Best corporate citizens 2004: Latin America companies set the standard for corporate citizenship in the region.

Oded Grajew, president and founder of Brazilian social responsibility organization Instituto Ethos, recently proposed making Porto Alegre the world's capital for good citizenship. While perhaps premature, Brazil is, at least in Latin America, the front-runner when it comes to corporate responsibility, with 800 companies involved in social practices.

For example, Brazil's Natura, a cosmetics company, successfully transformed its approach from social-action--like making donations to charities to a culture of corporate social responsibility in its management. In this sense, responsible practices are not a separate activity but rather from part of the company's everyday operations, from production to business relationships. "The concept of corporate social responsibility widened [in Brazil] when there was an understanding that it generates impacts throughout the company's entire chain of productivity," says Rodolfo Guttilla, director of corporate affairs at Natura. The company was also the country's first to publish the results and analysis of its social and economic impact, alongside its annual financial results.

To better define what makes a company among the best corporate citizens in Latin America, LATIN TRADE polled member organizations of regional social responsibility umbrella group Forum Empresa. We asked them to name the top Latin American companies in Argentina, Brazil, Central America, Chile. Peru and Mexico, the leading countries in corporate social responsibility.

Although multinationals not based in the region were not included in our initial poll of experts, we also collected surveys from 270 executives all companies in and out of the region. The second annual LATIN TRADE Best Corporate Citizens Survey, updated from last year to adapt to corporations' continuous work in improving social practices, provided an inside look at how things are done no matter how little resources are at hand. In our poll, 51% reported revenues of less than US$50 million.

This year's LATIN TRADE Best Corporate Citizens are Latin American corporations that are not only setting standards in corporate social practices but are also teaching others how to do it. Of respondents to the survey, half have been conducting corporate social responsibility for more than seven years. Eighty-seven percent felt it was positive for their corporate image, and 58% thought it offered them a major competitive advantage.

Nevertheless, 42% think the idea is new and 20% believe it is practiced mainly by multinationals with more money to spend. More than a third believe the concept is increasingly common in companies of all sizes, while just 3% think it is becoming the standard.

Yet corporate good deeds are not new. Of the 100 largest economies of the world, 51 are corporations. Naturally, Latin America's governments long have turned to the private sector to help ameliorate social afflictions. Some Latin American corporations have long-standing internal and external social practices, including policies for their workers and for the larger community. However, during the 1990s there was a surge in social activity as business began to clearly define and understand corporate social responsibility.

Home grown. Compared to multinationals operating in the region, Latin American companies have led the way in many countries. While international corporations, such as ABM AMRO and IBM, have made significant contributions to Latin America's communities, regional companies have proven they have some lessons in corporate responsibility for their foreign counterparts.

In the mid-1970s, private non-profit insurance organization Asociacion Chilena de Seguridad (ACHS) became the first company in Chile, and perhaps all of Latin America, Io develop and implement an internal social balance program that would allow its employees to evaluate the company. ACHS, which was created to provide compensation to workers injured while on the job, realized that corporate success depended on its employees--a revolutionary idea that became the springboard for Chile's corporate social responsibility movement. "I believe the people are the company," says ACHS President and Founder Eugenio Heiremans. "They are not resources." For the past 30 years, ACHS has taught its internal social balance program to other corporations seeking to emulate its model.

Companies that have put themselves on the track towards becoming socially responsible say that external social action cannot begin until there are successful internal practices in place. Peruvian security company J&V Resguardo, for example, has approximately 2,500 employees, 17% of whom are disabled. The security company's outstanding human resource management and employee benefits have yielded a turnover rate of less than 2%. "Companies cannot try to help externally if they do not have a good internal environment," says Javier Calvo, general manager and owner of J&V Resguardo.

In some cases internal practices cart also help lead to successful external aid programs. Brazilian financial consultancy Serasa created a program to teach and train professional skills to persons with disabilities, and then hired some of them as full-time employees. Almost coincidentally, the Brazilian government later passed a labor law requiring corporations to hire disabled staff. The United Nations Volunteers sought to learn Serasa's program and implement the model in other companies. "When a company demonstrates social action, other companies and people approach you," says Elcio Anibal de Lucca, president of Serasa.

Most companies that responded to the LATIN TRADE survey took their first steps in social responsibility by focusing on the communities closest to their operations, generating not only job opportunities but educational development and economic growth. Peruvian brewer Backus & Johnston began making investments in the country in 1954, cultivating barley to produce beer in the communities in which the company operated its plants and facilities.

As the brewer grew, however, social action also grew to include major investments in education, cultural heritage and scientific investigation.

"Our main product is beer, and it reaches several different areas," says Fernando Hilbck, manager for institutional relations at Backus. "In our corporate social responsibility practices we aim to embrace all those consumers."

Brazilian supermarket chain Pao de Acucar is among Brazil's leading companies in this area, going beyond simply selling to customers and instead teaching a responsible approach to consumption while developing socially conscious policies with their suppliers. Pao de Acucar has also become a key partner in the government-led anti-hunger program Fome Zero. Increasingly, the discussion on corporate social responsibility focuses on getting companies to extend their corporate practices into the supply chain and ensure partners follow in their footsteps.

Other companies seek to protect the environment in the towns they enter. Mexico's Industrias Penoles has also been active in community development and environmental conservation since the 1960s. In 1972, the company began treating wastewater from the city of Torreon to use in its operations and later on began to reuse dust and gas emissions to decrease air pollution. Peru's Minera Yanacocha is among the country's most recognized corporations for its environmental management plan, which includes programs to prevent and mitigate damage caused by their mining activity. The miner also monitors water sources to ensure they stay clean.

Banco de Chile, meanwhile, became the main sponsor for Chile's national 27-hour telethon, lending its offices and services to help collect donations for disabled children. The telethon became a cash cow for social investment and has generated more that $94 million since the late 1980s. Banco de Chile says being a good corporate citizen creates a positive image for the company, which is very good for the Chilean bank's brand.

Partners. Latin American companies also say that participating in social action can attract other corporations and organizations to create partnerships. Instead of developing their own independent projects, companies such as AeroMexico help support larger organizations by becoming a strategic or logistical part of the program. The Mexican airline developed a socially conscious vision from the outset of its operations 15 years ago but over the past few years has begun creating partnerships to achieve its social goals.

For example, the carrier works with the Shriners Hospital to transport disabled children to both national and international hospitals for surgical procedures and treatment. The airline has alliances with more than 10 organizations, such as Fundacion Mexico Unido and Cruz Roja Mexicana, and plans to establish Fundacion AeroMexico in the near future, says Carlos Bonilla, Director of Communications for AeroMexico.

By creating partnerships with public and private organizations, some corporations, including Mexican phone giant Telefonos de Mexico (Telmex), have been able to extend social projects to new areas. "We can't do it alone," says Arturo Elias Ayub, general manager of Fundacion Telmex. "There are people that know how to do things better than us, and we have the economic capacity." Fundacion Telmex, the telephone company's social fund, spun off from 15-year-old Fundacion Carso in 1996 to create its own programs and today has approximately $900 million available for social causes.

How these alliances are formed varies from company to company and from country to country. But companies are looking to each other to find ways to improve their communities. According to the LATIN TRADE Best Corporate Citizen Survey, 67% of the companies have created some type of partnership with other corporations in order to achieve these goals, and 64% have engaged in discussions with other corporations on the social ailments of their communities.

During the 1990s, many countries saw a boom in social action among the region's companies as the goals of such programs became more clearly defined. On the other hand, Argentina, which had promoted philanthropic activity since the mid-1980s, experienced a rise in corporate practices after the economic crisis of 2001, says Fernando Bach, president of social responsibility organization Fundacion del Tucuman.

Bach says Latin American corporations have increasingly developed corporate social practices in recent years because the region is in dire need of it. "Argentina's needs have forced companies to reach another level of commitment," he says. "The crisis helped promote that." Among the companies that have stepped up their commitment are steel company Acindar, conglomerate Grupo Perez Companc and brewer Grupo Bemberg.

Emerging. More recently, Central American countries have become especially aware of the influence the private sector has over sustainable development and, in the past three years, social responsibility agencies have emerged in the region. Union de Bancos Cuscatlan International (UBCI), the largest financial group in Central America with operations in Costa Rica, El Salvador, Guatemala and Panama, is recognized, particularly in El Salvador, for establishing a strong financial sector that will lead to the country's social development. At the end of 2002, the International Finance Corporation, an arm of the World Bank, granted $40 million to UBCI to help the financial group meet these goals.

Corporate responsibility practices have undoubtedly become an important factor for business in Latin America. Every year the region's corporations take bigger steps towards creating sustainable development for their communities. And every year more companies vie for the chance to be recognized for their corporate contributions, especially as they become aware of the positive effects social activity has on their employees and on the company's public image. As social responsibility slowly becomes the standard, executives say that companies that tail to participate in social activity will fall behind.

Building A Future

Financial consultancy Serasa paved the way for Brazilian companies with job training for disabled people, which prepares them for the professional work environment. Elcio Anibal de Lucca, President of Serasa, talks about how the United Nations got involved to help promote the concept to other corporations.

How was Serasa's program revolutionary In Brazil?

When we began this program, the concept was unheard of. Brazil later established a law that required companies to hire disabled employees, so other companies began doing so in accordance with the law. When we began, it was not only to hire disabled people but also train them so they could find employment.

How did the United Nations get involved?

The United Nations Volunteers learned about our program and asked for some recommendations on how to do this. They organized an international forum and other projects on the topic and realized this was a very valuable tool to get other companies to do the same and to train people to continue doing this type of work. We already have other companies working on this, and we are training the volunteers so they can teach this program to other companies.

What percentage of Serasa's employees are disabled?

Only 5%, but we have this permanent project, which continues to work in this area. It is the project we are most content with [because] we gain know-how, and we have a free workshop every two months so other companies can learn how to do it.

Call for Help

In 1996, Mexican telephone operator Telmex established Fundacion Telmex to work in various social aspects including health, education and culture. General Manager of Fundacion Telmex Arturo Elias Ayub explains the importance of creating social alliances to achieve these goals.

How does Fundacion Telmex ensure that all of its programs receive equal attention?

There are many [programs], but they are very focused and very clear. More than 99% of the money in the foundation goes to our programs. We are foundation with US$900 million in assets. The money is not spent on administration, and the way we achieve that is by joining with different associations.

Why is it important to create these kinds of alliances?

Because we can't do it alone. There are people that know how to do things better than us. We have the economic capacity. We have a project called Equal Start in Life with the [Mexican] health department. We buy equipment ... to prevent insufficiencies a child may have due to a lack of medical resources during birth.

Is there a competitive advantage to being socially responsible?

Although that is not the intention, there is. Fundacion Telmex is not making noise [about its corporate social responsibility], but at the end of the day people realize that Mexican companies have a social responsibility with their country and people. It's payback for everything Mexicans have given us. And it's always good to know that your company is helping.

People Skills

Eugenio Heiremans is president and founder of Chilean workers" compensation insurer Asociacion Chilena de Seguridad. It is the first in the region to develop internal evaluations aimed at boosting productivity and financial growth. Today, the assocation teaches other companies how to improve their business by looking inside.

How does the internal social balance program work?

We have been conducting this program for 28 years, in which we survey the 3,800 company employees all over the country once a year to tell us their opinion with regard to the management and benefits they receive. More than 90% of our personnel complete the survey, It is a valuable tool for the company's management because it is aimed at its personnel and it creates an extraordinary internal harmony.

What must companies do to implement their own internal social balance programs?

Companies must be truly ready to efficiently take in the suggestions and aspirations of its personnel and know how to satisfy the [their] goals. Companies and their personnel have to be convinced that it is an instrument that will improve the future relationships between companies and employees.

Would you say employees are the company's best resource?

One of the mistakes modern companies make is when they talk about the management of human resources. The company itself is the people, and that is why it's a mistake to consider them as resources of the company. [When that happens] the concept of corporate social responsibility fails.

Tracking the Best

LATIN TRADE asked CEOs of the top 130 companies in Latin America in
writing to take our annual Best Coporate Citizens benchmark survey.
Also more than 100,000 readers took part online. We received 270
completed surveys.

What is the company's annual sales range in U.S. dollars?

More than $1 billion         22%
$100 million to $1 billion   19%
Less than $100 million        8%
Less than $50 million        51%

Note: Table made from pie chart.

How long has the company practiced
corporate social responsibility?

Less than 1 year        12%
Between 1 and 3 years   24%
Between 4 and 6 years   14%
More than 7 years       50%

Note: Table made from pie chart.

Are executives compensated for performance
on meeting social goals of the company?

Not at all        62%
To fair extent    12%
To some extent    19%
To large extent    7%

Note: Table made from pie chart.

Do you think coporate responsibilty
has an effect on your corporate image?

Not at all         3%
To fair extent    16%
To some extent    32%
To large extent   39%

Note: Table made from pie chart.

Does being known as socially conscious
offer a competitive advantage?

Not at all         3%
To fair extent    12%
To some extent    27%
To large extent   58%

Note: Table made from pie chart.

SOURCE: LATIN TRADE

Taking Responsibility

Alone or with partners, Latin America's companies tackle big problems

How does the company practice social responsibility?

           Corporate donations to charity   20%
                         Corporate grants   17%
                        Community service   16%
Partnership with organizations or charity   15%
                       Company foundation    9%
                                    Other    8%

Note: Table made from bar graph.

Who is directly responsible for social goals?

Chief Executive Officer   29%
     Board of directors   18%
        Middle managers   13%
   Employee-run program   11%
   Corporate foundation   11%
         Vice-president    7%
  External organization    7%
                  Other    4%

Note: Table made from bar graph.

What is the company's social focus?

  Education   36%
 Social aid   29%
Environment   16%
      Other   19%

Note: Table made from bar graph.

Does the company have any partnerships for social programs?

       Not at all   33%
 To a fair extent   24%
   To some extent   25%
To a large extent   18%

Note: Table made from bar graph.

SOURCE: LATIN TRADE