412 infrastructural projects, 910 new small businesses; at least 1,542 new jobs, average monthly profit of ₾301 per business, and an average profit increase of 25% among target families – these are only some of the results of the social responsibility program conducted by BP Georgia in villages located along the pipeline.
The business and economic agenda of the twenty-first century is saturated with the subject of corporate social responsibility – a subject of discussion at every global economic forum. The focus of these discussions is usually the question as to whom the main initiative regarding social responsibility ought to be coming from – should the businesses themselves decide independently to combine the profit-making process with social and environmental issues, or should the government force the business to undertake socially responsible steps via regulations?
The World Economic Forum’s attitude towards this issue is that corporate social responsibility can be viewed as a business’ competitive advantage. Research shows that businesses that include a social responsibility component in their business model from the beginning are more viable and grow 30% faster on average. Why is this the case? Because social responsibility – if envisioned and implemented properly –can help a business establish a positive reputation, thereby increasing trust and becoming a key factor in achieving effective growth.
Under what circumstances can a positive reputation be achieved? Clearly not when corporate social responsibility components are forced through by the government or by regulations. This reputation can better be established when businesses themselves make informed and free decisions. By businesses, we always mean the people who own and manage the enterprises in question.
BP is one of the companies that decided to include corporate social responsibility into its business model. Against this background, BP has been operating three pipelines in Georgia (Baku-Supsa, Baku-Tbilisi-Ceyhan, and the South Caucasus pipelines) for more than 20 years.
One of BP’s social responsibility programs drew Forbes Georgia’s particular attention – namely, the Local Community Development Initiative, which involves 217 villages. As BP Georgia’s Social Responsibility Manager Rusudan Medzmariashvili explains, the program has three main components.
The first component involves strengthening the community organizations that are established by villages participating in the program. Based on the training which they receive within the framework of the program, these organizations then devise projects that get selected by a special committee which excludes BP representatives. The winning project is chosen in a free competitive environment. The winning communal organization receives funding and gets to lead the project independently (albeit under supervision). One of the main provisions of the project is the community’s contribution, which can take the form of time, materials, finances, or other aspects.
“The winning community must contribute at least 30% towards the project. A community that has put its own resources into the project will be more interested in persevering with the work and trying to achieve success than if they were given all the money for free,” explains Rusudan Medzmariashvili.
BP’s own detailed statistics show that 412 infrastructural projects have been implemented as part of the Local Community Development Initiative. Over the past three years alone, the financial returns from the various infrastructural projects have exceeded ₾1.4 million.
The second component of the Local Community Development Initiative involves supporting agricultural development. It involves establishing demonstration farms where farmers receive training and have an opportunity to familiarize themselves with a new methodology or culture. Detailed statistics show that as of today, 507 demonstration plots and 28 seed and seedling farms have been established, while at least 3,421 farmers have become involved in training initiatives or consultations.
“Knowledge obtained from such training courses will be passed on by one farmer to another,” adds Ms. Medzmariashvili.
The third component of the Local Community Development Initiative involves supporting the development of small businesses. The scheme is the same as the first component (strengthening community organizations). Successful business projects are assessed by the committee, and the winner receives funding. Here too, the winner must contribute towards the success of the project through funds, essentials, or other resources.
What sets BP apart from other companies operating using a similar strategy is that it monitors each stage of the winning business’s program from the point when the grant is given out. As soon as the business reveals a weakness, it is offered additional consultation and training. Thus, BP is mitigating the main risk associated with starting a small business – namely, that it may turn out to be unviable.
Once again, statistically, 910 small businesses have been established, over 1,500 jobs have been created, and at least 146, 721 services have been performed by the businesses over the past three years. The total income of the businesses has exceeded ₾3 million, the average monthly profit amounted to ₾301 per business, and 119 of the businesses offered unique services and/or products that were otherwise unavailable in the respective village, community or region.
One of the key aims behind each of the project’s three components is to increase income among the target families. Statistics show that their average income has already increased by 25%.
“I am very happy,” says Gevond Poghosyan from the village of Upper Skhvilisi in the Municipality of Akhaltsikhe, who managed to purchase work tools and equipment through the program. The local newspaper Samkhretis Karibchewrote an article about him two years ago. Poghosyan is a technician who not only can fix technical issues, but can also invent new equipment – thus, by joining together several trailers, he could implement two operations simultaneously, while also saving on costs.
“I needed workshop tools that are vital for my business – a welding machine, cutters, a metal polisher, and so on. I had some of these tools before, but they were old and defective. Having received funding, I managed to buy everything that I needed. For the first time, I can undertake high-quality metal cutting jobs fast and easily. I have designed a potato harvester that I believe to be unique in Georgia. To this end, I contributed ₾1,300, while also receiving funds totalling ₾2,600through the program,” noted Poghosyan.
Another beneficiary of the BP Georgia program is Gia Abashidze, who resides in the village of Khajalia in the Lanchkhuti municipality and operates a beekeeping business.
“I never believed I could be successful,” recalls Mr. Abashidze. “I was afraid that my project would not win. So I was over the moon when I received the phone call telling me that I managed to obtain the grant. I can now provide my own family with natural honey, but also sell it to generate an additional annual income of ₾3,000 for myself.”
Ana Iluridze lives in the Gori Municipality in the village of Ksovrisi near the border. The BP program allowed her to open a beauty salon in her own village, which never had such a service before. Iluridze devised a business plan that emerged victoriously. Having then registered herself as an individual entrepreneur, her business received funding totalling ₾2,000. An article titled “A Little Story of a Little Salon” has already appeared in the local media. “Nobody should have the illusion that they are going to become rich through this project. However, for low-income families, it is a great help,” says Iluridze.
Supporting women entrepreneurs in target villages through the Local Community Development Program is something that BP Georgia is proud of. According to the statistics, 239 women entrepreneurs have received backing thus far. Among them is Nana Gurgenidze from the village of Martotubani in the Zestaponi municipality, who cultivates seedlings. Her story has also been told by the media by the Kutaisi-based newspaper P.S.
“I am delighted to be given the opportunity to start my own business. Devising a business plan and producing financial reports certainly was not easy, but the project helped me master those skills. I managed to win the competition, and I have now been operating the greenhouse for almost a year. It has become a source of stable income for myself and my family,” explains Gurgenidze.
Those who did not manage to win received detailed explanations of their projects’ shortcomings, so that they would be able to focus on those issues during future training and consultations, and be in a position to offer a more sophisticated and competitive business plan to the donors at a later stage.
The BP Georgia program currently has three partners – the Consultation and Training Centre, the Regional Development Association, as well as the Biological Farming Association Elkana.
“When we started the program in 2003, we were cooperating with two international organizations. However, following the development of the non-governmental sector in Georgia, we decided to replace the international companies with local ones, and this proved to be a successful step. A majority of the company’s staff members are also local,” says Rusudan Medzmariashvili.
The government of Georgia has identified the development of small and medium-sized businesses as one of its main priorities through which it intends to bring the self-employed into the formal employment field and thereby facilitate the country’s economic growth. As such, Forbes Georgia decided to conduct research into the field of supporting the development of small businesses, and spoke to one of the most active figures within this program, Eter Kvirikashvili, who acts as the program’s advisor.
Right from the beginning of the interview, it became clear that Ms. Kvirikashvili has thoroughly calculated each and every detail of the program. All her ideas are backed up with statistics and examples from other countries. She listens to questions very carefully, and then seeks to show how important the existence of this program is for Georgian villages. Sometimes she stops and asks whether her long speeches are tiresome. I disagree, and the interview proceeds dynamically.
We find out from her that both agricultural and non-agricultural business projects have been supported through grants from the project. Agricultural businesses include beekeeping, poultry, greenhouse farming, and milk products. As for the non-agricultural enterprises, the majority of them are beauty salons, mills, shops, auto repair shops and the like. “When we initiated the program, the services that I just listed were virtually non-existent in Georgian villages,” states Kvirikashvili.
It turns out that winning the trust of the local population was not easy. Initially, the locals did not believe that a for-profit company would be willing to invest the necessary amount of time and energy to ensure their well-being.
“Changing people’s attitudes in the villages has been very difficult,” says Ms Kvirikashvili. “We try to introduce new technologies and new products to the local population. Fear of innovations does exist, and there are many reasons for this. The main goal of our program is ensuring that such fear does not halt development.”
According to Kvirikashvili, the main prerequisite for achieving development is for the target communities to be willing to embrace development. “That is why we invest a lot and constantly monitor each and every detail. Our organization knows how to work with a community.”
Ms Kvirikashvili does not shy away from making ambitious statements and plans, saying that the community must get used to the idea that eventually it will have to continue operating independently, rather than constantly relying on grants. “That is precisely why we spend more on training and consultation. The company has the correct approach.”
It seems that this approach does indeed work. Two years ago, 26 families residing along the Baku-Supsa pipeline rejected state aid, which is designed to help families without income. Instead, they expressed their intent to start businesses and change their social status accordingly.
In spite of these positive examples, Kvirikashvili does not believe that the success enjoyed by the 217 villages covered by the BP Georgia program can change the weather across the country. Nevertheless, the plan designed by BP Georgia to support small businesses has become a source of inspiration for the state: during a visit by government officials to the Akhaltsikhe region for the purpose of familiarizing themselves with small businesses, it was decided that the government would initiate its own program of supporting micro and small businesses through grants of up to ₾5,000.
“We shared with them our knowledge of how to conduct an informational campaign, train and teach the participants, as well as devise, select and strengthen the project. Our interests match those of the Ministry of Economy. The main thing is to reduce the number of unsuccessful projects to a minimum,” explains Kvirikashvili. According to the current statistics, 75% of the projects funded by BP Georgia’s program are viable.
At a recent economic forum in Davos,the BP Georgia program was first praised by Georgia’s prime minister, and later by the group chief executive of BP, Bob Dudley. Such recognition came on the back of solid facts which show that since the program gathered pace, the number of non-technical risks has been reduced to a minimum.
“This is the best way to measure the brand, its value, and its reputation,” add Kvirikashvili, who has been involved in this program for 14 years. According to her, the program’s longevity further helps to obtain and strengthen trust.
The Local Community Development Initiative is part of a common social investment strategy carried out jointly by Georgia, Azerbaijan, and Turkey. A new strategy was developed towards the end of 2016. We can expect certain changes, but nothing radical – such is the promise from the management of one of BP Georgia’s most effective programs.
