Landlocked, blockaded, and permanently under threat of attack from hostile neighbors, the Republic of Armenia faces a multitude of national security issues. These issues are further perpetuated by a myriad of social concerns relating to health, education, and poverty, and arising from a government wrought with corruption, a business environment dominated by oligarchs, and a serious emigration problem.
But all is not doom and gloom. For the most part, Armenia’s social problems have been tackled by individual- and group-run NGOs, which have done their collective utmost to serve the needs of the country and the people. Coupled with this have been the generous donations of Armenians in Armenia and across the globe who have assisted in funding NGOs in the country. Despite this generosity, however, NGOs face an uphill battle to fund the projects that will help Armenia make the transition from a developing to a developed nation.
In the absence of good government and with NGOs constantly limited by budget constraints, a more sustainable solution to some of Armenia’s social challenges is necessary.
One solution is Corporate Social Responsibility (CSR). CSR is regarded by experts as an evolution in political and social development.
After a protracted global battle ensued through much of the 20th century between the virtues of socialism and economic liberalism, by the 1990’s economic liberalism and the rule of market forces had ultimately prevailed. Public enterprises were privatized, taxes were reduced, barriers to trade were removed, and governments were no longer responsible for economic growth. Rather, the economic prosperity of a nation was dependent on markets and the entrepreneurship of its citizens. But after privatizing state assets and relinquishing responsibility of economic performance, governments also saw a reduction in their ability to cater to and fund the social needs of their citizens. This is where CSR comes in. While governments are not absolved of social responsibility, corporations as the key beneficiaries of economic liberalism now bear some responsibility for social improvement.
Broadly, CSR refers to the behavior of organizations as they relate to human rights, the environment, labor conditions, communities, consumer rights, and social policy. CSR is increasingly becoming a focus area for governments and businesses across the globe. Sponsored by the United Nations Institute for Training and Research (UNITAR), the Global Summit on Social Responsibility was held in Quito, Ecuador. The event provided an international platform to debate various social responsibility issues, contributing to the enhancement of competitiveness and the promotion of socially responsible corporations, cities, and states.
Many corporations in Armenia have been criticized for their lack of ethics, monopolization of markets, and disregard for consumer rights. Businesses avoid tax payments, provide employees with only minimum wages, and create barriers to market entry for competitors through unethical means. The 2009 OECD Anti-Corruption Network Report identified these practices as a “major obstacle to business development in Armenia.” Similarly, in 2012 the International Crisis Group reported that the influence of oligarchs in Armenia “increases a propensity for corruption, undermining economic growth and the development of effective economic institutions.”
Despite the commonality of unethical business practices, a handful of corporations in Armenia are demonstrating genuine socially responsible behaviors. Tufenkian Artisan Carpets, which operates in Armenia, refuses to hire any employee under the age of 18, utilizes environmentally friendly production processes, and pays competitive wages. The company and its diasporan owner, James Tufenkian, make significant contributions to protecting the communities in which they operate.
Operating in accordance with a set of social principles, Vivacell is another corporation making a difference to social issues in Armenia. With a commitment to ethics and human values, Vivacell supports the National Center for Oncology, the SunChild International Environmental Festival, and operates a neonatal medical program to support young mothers and families in regional Armenia. The Lebanese-born Armenian CEO of Vivacell, Ralph Yirikian, has driven the company to be a profitable and socially responsible corporation.
While many businesses in Armenia have operated unethically and with impunity, some enterprising diasporans have demonstrated that businesses can make a social difference and still turn a profit in Armenia.
CSR presents a unique opportunity for diasporans who have an interest in operating businesses in Armenia. By employing socially responsible behaviors in their Armenian business operations, business leaders can contribute to the improvement of the country’s social situation just as Tufenkian and Yirikian have successfully done.
The public and diasporans visiting Armenia also have the power to influence and shape business practices by supporting those enterprises that operate and behave in an ethical manner. Support for socially responsible corporations will lead other enterprises to operate ethically in order to remain competitive and ultimately improve the business culture in Armenia.
Varant Meguerditchian is the former executive director and president of the Armenian National Committee (ANC) of Australia. He currently works as a government relations professional in Sydney. He holds undergraduate and graduate degrees in politics and business administration, and is currently completing his second master’s degree in international relations. Meguerditchian recently presented on the topic of “The public’s ability to shape the ethical behavior of governments and organizations” at the Global Summit on Social Responsibility sponsored by the United Nations Institute for Training and Research in Ecuador.
Varant Meguerditchian
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Varant, your article is an excellent introduction to the concept of Corporate Social Responsibility in Armenia, and how companies all over the world are paying attention to the economic, environmental, social issues that contribute to the “triple bottom line.” It’s not just about making a profit, although a company does have that fiscal obligation to its shareholders-investors.
On this issue, even Harvard business professor Michael Porter argues that firms showing leadership on environmental and social concerns will have a “competitive advantage.” I’m not sure how deeply those principles have penetrated in the former Soviet Union but you cite a few strong examples.
Several local and global companies doing business in Armenia are also supporting the work of Armenia Tree Project, including Synopsys Inc, HSBC Bank Armenia, KPMG Armenia, LTX-Credence Armenia, and Mentor Graphics Development Services. Each company may have its own particular rationale for sponsoring tree planting which extend well beyond marketing, from employee engagement to fighting climate change.
When I met Synopsys VP Rich Goldman in Yerevan, he explained that it’s really an issue of “corporate citizenship,” which I find to be even more meaningful than CSR. In short, the goal is to improve the fabric of the community in which their customers and their employees live.
These are all great examples and we hope to see much more of this kind of leadership as Armenia’s economy grows and becomes more globally interconnected.