The concept of corporate social responsibility (CSR) has been gradually spreading in Hungary since its introduction in the 1990s. Nevertheless, it still had not been fully embedded in company culture when the current economic crisis began in 2008. Despite the implementation of some new and creative practices, in general the progress of CSR in Hungary has failed to meet the expectations of many stakeholders, including most importantly those of employees.
A debate on corporate social responsibility (CSR) was organised to mark the publication of the first book to thematically review its impact on employment in Hungary (Kun A., A Multinacionális Vállalatok Szociális Felelőssége, Budapest, Ad Librm Kft, 2009). The discussion explored the development of CSR in recent years and examined how it has been affected by the current economic crisis.
Background
Similar to other former socialist countries, the concept of CSR appeared relatively recently in Hungary. Given the country’s state-socialist past, early waves of the emergence of CSR from the 1960s to the 1990s had no impact on the country’s economy, as social responsibility was predominantly ‘taken care of’ by the state. Thus, when the idea of CSR first reached Hungary, the country was opening up to foreign investment and working arduously towards the deregulation of state welfare and central redistribution, guided largely by an unrestrained neoliberal economic policy. Old practices of social responsibility were disappearing, new ones were not yet in place, and the main new economic actors – multinational corporations (MNCs) and the new business elite – at that time were uninterested in implementing a new approach to social responsibility. Consequently, many people nurtured some nostalgia towards the state-run, paternalistic approach to social responsibility and viewed transnational companies with little respect; local communities were initially reluctant to accept the new foreign companies as social actors. However, CSR started gaining importance in Hungary from the second half of the 1990s.
Despite its growing recognition, CSR has been advanced primarily by transnational and multinational companies, and less so by other stakeholders – a structural shortcoming typical of the country. The institutional background for CSR was also established relatively late. Only in 2006 did the Hungarian government – referring to the relevant EU initiatives – issue an ordinance (1025/2006 (III.23.)) on promoting employers’ social responsibility practices and the related incentive measures. In the same year, an ad hoc forum comprising various stakeholders, such as employers (including MNCs), trade unions and civil groups, was set up within the Economic and Social Council (Gazdasági és Szociális Tanács, GSZT) to prepare recommendations on the promotion of CSR in Hungary (HU0802059I). In 2007, the forum published a book of recommendations (in Hungarian) to be debated by the government. Furthermore, the forum has gained permanent status.
CSR on the eve of economic crisis
Although the concept of CSR started to take root in Hungary only recently, there have been a number of developments in recent years in this area, including:
- an increase in the number of companies affiliated to the United Nations Global Compact; the number of Communication on Progress (65Kb PDF) reports has also grown accordingly;
- an increase in the number of companies with an International Organization for Standardization (ISO) 14001 certificate – amounting to 1,100 companies in 2006 (GSZT, 2007, p. 13);
- an increase in the number of companies publishing environmental or sustainability reports – in 2006, 40 enterprises did so, meaning more audited companies than ever before;
- the establishment of a number of prizes to recognise socially responsible companies, such as the Green Frog Prize of the professional services MNC Deloitte, the Environmental Savings Prize granted by the KÖVET Association for Sustainable Economies (KÖVET Egyesület a Fenntartható Gazdálkodásért) and the Family- and Women-Friendly Workplace Prize awarded by the Ministry of Social Affairs and Labour (Szociális és Munkaügyi Minisztérium, SZMM);
- a greater awareness of labelling among producers and consumers;
- university sponsorship by major companies – including the global computer manufacturer IBM, the technology and services conglomerate General Electric (GE) and the oil, gas and petrochemicals corporation MOL – mainly to secure the supply of professionals.
Problematic aspects
Despite the promising developments, many difficulties remain. In 2006, the Hungarian accountability rating of 17% was still far behind the global average of 34% (GSZT, 2007, p. 12). As the majority of CSR initiatives have been implemented by MNCs, local programmes are often outright translations of the corporation’s CSR policies with no relevance to local needs and interests. Implementation greatly depends on whether human resources (HR) or public relations (PR) managers are in charge of CSR at the Hungarian subsidiary. Often, local CSR activities have nothing to do with the company’s core business, which does not ensure sustainability for the programme.
Another problematic area revolves around stakeholders and their involvement.
- Firstly, conscious consumer behaviour – thought by many to be a cornerstone of a ‘healthy’ CSR development – has remained restricted to consideration of the price of products, even though a 2006 study revealed that more than half of the interviewees indicated a preference for the products of socially responsible producers (Ligeti, G. et al, ‘CSR – Közép-Kelet-Európai Összehasonlításban’, in Novák, T. and Szilágyi, J., Kelet Európa Tanulmányok 2 (795Kb PDF), Budapest, VKI, 2007, pp. 81–112).
- Secondly, civil society and non-governmental organisations (NGOs) do not play an active role. In addition to a far from robust civil society, only a few NGOs move beyond merely criticising the private sector and cooperate with companies on their CSR programmes.
- Thirdly, many stakeholders call for better developed institutional settings for CSR. Taking, for instance, CSR’s internal dimensions, which include mainly labour-related company issues, the highest consultative forum is the tripartite National Interest Reconciliation Council (Országos Érdekegyeztető Tanács, OÉT); however, this council lacks the participation of both civil society and MNCs. Consequently, CSR issues are debated in the GSZT, which has fewer entitlements and less influence on governmental actions.
In addition, communication issues and the role of the media deserve attention. A study conducted in 2006 found that as many as 77% of the Hungarian enterprises surveyed did not communicate their CSR work externally, while 67% did not even communicate it internally (GKI Economic Research Co. (GKI Gazdaságkutató Zrt), Visszafogottnak tartják CSR-kommunikációjukat a vállalatok, Budapest, 2006). On the other hand, some companies turn their CSR activities into nothing more than PR actions with excessive media coverage. Limited coverage in the media about CSR contributes to a low level of awareness and only a few good practices. Broadcasters, in an attempt to avoid being fined for airing hidden advertisements – which is prohibited by the Hungarian telecommunications law – provide the time slot designated to ‘public benefit advertisements’ for companies to publicise their CSR activities. While this regulation is actually beneficial for broadcasters in that advertising generates their income, the high costs of advertising prevent the majority of small and medium-sized enterprises (SMEs) from communicating their knowledge and practices to the wider public.
CSR during the crisis
The foremost positive outcome of increased CSR awareness during the current global economic crisis has been the great number of employers trying to implement job cuts through ‘caring dismissal’ outplacement. Some companies organised job fairs or directly contacted other employers in an attempt to secure jobs for their dismissed workers, while others set up career development and job search centres to help redundant employees.
Another relatively novel practice in Hungary has been the introduction of company policies to avoid layoffs. These policies included making working and holiday time more flexible to enable the temporary suspension of production and reducing the working week from five to four days. Besides these more widespread practices, companies introduced some innovative initiatives, including that of the supermarket giant Tesco, which offered temporary Christmas jobs to unemployed family members of their workers.
On the negative side, the economic crisis brought a rearrangement in stakeholders’ importance. Previously, employers claimed that they had valued their workers more than twice as much as their shareholders, declaring that the most important assets of their company were the employees. Since the beginning of the downturn, however, layoffs have often been undertaken to secure returns for investors, demonstrating the supreme importance of shareholders’ value above other stakeholders. Furthermore, disparities arise in how employees in different countries are treated: in the home country of an MNC, employees have a better chance of avoiding downsizing or salary cuts – at the expense of workers in other countries.
The economic recession has also changed some stakeholders’ lobbying capacity. Hungarian consumers have become more price sensitive, which negatively affects CSR-related considerations. The crisis has also had a negative impact on NGOs and other civil society actors as their monetary bases have been weakened. Although trade unions have informally claimed that they sense growing confidence on the part of workers in their lobbying capacity, driven by the economic crisis, this perception is highly questionable.
Another consequence of the economic downturn on CSR has been some sort of repositioning between the internal and external dimensions of CSR. Although the former have always received more preference, externally-oriented CSR practices – entailing the company’s commitment to its environment, including its responsibility towards nature and society – had been gaining weight before the crisis. However, with the unfolding downturn, the external dimension has quickly lost ground. Moreover, in many cases the company’s commitment to local communities – demonstrated for instance by sponsoring local sports teams – decreased, highlighting that paying for sports was deemed an expendable luxury when downsizing was necessary.
Commentary
Before the economic crisis, CSR practices in Hungary had been spreading steadily and the concept had become increasingly familiar among stakeholders. Since the outbreak of the crisis, however, almost all stakeholders have had to readjust their self-assessment, capacity or direction, the state being the only exception as it continued to move towards further deregulation under the slogan of defending workplaces (HU0907029I). This implies two problems: firstly, although CSR has provided some good ideas for dealing with problems caused by the crisis, its prevalence and level of implementation is lagging behind what is expected by experts in the field. This partly stems from its unregulated development which proves in many ways insufficient in times of hardship. Secondly, the economic crisis threatens to impede the implementation of the necessary structural changes which could help to overcome the problems that make Hungarian CSR development a mixed experience.
Márk Edelényi, Institute for Political Science, Hungarian Academy of Sciences