processes is characterized by the factors inducing businesses to commit to CSR. But some others definitions s has depicted CSR in terms of concrete organizational processes often analyzed under the label of corporate social responsiveness.

Current Economic Trends in Istrian County

Istria is the largest peninsula on the Adriatic and the westernmost county in the Republic of Croatia is located on the northeast of the Adriatic Sea. Surrounded by the sea on three sides, its northern border towards the mainland can be drawn as the line between the Bay of Muggia in the immediate vicinity of Trieste and the Bay of 

Preluka in the immediate vicinity of Rijeka.

Owing to such a favourable geographical position, almost in the heart of Europe, half way between the equator and the North Pole, Istria has always acted as a bridge connecting the Central-European continental area with the Mediterranean.

The basic facts reveal that Istria stretches over an area of 2,813 km2 and that it has 206,344 inhabitants. The average population density is of 73.4 per km2, and as much as 68 % of Istrian population lives in 10 cities with the remaining population living in 31 municipalities. Istria’s administrative centre is Pazin while its economic centre is Pula. The most important economic activities are the processing industry, tourism and trade. When reviewing its natural resources it must be stressed that Istria possesses rich water reserves and that its most important rivers are Dragonja, Mirna, Pazinčica and Boljunčica. The highest mountain in a hilly Istria is Učka and its highest peak is Vojak that is 1,396 meters high. The climate on the coast is mild Mediterranean while the hinterland has a mild continental climate. Its priceless treasure is certainly its exceptional cultural and historical heritage. Istria is today a leading region, a region that is a brand name in itself. Istria is a multi-cultural oasis that is outstanding precisely for its diversity, boasting a high level of international cooperation.

Istrian County is a particularly interesting case to explore for several reasons.

A diverse and stable economy, a developed entrepreneurial infrastructure and an industrial tradition make Istria the second most developed region in Croatia and the second exporter in the country. Istria’s potential and its excellent investment locations have been recognized by many foreign investors among which Benetton, Rockwool International, RWE, Calucem, Holcim, Cimos, Kempinski, Hempel, AGIP, Luxottica, Holding Pizzolo, Biasuzzi, Horstmann, Europagroup, Heidelberg Zement, Bouygues, Metro and Lukšić group.

Istrian economy is very diverse, and regarding its economic potentials and business relations it is certainly a very attractive area for domestic and foreign investors. More than 6200 entrepreneurs with 42 thousand enmployees realised the revenue od 24, 6 billion kunas, mostly in processing industry (34%) , trade (28%) and hotels and restaurants (10% ).

Direct foreign investments from 1993 until September 2007 was 270,9 mil USD BDP per capita was 9 126.00 euro in the year 2005.

Istria is traditionally the most visited Croatian tourist region, so that it realized one third of all arrivals and overnights in the Republic of Croatia in 2006. It has a well-developed processing industry, construction industry, trade, sea fishing and fish growing, agriculture, and transportation. According to the number of economic subjects and according to financial indicators, the leading activities are processing industry, tourism, and trade.

Photo 1. Total Revenue Structure in the Region of Istria per activity in 2006.

[pic]

*Data provided by the Croatian Chamber of Commerce: Regional Chamber of Commerce Pula

In the field of processing industry, the most developed branches are shipbuilding, production of construction material (lime, cement, brick, stone), tobacco products, furniture, electric machines and appliances, parts for the automobile industry, glass, processing metals, plastic, wood, textile, and the production of food.

Great attention has been given to the revitalisation of agriculture in the previous few years, which marked a big improvement in wine- and olive- growing, and in the system of ecologic food production.

Istrian commodity exchange is the reflection of its comparative advantage. The exports exceeded one billion dollars, well balanced with one million dollars imports. In the merchandise exchange of the Istrian Region, processing industry has the largest share-almost 90 %; and one third of it is made up by shipbuilding. 

The Istrian economy is carrying out a systematic construction of entrepreneuring infrastructure through programmes of co-financing, motivational crediting, establishment of supportive institutions, construction and equipment of business zones, promotion and education. 

Photo 2. Foreign trade of the Region of Istria

[pic]

*Data provided by the Croatian Chamber of Commerce: Regional Chamber of Commerce Pula

Istria is a region moving upwards on the scale of development cycle. Strategic geographic position and good traffic connections between Europe and the Mediterranean, preservation of natural resources, stability of regional politics and the collaboration with numerous regions abroad make Istria an attractive destination for foreign investments.

It is useful to know the increasing trend of internationalization, because the economic structure of Republic of Croatia and also is still quite different from those in the EU countries, and this influences the relationship between business and society. Besides these economic elements, the discourse and practice of CSR in a county are embedded in the understanding of the roles of business and government in society and of the role of other groups of social actors, both of which evolve over time.

Even if the Croatian governments have privatized many companies, our economy remains characterized by the significance of the public sector. Another

important feature of the Croatian economy is the role played by social economy organizations, particularly in the financial and the insurance sector. Other cultural factors, such as religion, also contribute to shaping the values and expectations of the various actors involved. In Croatia, and also in Istrian County , the influence of traditions and history may be more marked than in some other countries. There are additional barriers to talking and writing about corporate social responsibility in Republic of Croatia. These barriers are of a linguistic and philosophical nature, because the translation of the words corporate social responsibility does not have the same meaning in the Croatian tradition as they do in the relevant literature.

CRS in Istrian County

The scope of this paper is not to explore the issue into great detail but to heighten the awareness in the society especially in industry about the importance of social responsibility. In Istrian County CRS could be achieved through greater involvement of civil organizations and their partnership with the state. We believe that in our society social responsibility for the problems in the community through donations and sponsorships is not a part of developed business policy of companies.

Good implementation of CRS means that managers and companies’ heads should be more sensitive to problems which influence directly the lives of people with whom they live and work; have more understanding regarding conditions in the society that they could influence in positive way; pay attention to financial and business decisions that have implications on the society, their stakeholders and environment; be aware not only what their company produces but how they do it.

Companies still do not know what they might get in return if they would developed a transparent donation procedure. The involvement of entrepreneurs in social activities means establishing a network connection within the society and setting up new norms important for the establishment of society’s confidence. It should be an important innovation field and a stimulation to economic and social development of the Istrian County. These changes are stimulating because they contribute to the construction social responsibility of the industry and civil society in general. In the current situation when the other stakeholders are not strong enough, the non-profit sector in the first place as a provider of social services, Istrian County will have serious difficulties to come to terms with strong government influence.

In the context of this paper it is important to point out that the differences between sponsorship and donating are not clear enough. According to the law donations are bestowals with nothing in return. On the other hand sponsorships are motivated by advertising and therefore considered economic activity. True dedication to CRS brings along exceptionally positive results in quantitative and qualitative sense.

Conclusion

CRS has become an important and significant contribution to the construction of modern society. It is an important factor of mobilisation of additional resources and society’s integration. It is fair to mention that the economical situation in the County in the last few years was not favourable for the considerable promotion of CRS. The overall Croatian economy could not be considered stable yet, although the prospects for its future prosperity undoubtedly lay ahead.

In the recent process of privatisation of companies owned by the state the concept of social responsibility was neglected.

The solution of the problem lies within the framework of encouragement of providing benefits for common welfare purposes by the government.

The main role of the government should be the recognition of CRS as equal and reliable partner.

References

Berthoin Antal, A., & Sobczak, A. (2004). Beyond CSR: Organizational learning for global

responsibility. Journal of General Management, 30(2), 77-98.

Bežovan, G. i Zrinščak, S. (2001) Mogućnosti decentralizacije u socijalnoj politici i nove uloge lokalnih vlasti, Revija za socijalnu politiku 8:239–258.

Capron, M., & Gray, R. (2000). Experimenting with assessing corporate social responsibility

in France: An exploratory note on an initiative by social economy firms. European

Accounting Review, 9(1), 99-109.

Carroll, A. B. (1999). Corporate social responsibility. Evolution of a definitional construct.

Business & Society, 38(3), 268-295.

Clarkson, Max B. E. 1995. “AStakeholder Framework for Analyzing and Evaluating Corporate Social Performance.” Academy of Management Review 20 (1): 92-117.

Frooman, Jeff. 1999. “Stakeholder Influence Strategies.” Academy of Management Review 24 (2): 191-205.

Giddens, A. (1999) The Third Way – The Renewal of Social Democracy. Cambridge: Polity Press.

Hrvatska gospodarska Komora (2007). Gospodarski profil Istarske županije u 2006. godini, HGK

Narodne novine (2000) Zakon o porezu na dobit, br. 127.

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Extended Abstract

This article explores the dynamics of the discourse and practice of corporate social responsibility (CSR) in Istria County. It shows how the cultural and socioeconomic influence the way ideas are raised, the kinds of questions considered relevant, and the sorts of solutions conceived as desirable and possible. Furthermore, the article traces how expectations and practices evolve as a result of various social and economic factors within the region and, increasingly, as a result of global influences such as, the international practices of multinational companies, nongovernmental organization.

The scope of this paper is not to explore the issue into great detail but to heighten the awareness in the society especially in industry about the importance of social responsibility. In Istrian County CRS could be achieved through greater involvement of civil organizations and their partnership with the state. We believe that in our society social responsibility for the problems in the community through donations and sponsorships is not a part of developed business policy of companies.

The article closes with reflections about what can be learned from the experience with CSR and how to stimulate and apply such cross-border learning. The solution of the problem lies within the framework of encouragement of providing benefits for common welfare purposes by the government. The main role of the government should be the recognition of CRS as equal and reliable partner.

Keywords: CSR in Istria; sponsorship; donations ; social innovation; social responsibility,

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