COLOMBIA'S TRADITION OF CORPORATE SOCIAL

UNCLAS BOGOTA 003135 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ECON SOCI CO SUBJECT: COLOMBIA'S TRADITION OF CORPORATE SOCIAL RESPONSIBILITY CONTINUES TO GROW ¶1. (U) SUMMARY: Colombia has a long tradition of Corporate Social Responsibility (CSR). Philanthropic foundations and industry associations have, fueled in part by absences of state presence or resources as a result of civil conflict, provided social services and built infrastructure in areas where the conflict made it difficult for the GOC to operate. Private company CSR investment has risen exponentially in recent years as companies seek to realize "win-win" benefits. Together these three forms of CSR make Colombia a regional leader in the field. As a result of this culture of activism the GOC has enacted some CSR programs into law and has created a formal mechanism to incorporate CSR into GOC development policy design. END SUMMARY Colombia's Rich CSR Traditions -------------- ¶2. (SBU) Colombia's history of CSR includes three distinct strands: philanthropic foundations with a regional emphasis on improving worker living conditions, industry associations focused on infrastructure, and corporations that view CSR as a strategic tool. Juana Oberlaender, Director of Enlaza Colombia, a consulting company that helps corporations develop CSR projects, told Econoff that modern corporate CSR differs from the efforts of foundations and associations in that it ties into specific corporate strategies and has "hard" dollar benefits to companies through increased worker productivity, public relations and lowered production costs by incorporating environmentally friendly practices into the production cycle. She thinks associations and foundations will continue to have an important role in Colombian CSR, but that corporate programs will become the dominant model. ¶3. (SBU) Irena Bello, the editor of a Colombian magazine devoted solely to CSR, called Colombia a regional CSR leader. Bello told Econoff that hard data on CSR in different countries remains elusive, but a recent study found that Colombia had 111 CSR foundations while Peru, Argentina and Chile all had less than 60 such foundations each. Bello also noted that 140 Colombian companies registered as participating members of the UN Global Compact on CSR, but Peru, Argentina and Chile respectively registered half or less this amount. Why Colombia? -------------- ¶4. (SBU) Oberlaender said Colombia's history of political instability actually strengthened CSR. She said that companies stepped into the gap to provide social services where conflict made it difficult for the government to operate. Oberlaender noted that Colombian CSR often focuses on worker-oriented areas, such as education, housing, health and food. Andean AFL-CIO representative Rhett Doumitt, a frequent critic of Colombian companies, admitted to Econoff that companies in Colombia often did more than their Andean counterparts for workers because conflict-weakened unions largely lacked the resources to create worker social safety nets. Providing Social Services -------------- ¶5. (SBU) Andres Penate, the head of CSR for Bavaria/SABMiller, one of Colombia's largest beverage companies, said that many large family-owned companies established semi-independent foundations with a regional focus (usually where the family came from) in the 1960s when new tax laws made such donations tax deductible. Penate, the former Director of the Department of Administrative Security, said conflict spurred such foundations in two ways. First, company founders with a "patron" relationship with employees used foundations to provide services in areas where the GOC had difficulty operating. Second, Penate said that wealthy families saw CSR as a form of risk insurance to create goodwill and insulate them from attacks against their companies, or themselves. ¶6. (U) Penate pointed to the Carvajal Foundation as a paradigm of a Colombian philanthropic foundation. The Carvajal family created the foundation in 1961 by donating 35 percent of the shares (currently valued at USD 200 million) of its 100 year-old multinational Carvajal company. Foundation Director Roberto Pizarro told Econoff the Foundation spends USD 10-15 million per year in the family's home department of Valle del Cauca, especially in the slums of Cali, on social programs for the poor focused on housing, health, education, and entrepreneurial development. Pizarro said the Foundation has trained over 50,000 microentrepreneurs and helped over 10,000 people own their own homes. Building Critical Infrastructure -------------- ¶7. (SBU) In one of the most prominent examples of an industry association involved in CSR, the National Association of Coffee Growers (FedeCafe) and its 565,000 coffee-growing members have directed much of their CSR focus on infrastructure. Maria del Pilar Fernandez, special advisor to FedeCafe's Director, told Econoff that FedeCafe's strong grassroots relationships in rural areas allowed it to build critical infrastructure in areas with traditionally weak GOC presence. Over an eighty-year history FedeCafe has worked on infrastructure critical to the coffee industry in a quarter of Colombia's municipalities, including building 6,000 aqueducts, 16,000 kilometers of roads and over 2,000 bridges. FedeCafe also constructed over 16,000 classrooms and 50 health clinics. In 2007 alone FedeCafe spent USD 145 million on CSR activities with most devoted to infrastructure development, quality of life, and productivity enhancement. Creating "Win-Win" Corporate Programs -------------- ¶8. (SBU) John Karakatsianis, CSR Director for the National Association of Industries (ANDI),Colombia's most powerful private sector group, told Econoff that a recent survey showed 98 percent of ANDI members had CSR programs with average contributions of 2.7 percent of sales funding programs in worker education and health with a growing emphasis on environmental protection. Karakatsianis noted that ANDI-member CSR investment more than quadrupled in the last four years, from USD 100 million in 2003 to USD 450 million in 2007. ¶9. (SBU) Andres Penate pointed to Bavaria/SABMiller's CSR as an example of the "win-win" model. Bavaria/SABMiller invests USD 10-15 million per year in CSR, the majority of which goes towards helping small Colombian farmers improve and expand the production of domestic grains suitable for beer. While this helps small farmers, Penate said it also benefits Bavaria/SABMiller which buys the grain since currency fluctuations will have less impact on the company, the company will have tighter control over its inputs, and the program will create up to 100,000 rural jobs for small farmers thus giving Bavaria/SABMiller a large group of voters on whom it could call when it needed "political goodwill." Spearheading Government-Private Sector Collaboration -------------- -------------- ¶10. (U) CSR has lead the way in developing social programs later adopted by the GOC. Karakatsianis said that in 1954 ANDI created the Family Compensation Fund of Antioquia to ensure a "living wage." ANDI and 45 Antioquian companies created the fund by matching 4 percent of workers salaries. In 1957 the GOC adopted the idea and made such compensation funds mandatory. Colombian companies now contribute over USD 500 million annually to such funds with 10 million Colombians receiving benefits. Similarly, a Carvajal Foundation program for microenterprise development evolved into a National Plan for Microenterprise Development. The GOC recently began institutionalizing the private-public CSR relationship with a national "Roundtable on Sustainability." Chaired by the office of the Vice-President, the Roundtable brings together the private sector, various government branches, academia, and labor to create a formal mechanism to incorporate CSR into GOC development policy design. BROWNFIELD