Dragan Golubović Ph.d.

Serbia’s EU Agenda Influences CSR Policies

Consider the abandoning of the use of plastic bags in Serbia as an important example of how the engagements of large companies in the domain of corporate social responsibility in the country moved from being purely philanthropic to become socially aware. Yet much more can still be done to push both large companies and SMEs towards being active in CSR

Dragan Golubović

The European Union has been very active in promoting corporate social responsibility as an important tool in improving societies. Although Serbia is not following that example closely, the EU integration process is also likely to bring more advanced polices related to corporate social responsibility, says expert on CSR Dragan Golubović Ph.D.

To what extent is Serbia’s institutional framework in the field of cross-sector partnerships and corporate social responsibility harmonised with European policies in this field?

– It is noteworthy that issues related to cross-sector partnerships (CSP) and corporate social responsibility (CSR) have steadily gained traction in the European Union. Among others, they are addressed in the EU 2020 Strategy for Smart, Sustainable and Inclusive Growth, the renewed EU Strategy on CSR 2011- 2014, and the Action Plan on Human Rights and Democracy 2015-2019. The importance of CSP and CSR has been further underscored within the framework of the EU Sustainable Development Goals. Thus, the European Commission’s sub-group on CSR has put forward a number of policy recommendations for the EU and its member states that would encourage and facilitate CSP and CSR practises. These include, among others, raising awareness and encouraging public authorities to utilise possibilities presented in the EU law for integrating environmental and social considerations into their respective procurement processes, supporting awareness and the implementation of due diligence by companies against human rights and other social risks etc.

In addition to the aforementioned soft instruments, EU Directive 2014/95 requires disclosure of non-financial information by certain large economic undertakings and groups with respect to environmental protection, social responsibility, the observance of human rights and other pertinent social issues.

The tax law doesn’t currently recognise human rights, the promotion of gender equality or European integration as charitable causes

At this juncture, Serbia does not have a comprehensive strategy with respect to CSP and CSR. However, issues related to CSR are recognised as cross-cutting issues for a number of EU accession negotiation chapters, including public procurement, environment, and social policy and employment, to name just a few. It is therefore fair to assume that policy measures pertinent to CSR will gradually be introduced as negotiations progress with the EU.

What have examples of CSR in Serbia to date shown about the extent to which companies perceive this area of their operations as an integral part of their development policies?

– It is evident that issues related to CSR have been mainstreamed into the overall business strategies of large companies operating in Serbia, regardless of their origin (domestic or foreign). This practise reflects a general recognition that CSR is not an expense, but rather an investment that plays a significant role in ensuring that a company keeps and expends its customer base. On the other hand, it is still fairly rare for an SME in Serbia to have some form of CSR strategy in place. This has to do with a number of factors, not least the lack of necessary resources and lack of capacity, as well as policy measures that would encourage and facilitate this process.

CSR often boils down to philanthropic donations. Is this still the case in our country when it comes to companies’ practises?

– The practise of CSR in Serbia has passed the point of the concept being reduced to giving donations. Rather, large companies increasingly strive to lead by example in addressing pressing social issues. The recent decision of a number of large retailers to abandon the use of plastic bags is just one example of this trend.

Dragan Golubović illustration

What could be done in terms of tax policies in order to encourage corporate donations?

– Under the tax law, a company may deduct up to five per cent of its annual gross income for charitable causes. While the general framework for corporate giving is modestly favourable, there is significant room for its improvement. Among others, the list of charitable causes in the tax law needs to be aligned with the one in the Law on Associations and the Law on Foundations and Endowments, respectively.

Currently, for example, the tax law does not recognise human rights, the promotion of gender equality or European integration as charitable causes, and thus donations for those purposes are not exempted from taxation. In addition, it is unclear whether a donation in real estate would qualify as tax exempt; whether a donation in the form of an institutional grant (a donation designated to support the institutional development of a donation recipient, rather than the implementation of a particular project) would qualify as tax exempt; what is the tax status of a carry-over donation; and to what extent a donation can be used to cover the overheads of a recipient.

The practise of CSR in Serbia has passed a point of the concept being reduced to giving donations

The more pressing issue, however, seems to be the practise of the Tax Office requiring a donor to submit to the Office material proof that a donation is spent legitimately by the recipient. This should ultimately be the responsibility of the recipient, rather than the donor. As a result of this malpractice, many donors avoid duly reporting on donations, but rather treat them in their books as other, non-deductible expenses.

One element of CSR is encouraging volunteering. What challenges do companies face in developing this important dimension of social action?

– While the law does allow companies to host volunteer activities under certain conditions, it is overly intrusive and prohibitively expensive for a host of those activities. That is largely due to the fact that the law regards volunteering as a subset of labour relations, rather than as a private, voluntary activity.

Dragan Golubović illustration

Among other things, a host of volunteer activities are required to cover the cost of work insurance for a volunteer, as well as his or her medical, social and pension contributions. As a result, rather than encouraging and facilitating volunteer activities, the law is largely recognised as a major impediment for the development of volunteering.

While the law does allow companies to host volunteer activities under certain conditions, it is overly intrusive and prohibitively expensive for a host of those activities

Investing in one’s own human resources and the development of human capital represents an important dimension in the development of companies and in the development of society. To what extent do solutions in Serbia related to scholarships favour investments?

– The current legal framework provides quite modest incentives in this respect. Under the personal income tax law, a recipient of a monthly scholarship of up to 11,741RSD (circa 100 euros) is exempt from paying personal income tax.

However, the Ministry of Finance is currently considering amendments to the law that would increase the tax exempt monetary threshold for monthly scholarships from 11,741RSD to as much as 30,000RSD. In addition, the new proposal would allow for scholarships to be paid not only monthly, but in any other time sequence, including one-off payments.