Speech for Russian Union of Industrialists and Entrepreneurs (RSPP)

Jonathan Fanton discussed the issue of Corporate Social Responsibility in the United States and in Russia as part of his trip to the European University at St. Petersburg. Here are his remarks. 

March 18, 2012

I welcome this opportunity to learn more about the concept and practice of corporate responsibility in Russia.   Natalia has shared with me the Social Charter of the Russian Union of Industrialists and Entrepreneurs, which is an impressive document: clear, comprehensive, compelling.  I have also looked at the Reference Performance Indicators which is extremely well done.  I look forward to hearing how it is working in practice.

As you know, I have deep interest in Russia from my decade as President at the MacArthur Foundation, which has had an office here since 1992.  Over that period MacArthur has supported 150 organizations and institutions with about $120 million in grants, MacArthur’s largest financial commitment outside of the United States. We come to Russia in the spirit of partnership and respect for its people and its prominent role on the global stage.  Our early work supported cooperative research between Russian and American scientists and policy experts on disarmament.

This work contributed to the development of cooperative threat reduction programs that have done so much to make the world more secure and maintain positive momentum in the U.S. -Russian relations over the years.  MacArthur’s first decade in Russia also featured a research and writing grants competition that supported more than a thousand scholars.  And early grantmaking in the conservation field helped strengthen Russia’s network of protected areas and encouraged the growth of sustainable forestry.

But the centerpiece of our work here is a 20 year, $100 commitment to strengthening higher education and scholarly infrastructure.  MacArthur provides support to 24 state universities – from St. Petersburg State University to Tomsk State University to Far Eastern State University (in Vladivostok) – three private universities: the New Economic School, the Moscow School of Social and Economic Sciences, and, of course, the European University at St. Petersburg.  We also have supported eleven independent policy institutes, three journals and five scholarly networks.

Much of our work is carried out in partnership with the Ministry of Education and Science. The Potanin Foundation and major Russian corporations such as Alfa
Bank and RUSAL have joined MacArthur and other Western donors in support of universities in Russia.

MacArthur also supports organizations in Russia working in the field of human rights and the rule of law.  During the past twelve years, we have supported more than eighty civil society groups working on these topics – in Moscow but also in the regions, from Rostov to Perm to Tatarstan.

We are deeply committed to European University St. Petersburg, which is sponsoring my trip to Russia.  I travel to St. Petersburg tonight to give a lecture at the University.  I serve on the International Advisory Board of the University, which I have known since its founding when I was President of the New School for Social Research in New York.

I am pleased to see the creation of the Severstal Chair in Corporate Social Responsibility at the University and the plan to develop a program in corporate social responsibility and social partnerships with executive seminars for business and NGO leaders, as well as government officials.  European University St. Petersburg will quickly become a center for high quality research on the theory and practice of corporate social responsibility and philanthropy.

I am pleased to see the growth of corporate social responsibility among Russian companies.  I note the introduction to the performance indicators talks about a tool kit which “helps companies adapt and apply proven international standards and regulations of corporate responsibility and social accountability such as the United Nations, Global Compact, Global Reporting Initiative and others.”

I was glad to see the Social Charter contains references to human rights including non-discrimination, equal opportunity, freedom of speech, labor rights, as well as rights to a safe workplace, health, a clean environment and education.

The Social Charter is a good indicator that Russian businesses are taking their rightful place among the large corporations of the world in caring about how they can help improve Russian society and contribute to alleviating poverty and suffering in the developing world.

As the Social Charter makes clear the term corporate social responsibility is broad, encouraging promotion of workforce health and well-being, good environmental practices including energy efficiency, ethical procurement practices and more.  I believe corporate philanthropy is central to corporate social responsibility, and that is the topic I want to talk with you about today.

As President of MacArthur, I was open to partnerships with corporations.  In the United States we helped organize a group of foundations and corporations to promote economic and social development in 23 cities across America.  Called the National Community Development Initiative, the partnership developed affordable housing, created jobs, established community centers to provide health and education to America’s poorest neighborhoods.  Big banks, J.P. Morgan Chase, Bank of America, CITIBank, joined MacArthur, Ford, Rockefeller and other foundations.  Since inception it has made grants and program related loans worth over 600 million dollars.

And overseas MacArthur joined with international and local businesses to support higher education in places like Nigeria.  MacArthur and Shell chaired a capital campaign for the University of Port Harcourt in the Niger Delta that raised money from Shell, Schlumberger, Total Fina Elf, as well as Nigerian companies like Allstates Bank and Mobile Telecommunications of Nigeria.  At that University our partnership built an IT Center, created a Gas and Petroleum Institute, enhanced the central library and built dormitories.

I like the Port Harcourt example because it brings together international companies doing business in Nigeria, local Nigerian companies and international foundations and local individual donors.

So as Russian companies develop a more robust philanthropic program, I hope they will be open to partnerships with others, at home and abroad.  But I do believe charity begins at home and I am glad to see wealthy individuals and corporations supporting European University St. Petersburg, companies like Coca-Cola (Chair in Visual Studies), Novartis (Chair in Sociology of Public Health, Barclays (Chair in Financial Economics) and MDM Bank.  European University St. Petersburg and a few other leading private universities are offering education and research programs that meet the highest international standards and are connecting Russia to leading intellectual centers around the world.

But as one of the most powerful countries in the world, Russia, and its corporations and wealthy individuals, have a duty to help less fortunate people in the developing world.  I want to tell you the story of an organization I work with which would welcome partners from Russia.

The organization is Safe Water Network and its mission is to provide safe water to the world’s poorest people.  Consider these facts:

  • Nearly one billion people do not have access to safe, affordable water.
  • 3.6 million people die each year as a result of unclean water and poor sanitation.
  • 1.4 million of those deaths are children.

Only three years old, Safe Water Network works in India, Kenya and Ghana in 70 villages serving 250,000 people.  Unlike big water projects from international agencies like the World Bank and the United Nations which sometimes fail, Safe Water Network works with local villages to develop water purification facilities that are locally owned and managed, and cover their operating costs.  The theory is that when local communities take responsibility, the project is likely to be sustainable unlike the mega projects that breakdown when the international aid agencies leave.

The history of Safe Water Network is interesting.

It was co-founded by the actor and philanthropist, Paul Newman, in 2007.    Yes, this is the Paul Newman of Butch Cassidy and the Sundance Kid, The Road to Perdition, Cool Hand Luke and The Color of Money.  He was a friend of mine and a person I admired greatly.

Mr. Newman quietly devoted himself to advancing many social causes, and had an uncanny ability to break new ground.  The idea for Safe Water Network emerged from his association with the Committee Encouraging Corporate Philanthropy (CECP).  Mr. Newman cofounded CECP in 1999 and today, the group is a global network of CEOs dedicated to increasing the level and quality of corporate responsibility.  With over 180 members, 63 of which are in the Forbes 100, CECP inspires and challenges executives to find innovative ways to meet community needs, and to lead the way towards better alignment of their business and society’s needs.  In 2010 its members donated over $15 billion to charities, approximately 1% of pre-tax profit.

Although this $15 billion represents 40% of all reported U.S. corporate donations, it does not reflect private giving by executives through their own foundations.  The Conrad A. Hilton Foundation, for example, is a philanthropic trust, separate from Hilton Hotels.
Paul Newman set the bar high for corporate America.  His own company, Newman’s Own, quickly established itself for healthy, organic foods, from salad dressing to cookies.  But more impressive than its commercial success was his insistence that every cent of after-tax profits and royalties be given away.  To date, through the Newman’s Own Foundation, over $300 million has been donated to thousands of charities around the world.  That number continues to rise as the popularity of Newman’s Own products grows.

I remember talking with Paul over dinner one night about his impatience with the Committee to Encourage Corporate Philanthropy.  He didn’t think its members were doing enough, lots of talk but not enough action.  And here is a key point. Paul Newman was not satisfied with only corporate donations.  He felt corporate leaders should be personally involved with social problems, with making the world more just, humane and peaceful.  And he thought companies had more to give than money.  They had expertise in building infrastructure, training people, marketing good ideas, research and strategic planning.  And more, they had employees who could volunteer their time.

Paul Newman was a quiet, modest man – but he had passion, strong moral convictions, restless energy and was a gifted businessman.  He liked getting things done.  So he decided to take on the challenge of providing safe water to the poor.  He recruited fellow members of the CECP, John Whitehead of Goldman Sachs, Hank Greenberg of AIG and Teresa Heinz-Kerry, all of whom made a personal contribution to establish Safe Water Network.

The mission is not only to provide safe water directly but to pioneer a model that others could copy, indeed that governments and companies could grow to a large scale.  As I said earlier, fundamental to the model is a respect for the talents of local communities and a commitment to turn over ownership and management to village councils and local entrepreneurs once the water purification station is breaking even.

Safe Water Network has attracted major companies to give money and expertise to the project.  It is a good example of corporate social responsibility at its best.

Early partners and funders included such organizations as PepsiCo. IFC, Merck, John Hopkins University, the Tata Group and IBM.  Each is an active participant in Safe Water Network activities.

Safe Water Networks’ relationship with PepsiCo is a good case study.  PepsiCo employees are in the field, working alongside Safe Water Network experts and its local partners, to develop and test cost-effective ways to operate and maintain water stations in remote, underserved markets.  Using Safe Water Network field installations as a real world laboratory, PepsiCo engineers, operators, researchers and marketers monitor, evaluate and improve system performance, quality assurance and taste.  PepsiCo’s deep technical expertise contributes to the process of testing, refining and testing again for continual improvement.

Another aspect of the PepsiCo relationship is to contribute to the documentation of this field learning and to organize and package this expertise in innovative ways so that operators in thousands of villages around the world can learn to manage and maintain a water system properly.

At the same time, PepsiCo and Safe Water Network are making an immediate impact on people’s lives.  Not only are they training and supporting local citizens to assume complete responsibility for the management and operation of their system, they are providing safe, affordable water to nearly a quarter of a million people.

The drug maker, Merck, is another example of how a global corporation contributes both dollars and expertise to solving a difficult challenge.  Merck brings its world-class technical and marketing capabilities to understanding consumer behavior and preferences in underserved markets.  Together with Safe Water Network, they seek to change habits to improve health and hygiene practices, in areas where there are significant cultural, educational and economic hurdles.  Short and long-term studies are also being conducted to measure the impact of clean water on health and livelihoods.

IBM brings its technical know-how to Safe Water Network’s data management challenge.  Using RFID (radio frequently identification) technology, IBM technicians apply their digital expertise to rural India and Ghana to help Safe Water Network deliver timely information on key metrics like customer sales, usage rates and payment status.  This data automatically converts into P&Ls, eliminating errors and ensuring managers have the right information at the right time.

The Business Analytics Platform also provides operational systems data such as pressure, volume and capacity, which proves useful both at the local level and for managing a cluster of stations, where one skilled operator can monitor many stations at once from one location.

In each of these examples, private-sector employees are bringing critical expertise to complex challenges under difficult conditions.  But this immersion experience also provides companies like Pepsi, Merck, and IBM, valuable insights into the practical approaches required to be successful in areas lacking infrastructure and skilled labor.

So I think Safe Water Network is a good example of the new frontier in corporate social responsibility where the money, in kind donations and employee involvement does good, but also is good for the company.  I would love to see a Russian company part of the Safe Water Network and welcome your suggestions about possible candidates.

Let me end where I began, by recognizing the important role European University St. Petersburg has to play in working with you to document and define the growing field of corporate social responsibility.  And I look forward to helping make connections to United States foundations ready to work with Russian corporate philanthropy here in Russia and in places like Africa.

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