Baseline Study on Corporate Social Responsibility Practices in the Western Balkans
Baseline Study on Corporate Social Responsibility Practices in the Western Balkans
Mar 22, 2016
Baseline Study on Corporate Social Responsibility Practices in the Western Balkans BASELINE STUDY ON CORPORATE SOCIAL RESPONSIBILITY PRACTICES IN THE WESTERN BALKANS 1
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Baseline Study on CorporateSocial Responsibility Practicesin the Western Balkans
Baseline Study on CorporateSocial Responsibility Practicesin the Western Balkans
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Author: Eyyub Hajiyev, MSW
The views expressed in this study reflect the author’s opinion and do not necessarily representthe position of UNDP.
Materials and analysis provided in this report are for information and guidance purposes only. The informationand views included in this study have not been endorsed by any of the stakeholders or businesses examined.
ISBN: 978-92-9504-281-0
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted,in all forms or by any means, electronic, mechanical, photocopying, recording or otherwise without priopermission.
Copyright © 2008UNDP Bratislava Regional CenterFor Europe and the Commonwealth of Independent States
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Corporate Social Responsibility (CSR) is not just a pro-gressive business strategy; it is a tool for fostering sustain-able development and higher living standards. Sustainabledevelopment is no longer only a concern of governmentsand civil society organizations; it is increasingly on theagenda of private companies. For this reason, the estab-lishment of dialogue and partnerships that bring togeth-er both public and private sector actors has becomeextremely im portant.
CSR offers a framework for managing organizationsaccording to a set of financial, environmental and socialprinciples. Incorporating responsible business strategiesinto daily operations provides companies with anopportunity to engage in innovative processes, opennew markets, raise competitiveness, reduce legal risks,improve the bottom line, save energy and improverelations with shareholders and the public.
Against this exciting background, I am pleased to sharewith you the first comprehensive baseline study of CSR in
the Western Balkans – Albania, Bosnia and Herzegovina,Kosovo, Montenegro and Serbia. The study builds upona similar mapping study conducted in the New EUMember States and candidate countries.1
The analysis presented here provides snapshots of thecurrent state of CSR in the Western Balkans, maps rele-vant CSR organizations and initiatives operating in theregion, and evaluates the implementation of CSR prac-tices. It is addressed to a wide range of actors from busi-ness leaders and government officials, to civil society andgrass-roots leaders. It offers useful and inspiring recom-mendations to encourage the development of CSR in theregion.
The report was funded by the United NationsDevelopment Programme (UNDP). It reflects the orga-nization’s commitment to, and active support of, CSR.I believe this report will stimulate debate both onnational and regional levels about CSR’s role in buildinga more sustainable and prosperous future.
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FOREWORD
1 For more information on the project “Accelerating CSR practices in the New EU Member States and candidate countries as a vehicle for harmonization, competitiveness andsocial cohesion in the EU” see www.acceleratingCSR.eu.
Jens WandelDeputy DirectorRegional Bureau for Europe and CISUNDP
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The question of how businesses can increase the goodthat they do, and minimize the adverse impacts of theiractivities, is increasingly becoming a major issue forgovernments, business organizations and civil societyorganizations (CSOs) worldwide. In the context of theglobal economy, and the interest of all countries andcompanies to participate fully in global supply chains,Corporate Social Responsibility (CSR) is understood tobe a potentially powerful tool to help give competitiveadvantage in the marketplace. Increasing numbers of:• Business leaders understand that long-term compa-
ny value is based on the capacity of business torespond to society’s changing needs and expecta-tions;
• Employees prefer to work for companies whose val-ues and mission they share, and where they canmake a contribution to society;
• Local communities want to know that businessesare being good citizens;
• Investors look for companies that understand andmanage their risks, and are entrepreneurial in identi-fying emerging business opportunities;
• Regulators want to ensure that business activitiesnot only create jobs and economic growth, but alsohelp solve pressing problems such as climate change;
• Consumers often seek products and services ofcompanies they believe are doing the ‘right thing’ interms of human rights and the environment;
• NGOs expose examples of irresponsible behaviourand campaign for greater corporate accountabilityand transparency; and
• Media organizations look for examples of best – orworst – practice to spotlight.
Against this background, the study was conducted aspart of a larger UNDP regional initiative aimed atassessing the level of CSR in Central and Eastern
Europe. The main goal of the study was to measure thelevel of CSR engagement among both the businesscommunity and non-corporate stakeholders of CSRpromotion in the Western Balkans region includingAlbania, Bosnia and Herzegovina (B&H),Kosovo/UNMIK2 (hereinafter referred to as Kosovo),Montenegro, and Serbia. The study was implementedfrom February to July 2008 with the support of nation-al teams of experts from the above countries andunder the guidance of international consultants. Thestudy included desk research on CSR-related literaturefrom the region, and surveys with CSR non-corporatestakeholders as well as members of the business com-munity.
The Baseline Study on Corporate Social ResponsibilityPractices in the Western Balkans is the first compre-hensive CSR analysis conducted across the region. Thereport presents findings in both exploratory anddescriptive format. It describes detailed analysis of CSRdevelopment and practices in the region and illustratesexisting drivers, barriers, and available resources forCSR engagement and promotion. The report also sug-gests a set of recommendations for all stakeholders ofCSR implementation based on its findings and academ-ic literature.
The study findings and recommendations should beuseful for a wide variety of stakeholders. Re pre sen -tatives of national and international business companieswith operations in the region can use them to build,implement and evaluate their CSR strategies.Governments, civil society organizations, media anddevelopment partners3 interested in CSR-related activ-ities and/or promotion in the region, can apply thefindings and recommendations of the report in devel-oping their CSR-related policies and programmes.
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EXECUTIVE SUMMARY
2 Kosovo is a UN Administered Territory as per Security Council Resolution 1244.3 Development partners include international organizations, western public and private donors and institutions.
The report presents findings in the regional contextonly. The detailed country specific analysis of the find-ings from the study is presented in five differentreports published by UNDP offices in Albania, B&H,Kosovo, Montenegro, and Serbia and can be obtainedfrom UNDP web pages in each Country Office (CO)4.
I. Major findings
Overall, CSR engagement in the reference countries isshaped by a number of region-specific factors. Theseinclude the political and economic transition process, theeffect of shrinking economies, armed conflicts and polit-ical instability, weak civil society, along with the limitedcapacity of governments in effective policy making and inimplementing necessary reforms. CSR is a relatively newconcept in the region and has only recently been sup-ported by multinational corporations and developmentpartners. Nevertheless, the rapid development of region-al economies, along with the countries’ firm intentions topursue EU integration and adopt market economy prin-ciples are among the major factors creating a favourableenvironment for CSR development.
CSR UNDERSTOOD AS PHILANTHROPY,COMMUNITY SUPPORTAND ENVIRONMENTAL PROTECTION
There is no official or academic definition given to CSRin any of the research countries. The study utilizes thefollowing European Union CSR definition which is themost commonly used in the region: “CSR is a conceptwhereby companies integrate social and environmentalconcerns in their business operations and in their inter-action with their stakeholders on a voluntary basis5.”
Although CSR engagement in the region is mainly driven bythe multinational business community and development
partners, the current understanding of CSR among compa-nies significantly differs from the EU definition. There is lim-ited understanding of CSR as a potentially powerful way ofhelping businesses better understand societal expectations,engage in dialogue and partnerships, and in so doing identi-fy business risks and opportunities. Businesses in the regionview CSR mainly as philanthropy, community support andenvironmental protection. Although previous studies indi-cated companies understood CSR mainly as philanthropy,an increasing number of companies (81 percent), influencedby the rising attention given to climate change globally, seeenvironmental concerns as the major CSR issue, however,only a very small percentage of companies are engaged inenvironment related activities. Although many businessesplace the topic at the top of their agenda, they are yet totake real action.
EARLY STAGES OF CSR ENGAGEMENT
A relatively high number of companies reported beingengaged in CSR activities at some level. However, CSRactivities usually consist of ad hoc donations to charitiesand communities, environmental projects, and invest-ments in occupational health and employee training.There are very limited reports of activities in otherareas (e.g. fair treatment of customers, good corporategovernance, stakeholder engagement, transparencyand accountability, risk management, social inclusion,socially responsible investment, etc.).
The research used the AccountAbility rating TMmethodology and rated CSR engagement of compa-nies in the Western Balkans region, along six domains:Strategy, Stakeholder Engagement, Governance,Performance Management, Public Disclosure andAssurance. According to the findings:• 19 percent of the companies in the region currently
incorporate CSR into their overall business strategy;• 12 percent involve stakeholders in company activi-
ties and decision-making processes;
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4 UNDP Albania, http://www.undp.org.al.UNDP B&H, http://www.undp.ba/.UNDP Montenegro, http://www.undp.org.me/.UNDP Kosovo, http://www.ks.undp.org/.UNDP Serbia, http://www.undp.org.rs/.
5 European Commission presented Green Paper in 2001 as the main policy document to start debate about CSR. The paper also defined EU definition of CSR.http://ec.europa.eu/employment_social/soc-dial/csr/greenpaper.htm.
• 22 percent have governance and management sys-tems that integrate CSR into business processes;
• 23 percent have good reporting behaviour6; and• 4 percent utilize independent experts’ services to
assure CSR-compliance levels.
The numbers correspond to those of previousresearch from the region7 which indicated relativelyhigher levels of strategy and governance and lower lev-els of assurance practices. Conversely, companies in theWestern Balkans scored relatively higher with regardsto reporting on CSR performance and much lowerwith regards to stakeholder engagement.
Multinational corporations are leaders in terms of CSRin the region. They apply practices and experiencegained from their international operations. Small- andmedium-sized enterprises (SMEs) are typically‘bystanders’ of CSR activities. State-owned companiesfall in between national-private and multinational com-panies with regard to their engagement in sociallyresponsible activities.
The findings are consistent with early stages in the con-tinuum of CSR engagement. Companies from theWestern Balkans should be acknowledged for theirefforts in a particularly difficult context, and encour-aged to go further in embedding the CSR concept intotheir strategies and operations.
A WEAK ENABLING ENVIRONMENT FOR CSR
The policy environment where businesses operatedoes not actively encourage CSR engagement to anadequate level. Unlike an increasing number of EUmember states, none of the countries included in thisstudy has established a national CSR agenda with clear-ly defined objectives for incorporating CSR values inbusiness practices. While governments have adopted awide range of laws and regulations that relate to differ-ent aspects of CSR, mainly as a precondition to EUaccession, mechanisms to implement and enforce thislegislation are often weak or absent. By and large, gov-
ernments lack the capacity or information needed toprovide financial and/or non financial incentives forCSR engagement and to assist in creating a sociallyresponsible business climate. In addition, CSR may notbe prioritized by governments over other pressingissues in post-conflict, transition economies, such ascompleting privatizations, reducing unemployment andrural poverty, and ensuring political stability. Althoughthere are many civil society organizations in the region,few are actively engaged in promoting CSR. As a lega-cy of the former regime the general public, consumersand communities themselves, are often not empow-ered to demand greater business responsibility andhold business accountable. In short, businesses com-monly operate in an environment where they do notfeel that ‘someone cares’ whether they are account-able. Finally, the full potential of academia and media topromote CSR in the region is yet to be realized.
SOME BARRIERS TO CSRBUT MANY DRIVERS AS WELL
There are a number of internal constraints associatedwith companies’ own capacities. Overall companiesreport lack of CSR knowledge and lack of technicalcapacity to implement CSR-related activities along withinsufficient financial resources as the major barriers totheir involvement in CSR activities. On the other hand,Building company reputation, being able to hire skilledemployees and expanding boundaries of current mar-ket are listed as the main drivers for businesses toengage in CSR activities.
There are a number of important non-corporateactors working on CSR promotion in the region.Develop ment partners are considered the most activeand important in this process. The EU and govern-ments of other developed countries have significantinfluence in shaping and reforming the public policiesand programmes in the region. Under EU encourage-ment, many governments have adopted laws and reg-ulations in different areas that relate to CSR.Implemented adequately, this progressive legislation
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6 Refers to structured/standardized information on CSR and related policies and performance in the public domain.7 Baseline Study on CSR Practices in the New EU Member States and Candidate Countries; Bulgaria, Croatia, Hungary, Lithuania, FYROM, Poland, Slovakia, and Turkey.
can create a favourable environment for CSR develop-ment. In addition, the governments of many EU coun-tries fund specific projects and programmes on CSRpromotion in the region. Orga nizations, such asInternational Finance Corporation (IFC), InternationalLabour Orga nization (ILO), Orga nization of Securityand Cooperation in Europe (OSCE), UNDP, UnitedNations Industrial and Development Orga nization(UNIDO), InWent, and USAID (United States Agencyfor International Deve lopment) implement pro-grammes that fall under the CSR agenda, and con-tribute to building business and government capacity indifferent CSR-related issues (e.g. CSR knowledge andpromotion, labour standards, sustainable development,or environmental protection etc.).
II. Summary of main recommendations
Based on the findings of the study and existing litera-ture on CSR best practices, a set of recommendationsare proposed for each major stakeholder group – busi-nesses, governmental and public agencies, and othernon-corporate organizations – as to how CSR might bebetter promoted and implemented in the region.
BUSINESS:IT IS RECOMMENDED THAT BUSINESSES –• Pursue their efforts to embed CSR in their strate-
gies and operations by developing a CSR strategythat identifies the risks and opportunities of bet-ter responding to changing societal needs andexpectations, and holding someone at the highestlevel, accountable for its successful implementa-tion. It is also important to focus efforts on pub-lic reporting and assuring progress towards strat-egy objectives.
• Actively engage in dialogue with civil society andgovernment to better understand and meet theirexpectations, and to progressively incorporate inter-nationally accepted CSR standards, in order toenhance their competitiveness and sustained value.
• Support business associations, think-tanks, and pro-fessional organizations which promote understand-ing of CSR and provide advisory and research serv-
ices. By collectively investing in such organizations,businesses can reduce costs of in-house CSR work,and develop high national standards. Such organiza-tions could also provide information on internation-al best practice and help the monitoring of nationalperformance.
• Actively involve NGOs in their CSR-related pro-grammes and gradually establish partnerships withrelevant NGOs, with the view to improving CSRperformance in the stakeholder engagement andpublic reporting domains.
GOVERNMENTS:IT IS RECOMMENDED THAT GOVERNMENTS –• Designate a national state body responsible for the
coordination of the promotion and development ofCSR practices. To ensure wide national influence,the selected body might come under the directauthority of a relevant Ministry.
• Launch a national multi-stakeholder dialogue toidentify country-specific CSR objectives aimed atthe creation in the medium term, of a comprehen-sive national CSR strategy that should be closelylinked to any existing country’s sustainable develop-ment strategy.
• Put processes in place to raise awareness of andenforce legislation relevant to CSR. Ensure also thatnational legislation and public sector practices sup-port CSR. Through measures such as public procure-ment policies, governments can ensure that publicmonies encourage production of more environ-mentally friendly products and services, and supportemployment and social inclusion of vulnerablegroups.
• Provide incentives to the business sector to encour-age progressive extension of corporate engage-ment in CSR activities. Such incentives could includetax benefits, financial and non financial recognition,and awards for implementation of CSR good prac-tices.
• Promote awareness-raising on CSR and knowledge-sharing among CSR stakeholders. This could bedone through supporting CSR research, inclusion ofCSR in the academic curriculum, hosting and facili-tating conferences, educational workshops, training,and highlighting existing CSR practices.
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OTHER NON-CORPORATE ACTORS:IT IS RECOMMENDED THAT –• More NGOs efforts should be invested in commu-
nicating the business case for CSR that helpsdemonstrate concrete gains from CSR involvement.The media should also be encouraged to air debateson the topic.
• CSOs should try to engage in more dialogues, com-mon projects and initiatives with businesses on dif-ferent social, environmental issues including CSR.Development partners and governments shouldfacilitate and support such partnerships.
• CSO and development partners should worktowards making international standards and expert-ise available to businesses.
• Development partners with CSOs could play a valu-able role in developing the capacity of governmentto take a leadership role and implement reforms andincentives related to CSR.
• Universities and higher education institutions incor-porate business ethics and CSR in their educationalcurricula and ensure that their graduates areequipped with world-class knowledge of CSR so asto be able to compete in the regional and global jobmarket.
• Development partners work with NGOs to buildcivil society’s (including the media’s) capacity as awatch-dog to identify, evaluate and report on cor-porate CSR performance.
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The preparation of this report could not have beenachieved without the support and hard work of a largenumber of individuals. The author of the report andUNDP Bratislava Regional Centre Project Team wouldlike to thank to the National Expert Teams from theregion for their dedication and contribution to theresearch process. The report was made possible throughthe efforts and ongoing assistance of the UNDP focalpoints – Marina Kaneti and Paul Cohn (Albania), VanjaJankovic (Bosnia and Herzegovina), Lindita Daija(Kosovo/UNMIK), Ivan Boskovic (Montenegro) andJelena Manic (Serbia). Smooth progress of the regionalproject and coordination of all teams was ensured andprovided by Marina Kaneti – Regional Project Manager.
Our sincere gratitude extends to Paul Hohnen for hiscomprehensive review of the draft and his valuableobservations. We would also like to note the involve-ment of MHC International in the initial stages of theproject. Our appreciation further goes to David Keysfor editing the report. Finally, we wish to thank the fol-lowing persons for providing valuable comments: EriolaCela, Elda Dakli, Lindita Daija, Luan Dalipi, MarijaIgnjatovic, Marina Kaneti, Levent Koro, SusanneMilcher, Maya Nyagolova, Zuzana Polackova, LenkaSurotchak, Moises Venancio and Danica ViznerovaTheir feedback and suggestions were instrumental forthe finalization of the report.
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ACKNOWLEDGEMENTS
Author of the Publication
Eyyub Hajiyev,Research and Evaluation Consultant, MSW
UNDP – BratislavaRegional Centre Project Team
Pascale Bonzom, Private Sector Engagement Policy SpecialistMichaela Lednova, Research Assistant
AA1000 AccountAbility 1000 StandardB&H Bosnia and HerzegovinaBCIF Balkan Community Initiatives FundBRC UNDP Bratislava Regional CentreCRNVO The Centre for Development of Non-
Governmental OrganizationsCSO Civil Society OrganizationCSR Corporate Social ResponsibilityCEE Central and Eastern EuropeCSPC Civil Society Promotion CentreDFID UK Department for International
DevelopmentEAR European Agency for ReconstructionEBRD European Bank for Reconstruction and
DevelopmentECSRSE Establishing Corporate Social
Responsibility in South-eastern EuropeInitiative
EMAS Eco-Management Auditing SystemEU European UnionFYROM Former Yugoslav Republic of MacedoniaFOSS Fund for an Open Society in SerbiaHACCP Hazard Analysis and Critical Control
PointsG100 Fortune Global 100G50 Fortune Global 50GC United Nations Global CompactGDP Gross Domestic ProductGRI Global Reporting InitiativeIDRA Albanian Institute for Development
Research and Alternatives
IFC International Finance CorporationILO International Labour OrganizationInWEnt Capacity Building International,
GermanyIPCC International Panel on Climate ChangeIRC International Rescue CommitteeISO International Organization for
StandardizationMBA Montenegro Business AllianceNGO Non-Governmental OrganizationNCRI National Corporate Responsibility IndexNET National Expert TeamOHSAS Occupational Health and Safety
StandardOSCE Organization of Security and
Cooperation in EuropeOECD Organization for Economic Cooperation
and DevelopmentSA8000 Social Accountability 8000 StandardSME Small- and Medium-Sized EnterpriseUSAID United States Agency for International
DevelopmentUN United NationsUNDP United Nations Development
ProgrammeUNICEF United Nations International Children’s
Emergency FundUNIDO United Nations Industrial and
Development OrganizationUNMIK United Nations Mission in Kosovo
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ABBREVIATIONS
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INTRODUCTION.........................................................................................15
METHODOLOGY.......................................................................................17I. Goal and Objectives ........................................................................17II. CSR Definition ......................................................................................17III. National Expert Teams (NET) .............................................18IV. Limitations .............................................................................................18
1. REGIONAL BACKGROUND ...................................................20I. Socio-Political and Economic Overview .....................20II. CSR Overview ......................................................................................21III. Why do we need CSR
in the Western Balkans?...........................................................21
2. NON-CORPORATE STAKEHOLDERSOF CSR PROMOTION .................................................................23I. Introduction ............................................................................................23II. Governments .......................................................................................24III. Development partners ..............................................................28IV. Academia...............................................................................................29V. Civil Society and Non-profit sector..............................32VI. The Media............................................................................................34VII. Trade Unions....................................................................................35VIII. Conclusion..........................................................................................35
3. CORPORATE ENGAGEMENT IN CSR..........................37I. Overall CSR Engagement and Understanding ......37
a. Level of engagement ..........................................................37b. CSR Understanding...............................................................41
II. Barriers & drivers ..............................................................................42a) Barriers .............................................................................................42
b) Drivers ..............................................................................................43
III. Accountability Rating...................................................................45
4. SUMMARY OF FINDINGS.........................................................52I. Business Corporations ...................................................................52II. Non-corporate Stakeholders ................................................53
5. RECOMMENDATIONS ................................................................55I. Businesses...................................................................................................55II. Governments........................................................................................56III. Other non-corporate actors ................................................57
6. ANNEXES ..................................................................................................59Annex I. National Expert Teams .............................................59Annex II. Methodology and Sample Description....60
I. Desk Research.............................................................................60II. Surveys ..............................................................................................60III. Interviews ......................................................................................62IV. Analysis ...........................................................................................62
Annex III. Country-Specific Overviews .............................64Albania ....................................................................................................64Bosnia and Herzegovina.........................................................65Kosovo....................................................................................................66Montenegro ......................................................................................67Serbia........................................................................................................68
Annex IV. Company Scoring AccountabilityRating TM..........................................................................70
Annex V. Analysis of Companies with EachAccountability Rating TM Domain...........72
Annex VI. CSR Leadersin the Western Balkans........................................84
Annex VII. Selected Reference .................................................86
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TABLE OF CONTENTS
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Increasingly, CSR is regarded as a key driver of compet-itive business advantage and sustainable economicgrowth. The European Commission has long recognizedthe potential positive contribution that the Europeaneconomy can gain by engaging in CSR activities. Since itsGreen Paper on “Promoting a European Framework forCorporate Social Responsibility” in 2001, the EU hasissued a communication recognizing the importance ofCSR engagement in the sustainable growth of Europeaneconomies and extensively promotes CSR engagementamong all layers of European business8. Individual EUmember states have also been active in exploring CSR.Many have developed national CSR strategies, the mostrecent example being Denmark. Others, such as the UK,have introduced legislation requiring companies toreport on relevant social and environmental aspects oftheir operations. Since 2008, Sweden has requiredstate-owned companies to report on the sustainabilityaspects of their operations. Within the European busi-ness community, it is now commonplace for major list-ed companies to have a specific CSR strategy and toreport annually on their CSR performance. CSR is alsobeing actively developed in many new EU members andcandidate countries. Some countries (e.g. Lithuania)have already adopted a national programme/strategyon CSR promotion and others (e.g. Poland, Slovakia)have launched multi-stakeholder dialogues aimed atdeveloping such a strategy9.
EU member states have also been active outsideEurope in promoting CSR at the international level. In2007 and 2008, the ‘G8 Group’ of industrializednations (which includes Britain, France, Germany, and
Italy, together with Canada, Japan, Russia and theUnited States) underlined their support for CSR, specif-ically calling on the business community worldwide toadhere to recognized international standards. In thecontext of sustainable development, the world’s gov-ernments agreed at the 2002 UN World Summit onSustainable De ve lopment on the need to ‘enhancecorporate environ men tal and social responsibility andaccountability’. Governments noted that this wouldinclude actions at all levels to ‘encourage industry toimprove social and environmental performancethrough voluntary initiatives, including environmentalmanagement systems, codes of conduct, certificationand public reporting on environmental and socialissues’10. Most recently, the International Organizationfor Standardisation (ISO) has launched negotiations onthe first ever International Standard on SocialResponsibility. When completed, this Standard (to beknown as ISO 26000) will provide detailed guidance onwhat it means to be a ‘socially res ponsible’ organiza-tion, and set new levels of expectations.
As in many other transition countries in the region, thehistory of CSR in the Western Balkan region is compar-atively recent. As all countries in the Balkans are aimingtowards EU accession, governments have been keen toalign their public policies with EU standards. The firstCSR-related initiatives – in the sense defined by the EUdefinition – were launched in the countries reviewed,in the middle of the current decade by developmentpartners and some multinational corporations. Mostoften, however, those programmes concentrated onspecific CSR issues or segments of society/business and
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INTRODUCTION
8 2006 Commission Communication ‘Implementing the Partnership for Growth and Jobs: Making Europe a Pole of Excellence on Corporate Social Responsibility’. See also: 2006European Parliament ‘Report on corporate social responsibility: a new partnership’.
9 Conference Report: Accelerating Corporate Social Responsibility (CSR) Practices in the new EU Member States and Candidate Countries as a Vehicle for Harmonization,Competitiveness, and Social Cohesion in the EU - International Conference “Public Policies On Corporate Social Responsibility (CSR) In Eastern And Central Europe” 9 -10September 2008, Vilnius, Lithuania.
10 Report of the World Summit on Sustainable Development (2002), World Summit on Sustainable Development, Johannesburg, South Africa, 26 August – 4 September 2002,Plan of Implementation, Paragraph 18, http://daccessdds.un.org/doc/UNDOC/GEN/N02/636/93/PDF/N0263693.pdf?Open Element.
were not able to create wide debate on the CSR agen-da or to generate large-scale changes. The need for acomprehensive research project that would investigateCSR development in the region, illustrate the overall sit-uation in detail, set regional benchmarks and open theway for policy consultations, has been discussed amongexperts for several years. The aim of this Baseline Studyon Corporate Social Responsibility Practices in theWestern Balkans project was to close the knowledgegap among all CSR stakeholders with regards to CSRdevelopment.
The present study analyses the current CSR develop-ment situation – CSR understanding, actors, drivers,available resources, current policies etc. – and investi-gates gaps and barriers to CSR engagement in order tofacilitate region-wide discussions, consultations andactions. The findings of this research can be widely uti-lized as a guide by businesses, governments and othernon-corporate stakeholders, in assessing their currentCSR programmes and policies and in designing newCSR-related initiatives.
The study was funded by the United NationsDevelopment Program (UNDP) Bratislava RegionalCentre (BRC) and covered the Western Balkan region,including Albania, Bosnia and Herzegovina, Kosovo,Montenegro, and Serbia. In coordination with BRC andthe Regional Project Manager based in Albania, theUNDP Country Offices in the respective countriesrecruited National Teams of experts which wereresponsible for the study implementation. The expertswere trained in using a common research methodolo-gy and conducted the study (desk research and fieldsurveys) between February and June 2008, under theguidance of international experts.
The study included three major components: (i) Deskresearch, (ii) Field surveys for private sector companies,and (iii) Field surveys for non-corporate stakeholders.Field surveys were conducted with 180 companies and70 non-corporate actors. This report presents a criticalanalysis of the information collected from the abovesources. In addition, internationally accepted
Accountability RatingTM11 standards were used inassessing the level of companies’ engagement in CSRpractices.
• Section I. of the report discusses the regionalsocio-economic background and rationale forCSR;
• Section II. gives detailed analysis of non-corpo-rate actors of CSR promotion in the region, theirrole, and existing projects and programmes;
• Section III. analyses the current situation of com-pany engagement in CSR activities. The sectiongives a statistical display of the current situation,discusses the patterns with regards to differentCSR areas, business understanding of the CSRconcept, incentives and barriers for companyengagement and demonstrates company ratingson six AccountAbiltyTM domains – Strategy,Stakeholder Engagement, Governance,Performance management, Public Disclosure andAssurance;
• Section IV. summarizes the main findings of thereport, and
• Section V. provides comprehensive recommen-dations for Businesses, Governments and otherNon-Corporate Actors on the design of theirCSR activities and policies.
The author and research team hope this report willcreate broad policy debates on CSR development inthe region and will result in significant positive changes.
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11 http://www.accountabilityrating.com.
The Western Balkans CSR Baseline Study was conduct-ed between February and July 2008 by national expertteams from the region. The research included:
a) Comprehensive desk research, conducted in themonths of February and March by National ExpertTeams (NETs) using the standardized questionnaireprepared by international experts. The deskresearch covered literature review of previous CSRresearch and other relevant documentation nation-ally and in the region; identified key business andnon-business actors engaged in CSR implementa-tion and promotion; identified regulations and lawswhich facilitate CSR promotion and implementa-tion; and explored best CSR practices in the region.
b) Semi structured interviews with non-corporateactors13 promoting CSR, conducted during April –June; and
c) Semi structured interviews with business organi-zations, conducted during April – June.
I. Goal and Objectives
The main goal of the study was to measure the level ofCSR practices and development in the WesternBalkans. The study objectives included:
1. Define CSR boundaries given the WesternBalkans social and economic conditions;
2. Identify actors/entities promoting CSR at countrylevel;
3. Assess the level of engagement in CSR ofactors/entities;
4. Assess the level of dialogue between differentactors promoting CSR;
5. Identify the level of foreign/domestic businessengagement in CSR implementation at countrylevel and collect examples of good practices;
6. Identify capacity gaps/constraints of CSR pro-moters and business entities to engage in CSRactivities;
7. Formulate recommendations and suggest specif-ic activities based on the findings of the survey;and
8. Provide a basis for Central and EasternEurope–wide comparison of CSR practices byaligning study findings with those of a sisterUNDP project – “Accelerating CSR practices inthe new EU member states and candidate coun-tries as a vehicle for harmonization, competitive-ness, and social cohesion in the EU”(www.acceleratingCSR.eu), whose Baseline Studyon CSR Practices in New EU Member States andCandidate Countries was completed in 200714.
II. CSR Definition
Globally, there is a significant body of literature provid-ing definitions of CSR. However, until now, there hasbeen no official or academic definition of CSR in thesur veyed countries15. In consultation with the nationalteams, the study chose to utilize the EU definition ofCSR as: “A concept whereby companies integrate socialand environmental concerns in their business opera-
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METHODOLOGY12
12 Please review Annex 2 for additional information on the research methodology and detailed description of the survey samples.13 As it will be further explained below, non-corporate actors are defined as: government representatives, civil society and non profit organizations, higher education institutions,
and development partners.14 A similar CSR study has already been conducted in the region in 2007. The study covered eight countries Bulgaria, Croatia, Hungary, Lithuania, FYROM, Poland, Slovakia, and
Turkey. The study final report is available at http://ec.europa.eu/employment_social/soc-dial/csr/pdf/undpconference_26062007_brochure.pdf.15 As it will be further described in Annex III. – Country Specific Overviews, in almost all countries, businesses and other civil society organizations engaged in CSR are using trans-
lations of CSR in local languages. However, these translations are sporadic and do not represent one accepted definition. There is no officially accepted definition given to CSRby any of the governments in the 4 countries.
tions and in their interaction with their stakeholders ona voluntary basis.” The logic behind this was that: i) thedefinition emphasizes the essentially voluntary charac-ter of CSR; ii) all countries included in the study arepotential EU candidate countries, and thus it is impor-tant to relate CSR in its EU formulation; and iii) theUNDP sister project’s baseline study completed in2007 in new EU member states and candidate coun-tries took similar definition, and it was important tokeep consistency with previous research in the region.
III. National Expert Teams (NETs)
Data collection was carried out by teams of nationalexperts from each country under the guidance ofinternational consulting experts. UNDP CountryOffices were responsible for recruiting the NETs ineach country. Previous experience in conducting CSRwork and implementing national scale research projectswas taken as the main criterion in selecting NET repre-sentatives. The detailed description of NETs is given inAnnex I. NETs were further trained by the internation-al experts on implementing desk research, selectingsamples, conducting interviews, and writing countryspecific reports. NETs’ responsibilities included:
– conducting comprehensive desk research in eachcountry;
– participating in training on surveying techniques– selecting the sample of companies and non-cor-
porate actors;– translating interview questions into local lan-
guages;– sampling and selecting respondents;– organizing interviews and entering the data into a
database; and– conducting national-level analysis and writing
country specific research reports.
IV. Limitations
There were several limitations to the study that needto be taken into consideration:
• The most important limitation was related tosample size. Due to resource constraints the
number of companies selected in the sample wasrelatively small which led to a larger potentialmargin of error in percentages reported. It is rec-ommended that UNDP and other organizationsconducting such studies in the future invest suffi-cient resources to enable a larger sample size,with a smaller margin of error.
• Sample population. It was not possible in allresearch countries to obtain a government reg-istry of companies along with their contact infor-mation. This meant that NETs had to utilize alter-native company databases from which to drawthe sample and obtain company contact informa-tion. These directories were more likely toinclude larger and well-known companies thanother businesses. As a result, companies that hadgiven more attention to branding and participa-tion in different networking activities had morelikelihood of being included in the sample;
• Participation in the surveys was voluntary.Companies that did not have a clear CSR under-standing were more likely to refuse to participatein the survey. As was noted by NETs, being‘blamed’ for not doing good or accepting lack ofknowledge and skills in certain issues were consid-ered failure and sometimes offensive for manycompanies in the region. We acknowledge thatour sample might slightly over represent thosecompanies that had some understanding of CSR.
• Self assessment. All survey percentages given inthe report are based on self assessment by thecompanies. NETs did not employ alternativesources of information to confirm or reject(except in the case of the AccountabilityRatingTM grading) the statements made byrespondents. Therefore, percentages should beaccepted as the opinion of the respondentsrather than describing the actual situation of theparticular company.
• The original survey questionnaires were translat-ed into local languages before being presented tocompanies. Taking into account that CSR is a newterminology in all the countries, translation mighthave affected the meaning of some questions. Inorder to avoid these types of problems, theresearch team simplified the survey questions tothe extent possible to avoid translation errors.
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During interviews, NETs were available to explainthe questions further if a respondent experi-enced difficulty in understanding them.Moreover, the answers to all questions from dif-ferent countries were later cross tabulated,cleaned and scrutinized. Companies were re-interviewed if their answers were contradictory.
For more information on methodology, please seeAnnex II.
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This section provides analysis of the socio-political andeconomic situation and the context for CSR develop-ment in the region.
I. Socio-Politicaland Economic Overview
All the study nations have experienced many years ofsocialist economic systems followed by political andeconomic transition. These broad socio-economicchanges resulted in economic downturns, hyper infla-tion, increase of poverty, high unemployment rates anddeterioration of living standards and welfare.Moreover, these countries’ abilities to restructureeconomies while maintaining high socio-economic indi-cators were weakened by the disintegration of pre-
transition forms of inter-governmental cooperation.Specifically, Yugoslav successor states were particularlyhard hit by military conflicts and economic sanctions bythe United Nations which lasted for nearly a decade.Currently, it is the EU’s commitment to integratingthese countries which represents a significant incentivein their efforts towards democratic governance andmarket reforms. Since 2000, a series of Stabilisationand Association Agreements between the countries inthe region and the EU have provided for extensivetrade liberalization and significant assistance in differentareas (transport, customs, education, media etc), includ-ing sub-regional cooperation in Southeast Europe.
As poverty and the level of economic developmentusually have considerable impact on overall businesspractices in a country, reviewing socio-economic indi-cators would be the first step towards understandingthe regional picture (Figure 1).
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1. REGIONAL BACKGROUND
16 Transparency International, Corruption Perceptions Index 2007, http://www.transparency.org/policy _research/surveys_indices/cpi/2007.
Country Albania B&H Kosovo Montenegro Serbia
GDP (billions) $10.319 $14.78 $4,675 $2.974 $ 41.7 US
GDP increase 6% 6% 4.4% 7.0% 7.5%
GDP per capita $3,353 $3,712 $2,226 $4,385 $5,595
Transparency index16 (2007) 2.9 (105th among 179)
3.3(84th among 179) – 3.3
(84th among 179)3.4
(79th among 179)
Total population 3.166 million 3.982 million 2.1 million 678,177 7.5 million
Population below thepoverty line 19% 18% 37% (2003) 7% (2007) 6.5%
Life expectancy female 80.71 years 82.19 years 67-71 (2003) 76.71 78.09
Life expectancy male 75.12 years 74.74 years 63-67 (2003) 72.24 72.7
Time required to start abusiness 39 days 54 days – 47 days –
Source: International Monetary Fund, World Economic Outlook Database, April 2008
Figure 1. Regional socio-economic comparison (2007)
As demonstrated in Figure 1, in comparison to others inthe region, Kosovo falls behind in almost all economicand social indicators. Kosovo has the lowest GDP percapita and highest level of poverty. Despite recent eco-nomic improvements, Kosovo’s economic growth in2007 was 4.4 percent – the lowest in the region. Amongthe five nations, Serbia enjoys the highest economicdevelopment, GDP per capita and the lowest level ofpoverty. Albania and B&H also have significantly highpoverty levels in comparison with Serbia andMontenegro. Another important indicator is the trans-parency and corruption index developed by Trans -parency International, where Albania falls far behind,(there is no data for Kosovo). Albania is rated as 105th
place among 170 countries in the world based on thelevel of transparency perception in the country.
II. CSR Overview
During the socialist period, some aspects of CSR, particu-larly in the area of social protection and benefits toemployees, were present through state-led programmes.Being socially responsible to employees, donating moneyto local communities, complying with laws and regulations,were all part of the state-mandated culture. Presently,however, the modern internationally accepted EU notionof corporate engagement and CSR is still a new conceptin the region. As all the nations have undertaken variousinitiatives leading towards EU integration, they are alsoseeking to adopt EU values and standards in governingboth the business and public sector. One of the recentpolicies that the EU is strongly promoting among membercountries is to make businesses more accountable to theirstakeholders and engage in socially and environmentallyresponsible activities. The adoption of CSR standards andpractices is, therefore, viewed as an important part of thepolicy preparation for European Union integration.
Against this background, international organizations,governments and bilateral donors from Western coun-
tries, and multinational corporations were the first tointroduce CSR in the region. The following initiativesare among the main ones implemented in the regionaimed at developing CSR in the regional context17:
1. The United Nations Global Compact;2. This UNDP-sponsored study – “Baseline Study on
Corporate Social Responsibility Practices in theWestern Balkans”;
3. The UNIDO regional programme called “De -velopment of Corporate Social Responsibility inCentral and Eastern Europe” (CEE),
4. The Establishing Corporate Social Responsibilityin South-eastern Europe” (ECSRE) project initiat-ed and supported by the German FederalMinistry for Economic Cooperation andDevelopment and implemented by InWent; and
5. The Southern Europe International Standardsand Technical Regulations project initiated byInternational Finance Corporation AdvisoryServices18.
III. Why do we need CSRin the Western Balkans?
Every country is concerned about obtaining competi-tive advantage in the world economy and achievingsustainable development. As globalization advances,social, cultural and economic borders between coun-tries fade and national economies and businessesencounter international competition. Along with manyopportunities, globalization can bring challenges. Wheneconomies of less developed countries compete glob-ally they risk becoming less competitive against moretechnologically and financially equipped and experi-enced multinational businesses. From this perspective,CSR – incorporating social and environmental concernsin core business operations – can be a critical tool forobtaining competitive business advantage and sustain-able growth19. In contrast, a lack of CSR expertise
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17 The list contains programmes that have regional focus. There are several country specific initiatives and programmes in the region that will be described in Section II. andAnnex II.
18 The programmemes are described in details in Section II.19 The European Union has officially recognized environmental and social responsibility as core factor towards long-term sustainable economic growth in June 2001 in “Sustainable
Development Strategy for Europe” agreed at the Göteborg European Council.
among businesses can segregate the economy of acountry from the global supply chain and reduce itssustainability. Consumers in the global market increas-ingly seek products and services of companies theybelieve are doing the ‘right thing’ in terms of humanrights and the environment. Investors look for compa-nies that understand and manage their risks, and pur-sue innovative strategies in identifying emerging busi-ness opportunities. Employees prefer to work for com-panies whose values they share, and where they canmake a contribution to society. For Western Balkancountries, adhering to CSR principles among thedomestic business community is a necessary steptowards increased competitiveness and better integra-tion in the European context.
CSR engagement might also become a strong tool forregional cooperation and integration. Economic inter-ests can facilitate social, political, cultural integration inthe region. Socially and environmentally responsivebusinesses will attract better skilled employees and awide segment of consumers and eventually becomemore successful, which will result in crossing theboundaries of local markets and integrating withregional economies.
This research process also demonstrated the high levelcollaborative spirit of country representatives partici-pating in the implementation of this project which ledus to believe wide scale regional CSR engagementmight become excellent common ground for regionalintegration and cooperation.
Country specific overviews including existing CSR prac-tices in those countries can be found in Annex III.
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I. Introduction
The study explored initiatives by major non-corporateplayers in promotion of CSR in the region. A sample ofmajor non-corporate representatives of CSR promo-tion in the region was selected and interviewed. A totalof 76 actors were interviewed representing:
• Business associations;• Trade unions;• Local government / municipalities;• National government / regulators;• Non-governmental organizations;• Media;• Education: higher (universities, colleges); and• Development partners.
The sample was selected based on stakeholder typeand stakeholders’ contribution in promoting CSR in thecountry.
Figure 2 displays the ranking of key CSR promoters acrossthe region as seen by non-corporate stakeholders20. Some9.61 percent of the latter reported that internationalorganizations and businesses themselves are the key pro-moters of CSR practices in the region. In contrast, it wasstated that national governments (47 percent) and CSOs,such as environmental groups (45 percent), consumerprotection groups (33 percent) and trade unions, are notvery active in promoting CSR. This finding is aligned withthe desk research results and literature from the region, asdescribed in Section 1 and Annex 3, which indicate thatdevelopment partners and multinational corporations arethe main drivers of CSR in region21.
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2. NON-CORPORATE STAKEHOLDERSOF CSR PROMOTION
20 Survey only asked non corporate actors to identify key CSR players. Business respondents were not asked the same question.21 The previous CSR baseline study that covered 8 countries (Bulgaria, Croatia, Hungary, Lithuania, FYROM, Poland, Slovakia, and Turkey) identified businesses themselves, support-
ed by international organizations, as the key actors of CSR promotion.
International organizations 61%Businesses 61%
Media 53%Business organizations 50%
NGOs 47%Government 47%
Envrionmentalists 45%Consumer protection groups 33%
Trade Unions 32%
Who are the key players that are promoting CSR in your country? (N=76)
Figure 2. Actors’ perception on key CSR promoters
II. Governments
The role of governments in promoting CSR practices inthe region varies. However, there are three importantaspects characterizing overall government involvementin CSR-related activities.
(I) High expectations from business and civil socie-ty. In the socialist era, governments controlledbusiness activities and provided all social services.The belief persists among the general public andbusiness community that governments shouldtake a leadership role in ensuring social welfare,such as caring about communities, ensuring well-being of the poor etc. Consequently, for manybusinesses, minimum compliance with laws andregulations and providing wages for employeesare the only social responsibilities22 they believethey have.
(II) Weak capacity of governments to promote CSR.Governments do not have solid experienceeither in promoting good CSR practices and cre-ating a CSR culture or in providing incentives forcompanies to engage in CSR activities. There isno clear CSR strategy or programme implement-ed by governments in any country that was stud-ied.
(III) Different priorities currently perceived and pur-sued by governments. Governments of theregion are grappling with various issues that they
need to prioritize. Completing the privatizationprocess, fighting unemployment and rural pover-ty as well as ensuring the competitiveness of keysectors of the economy are higher on theiragendas than CSR.
As CSR literature demonstrates (Figure 3), govern-ment’s role in promoting CSR can be classified in fourstages23.
(I) Mandating – governments set up minimum stan-dards and regulations in certain sectors for busi-nesses to follow;
(II) Facilitating – governments create incentives forcompanies to engage in CSR activities;
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What would you say that CSR in your country is primarily about? (N=14)
Environmental Preservation 93%Meeting International Standards 71%
Increasing profitability 43%Solving local social problems 36%
Philanthropy-charitible giving 29%Combating corruption 29%
Figure 4. Governments perception of CSR
Figure 3. Government role in promoting CSR
Adapted: World Bank. 2006. CSR implementation Guide
hard
soft
Mandating
Facilitating
Partnering
Endorsing
22 The similar findings was reported from previous study in the region, CSR Practices in New EU Member States and Candidate Countries, completed in 2007.23 World Bank. 2006. CSR implementation Guide Non-legislative options for the Polish Government.
(III) Partnering – governments implement partnershipprojects, agendas, and policies with businesses; and
(IV) Endorsing – governments profile or supportcertain successful CSR activities and initiatives tothe wider business community.
The experience of many developed countries suggeststhat in order to engage businesses in socially responsi-ble practices, government should first start setting rulesand standards (mandating) in different fields and indus-tries to ensure that businesses meet certain basicrequirements in their operations. At the same time,governments should extend their engagement withbusiness, including by partnering and facilitation,encouraging them to go beyond mandatory require-ments. By facilitating and partnering with business tobecome socially and environmentally responsible, gov-ernments enable the businesses to invest moreresources and efforts in local communities, which pro-motes sustainable human development. In doing so, theburden of government responsibility for the welfare ofdifferent layers of society can be reduced.
As revealed by the survey, government representativestend to view CSR more as ‘meeting international stan-dards’ than as ‘solving local problems’, transparencyand/or philanthropy (Figure 4). There is no nationalprogramme, law or regulation in any of the study coun-tries directly aimed at promoting CSR principles.However, overall, governments in the region have donemost work on the ‘Mandating’ stage of CSR promo-tion. All research nations have set their long-term strat-egy on the goal of European Union accession. As aresult, they have adopted a number of reforms, lawsand regulations aligned with EU standards (Figure 5)and relevant to CSR. Nevertheless, they still do not usetheir full mandating potential, as processes, capacitiesand resources for communicating and enforcing thelaws and regulations are not in place24.
The governments show a low level of activity in rela-tion to the other stages of CSR promotion (facilitating,partnering, and endorsing). There is no single ministry
or designated government body responsible for CSRimplementation. Instead, different government bodiesdeal with various CSR-related activities.
As demonstrated in Figure 2, only 47 percent of the non-corporate actors consider the government as ‘important’or ‘somewhat important’ in promoting CSR. The numberis even lower (37 percent) when responses from govern-ment representatives themselves are excluded from thesample. Although companies and civil society organiza-tions expect more government support, governmentsusually do not have sufficient capacity and expertise ormay have other priorities.
Business corporations’ and non-corporate stakehold-ers’ concern over the lack of a pronounced govern-ment role in CSR promotion is supported by the qual-itative survey responses. Of the fourteen central gov-ernment institutions interviewed, only 4 were able togive concrete examples of what they are doing to sup-port the business community to follow the CSR stan-dards:
Can you cite any examples of what you doto promote CSR with businesses,government agencies, or CSOs? – “…promoting the application of CSR especial-
ly in the environmental aspect.”– “Consulting with the community and stake-
holders, public debates.”– “Cooperation with business groups on the
preparation of new laws, like discussion heldon the law on health safety at work and com-plaints from mining workers.”
– “Institutional networks for support of privatesector development; Credit lines with betterconditions.”
Similarly, national government institutions are not verysuccessful in describing the best CSR practices thatthey have observed.
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24 It is interesting to report that during the national presentation of this Baseline Study results in Albania on June 23rd, 2008, participating business representatives were surprised that,compared to most countries in the region, Albania has a very progressive legislation dealing with various aspects of CSR. According to the participants, most of these relevant laws arenot implemented at a satisfactory level; consequently, businesses also do not find the necessary government support and encouragement to engage in CSR activities.
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Albania Bosnia & Herzegovina Kosovo Montenegro Serbia
Transparency & Accountability• Law on the Protection of
Competition”• Law on the Prevention of
Money Laundering and Financingof Terrorism’
• Law on Accounting and FinancialStatements
• Law “On the Prevention of theConflict of Interests in the exer-cise of Public Functions
• Law “On Public Procurement”• Law “On the Financing of
Political Parties• Law “On Ethical rules in Public
Administration
Human Rights & con-sumer/employee protection • The Labour Code of the
Albanian Republic • Law “On Stimulation of
Employment” • Law “On the Social Assistance”, • Law “On the Status of Paraplegic
and Tetraplegic Invalids”• Law “On Social and Health
Insurance in the Republic ofAlbania”
• Law “On the Inspection ofLabour and the State Labour Inspectorate
• Law on Consumer Protection • Law on Food and Food Safety • Law “On the Production,
Collection, Treatment andTrading of Milk and Sub-prod-ucts”
Environmental protection • Law “On the Protection of
Environment” • Law “On the Environmental
Management of Inert Waste” • Law “On Elimination of Waste”. • Law “On the Protection of Air
from Pollution” • Law “On the Environmental
Treatment of Polluted Water”• Law “On the Estimation of
Environmental Impact” • CoM Decision of Year 2007,
“On the Approval of the Inter-sectoral Strategy ofEnvironment”
• Law “On the Protection ofAgricultural Land”
• Law “On Energy Efficiency”
Transparency &Accountability• Criminal Law of
B&H• Law on Conflict of
Interest• Law on Free Access
to Information ofpublic interest inB&H
• Law on PublicProcurements
• Law on CompetitionProtection in B&H
• Law on Accountancyand auditing in B&H
Human Rights & con-sumer/employee pro-tection • The Labour Law of
the Federation B&H;The Labour Law ofRepublika Srpska
• The GeneralCollectiveAgreement for theterritory of theFederation B&H; TheGeneral CollectiveAgreement for theterritory of RS
• Law on Council ofEmployees of theFederation B&H;
• Law on ProfessionalRehabilitation andEmployment ofDisabled Persons inRS;
• Employer’s GeneralNormative Act oflegal nature relatedto labour
Environmental pro-tection • Law on
EnvironmentalProtection
• Law on AirProtection,
• Law on WaterProtection,
• Law on WasteManagement
Transparency &Accountability• Law on Public
Procurement inKosovo
• Law on PublicFinancialManagement andAccountability
• Anti corruption • Law on competi-
tion • Law on copyright
and related rights • Law on foreign
investment • Law on Internal
Audit • Patent Law • Law on
Trademarks
Human Rights &consumer/ employee protec-tion • Law on Consumer
Protection • Occupational
Safety, Health andthe WorkingEnvironment
• Kosovo HealthLaw
• The Anti-Discrimination Law
• Law on TheProtection andPromotion of theRights ofCommunities andtheir Members inRepublic ofKosovo
Environmental pro-tection • Environmental
Protection Law(2002/8)
• Law on Protectionof Plants Varieties(2007/02-L98)
• Law on SpatialPlanning (2003/14)
• Law on AirProtection(2004/30)
Transparency &Accountability• Law on money
laundry preven-tion
• Law on theConflict ofInterests
• Law onAccounting andAuditing
• Law on businessorganizations
• Resolution onfight against cor-ruption andorganized crime
Human Rights &consumer/employee protec-tion • Labour Law• Law on health
care• Law on workplace
safety• Law for con-
sumer protection• Law on human
rights and free-dom
• Law on strike• Law on pension
and health insur-ance
• Charter onhuman andminority rights
• Law on social andchild care
Environmentalprotection • Law on environ-
ment• Law on nature
protection• Law on waste
management• Law on estima-
tion of the impacton the environ-ment
• Law on energy
Transparency &Accountability• Criminal Law• Law on Conflict
of Interest• Law on Free
Access toInformation ofPublic Interest
• Law on FinancingPolitical Parties
• Law on PublicProcurements
• Law onCompetitionProtection
• Law onAccountancy
Human Rights &con-sumer/employeeprotection • Labour Law • Law on
ProfessionalRehabilitation andEmployment ofPersons withDisabilities
• Law on LabourSafety and Health
Environmentalprotection • Law on
EnvironmentalProtection
• Law on StrategicEstimation ofInfluence onEnvironment
• Law onEstimation ofInfluence onEnvironment
• Law on IntegratedSuppression andPollution Control
Figure 5. Existing laws and legislation in the region related to CSR25
25 The list of legislations and laws is an overview of the situation and is not exhaustive.
Can you cite any examples that you consid-er „best practices“ of CSR, either by govern-ment agencies, CSOs/NGOs, or businesses? – “ business donations for the reconstruction
of local schools, kindergartens, etc; expansionof green areas in institutions.”
– “Environmental protection, saving energy.”– “NGO activities on environmental protec-
tion.”– “Provided grants on behalf of increase of
competitiveness, in cooperation with theInvestment Promotion Agency.”
Despite these shortcomings, there are some indicationsof greater government engagement in CSR promotionin countries of the region.
In Montenegro, the Directorate for Development ofSmall and Medium-Sized Enterprises under the Ministryof Economic Development is one of the leading govern-ment agencies that work on CSR promotion. TheDirectorate partners with an international initiative enti-tled Establishing Corporate Social Res ponsibility in South-eastern Europe (ECSRSE) financed by the German gov-ernment26. In 2007, in partnership with ECSRSE, theDirectorate awarded the “Best CSR Company of 2007”award to a business company that was selected based onits CSR merit. The government body also works withbusinesses to raise CSR awareness. In addition, theAgency for Environmental Protection in Montenegro isresponsible for controlling activities of pollution-emittingcompanies and the Anti-Corruption Initiative Agencyunder the Ministry of Finance works towards fightingcorruption and increasing transparency in business.
As desk research results revealed, and as the BaselineStudy on Corporate Social Responsibility Practices inAlbania (2008) stated: “…although the legislation andstructures that address business activity issues (such aslabour code, business-environment relations, etc), are inplace, at national government level there is no strate-gy/programme/legislation directly addressing CSR devel-opment in the country. However, to some extent gov-
ernments promote CSR by giving priority to companiesthat apply CSR in public procurement procedures.” – Atcentral government level there is a National Strategy forDevelopment and Integration, implemented by theMinistry of Integration. This document covers CSR issuessuch as environment protection, transparency and cor-ruption, improvement of the business environment, con-sumer protection, etc. The Cross-sectional Strategy forEnvironment, for example, implemented by the Ministryof Environment, considers creating a Code of GoodPractices in different industries and the agricultural sectorby the year 2008, and the implementation of mandatoryenvironmental standards for all public procurement con-tracts by 2010. Although the strategy covers differentareas pertaining to CSR, the document does not incorpo-rate CSR as a concept.
Denmark CSR Strategy. As part of the contin-uous efforts to support business to engage inCSR activities, the Danish government adoptedthe Action Plan For Corporate SocialResponsibility in May 2008. The main purposeof the action plan was to give businesses the“optimum framework within which to conducttheir social responsibility work” and help Danishbusinesses harvest more benefits from being atthe global front line of Corporate SocialResponsibility. The action plan considered morethan 30 initiatives falling in four key categories:(i) Propagating business-driven social responsibil-ity, (ii) Promoting businesses’ social responsibilitythrough Government activities, (iii) Corporatesector’s climate responsibility, and (iv) Marketing}Denmark for responsible growth.http://www.csrinfo.org/images/publikacje/denmark_csr_plan_2008.pdf
Bosnia and Herzegovina provided some other exam-ples of national government involvement. While there isnot currently a body responsible for CSR or a specificgovernment programme, focused on CSR promotionand development, the Ministry of Foreign Trade andEconomic Relations has demonstrated active interest in
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26 ECSRSE was launched in six Balkan countries including Montenegro, Albania, Bosnia & Herzegovina, Croatia, Serbia and FYROM. The project aims at increasing CSR practices inthe region by involving different stakeholders.
leading CSR activities in the country. The Ministry hasappointed a responsible contact person to representB&H in a Regional CSR Centre27.
Kosovo has no government bodies directly responsiblefor CSR promotion, no government sustainable devel-opment strategy and no programme that embracesCSR. However, there are many internationally support-ed programmes aimed at building the capacity of thepublic sector in Kosovo. For example, the Support forEconomic Growth and Institutional Reform Projectimplemented by Kosovo’s Ministry of Economy andFinance28, Hulla and Co Human Dynamics29 and PKF30
and funded by the European Agency forReconstruction (EAR)31 aimed at improving public sec-tor capacity to engage in (i) developing the private sec-tor, (ii) creating support services for businesses, (ii) sup-porting an enabling environment for businesses, and(iv) improving the workforce.
Although the Serbian government does not have agovernment body responsible for CSR, the NationalSustainable Development Strategy Paper, supportedby the EU and implemented under the supervision ofthe Deputy Prime Minister, considers CSR to be a partof the government’s strategy. The Paper considersbusiness engagement in CSR and environmental pro-tection in particular, as one of the main drivers for asustainable future of the country. Furthermore, theSerbian Poverty Reduction Strategy Paper Office, incooperation with the Serbian Investment and ExportPromotion Agency, has created a database of the bestsocially responsible practices in the country. The initia-tive aims to promote CSR practices among the busi-ness community. The Institution of EnvironmentalInspectors has done significant work in controllingcompanies’ adherence to environmental norms. In2007, several Serbian companies paid fines for pollut-ing rivers. A state-owned petrochemical company paidthe largest fine for continuously polluting the air andwas ordered to discontinue operations for severalmonths.
In conclusion, although governments investigated in thisstudy have no specific CSR programmes, laws and/orregulations and there are no designated governmentalbodies overseeing or coordinating CSR activities, lawsand regulations supporting different aspects of CSR arein place. If communicated, implemented and enforced,these laws and regulations could create a favourableenvironment for businesses to pursue CSR activities infuture. What is missing now is governments adequatecapacity to do so.
III. Development partners
Development partners are considered the main CSRdrivers in the region (Figure 2 above). Their involve-ment in CSR includes national level programmes toeducate the public sector and business community inCSR, providing grants for non-profit organizations deal-ing with different CSR issues, as well as advocacy andpressure on governments to adopt laws and regula-tions related to CSR.
The EU has significant influence in the region. Theresearch countries, in seeking EU accession, will have toharmonize their legislation with the EU legal frame-work including in the areas of social policy, environ-mental protection, and procurement which will posi-tively influence CSR development. Although the EU hasno programme or project directly promoting CSR inthe Western Balkans, and, CSR, as such, is not part ofthe negotiation process for EU membership, many EUmember countries fund CSR-related programmes.
As research demonstrates, UNDP is an important play-er in promoting CSR, implementing several regionalprogrammes which play a major role in promoting theCSR agenda in the research countries. UNDP is also thefacilitator of the UN Global Compact networks in theregion countries. This is one of the few internationalCSR initiatives that is widely taken up by the business
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27 B&H CSR Baseline study National Report, 2008; The Regional CSR Network is promoted by UNIDO and covers B&H, Montenegro and Serbia among research countries.28 http://www.mfe-ks.org.29 http://www.humandynamics.org.30 http://www.pkf.co.uk.31 http://www.ear.eu.int/kosovo/kosovo.htm.
community in the region. The UNDP Private SectorStrategy adopted in 2007 has articulated CSR as one ofthe five priority areas that will continue to be the focusof UNDP efforts over the next few years.
Another regional CSR programme has been supportedby the leading German-based international organiza-tion InWent32 in cooperation with IlTIS33 and a numberof other local partners since 2007. The programme isfunded by the German Federal Ministry for EconomicCooperation and Development and aims at (i) develop-ing CSR awareness, (ii) activating CSR key players andcreating commitment, (iii) encouraging businesses toengage in CSR, (iv) initiating and supporting joint proj-ects among NGOs and businesses, and (v) promotingexisting CSR best practices. The programme is beingimplemented in Albania, B&H, FYROM, Montenegroand Serbia.
UNIDO is implementing a programme called “Deve -lopment of Corporate Social Responsibility in Centraland Eastern Europe (CEE)” covering Serbia, andBosnia and Herzegovina. The aim of the programmeis (i) to disseminate the concept of CSR and imple-mentation practices throughout CEE and (ii) to forgea regional network of public and private partner insti-tutions that will support SMEs to adopt CSR prac-tices34. In 2007, UNIDO prepared an issue paper thatassessed the level of CSR development in Bosnia andHerzegovina, Bulgaria, Romania and Serbia35. UNIDO isalso keen to create a Regional CSR Network inCentral, South and Eastern Europe focused onenhancing competitiveness and market access forSMEs through continuous improvement of the busi-ness and social environment.36
The International Finance Corporation (IFC) AdvisoryServices has recently launched a regional programmecalled “Southern Europe International Standards andTechnical Regulations” supported by the NorwegianMinistry of Foreign Affairs. The programme provides a
range of technical services and assists companies fromAlbania, Bosnia and Herzegovina, FYROM, and Serbiato increase their awareness of international standardsand technical regulations37.
International Labour Organization (ILO) implementsseveral programmes and projects in the region onissues pertaining to CSR such as revising the nationallabour legislations, fighting child labour and human traf-ficking, advocating transparency, equal access to quali-ty services, etc.
USAID does not have explicit CSR promotion pro-grammes in the Western Balkans. It has, however, anoffice in each country and supplies grants for a numberof CSOs in implementing numerous projects and pro-grammes that fall under the CSR agenda. USAID prior-ity areas include building democracy and economicsecurity, fuelling economic growth and building a goodinvestment climate.
There are also other institutions such as PohlConsulting and Associates (Germany), HumanDynamics (Austria), OSCE, EAR, EBRD, The World Bank,DFID implementing a range of programmes and proj-ects related to CSR at national and regional levels.
IV. Academia
As the experience of other countries demonstrates,the academic community has the potential to play aninstrumental role in promoting CSR across differentdisciplines. Academic institutions are the cradle ofcapacity building, windows to the wider world of CSRand culture-specific research. Mainstreaming corporateresponsibility into academic and vocational studies cur-ricula is of central importance, as they are contributorsto the formation of future entrepreneurs, businessleaders, managers and employees.
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32 http://www.inwent.org/.33 www.iltis.de.34 http://www.unido.org/fileadmin/media/images/resized/Private_Sector_CSR/csr_Development_of_Corporate_Social_Responsibility_in_CEE.pdf.35 UNIDO. 2007. On the state of corporate social responsibility (CSR) in Central and Eastern Europe (CEE). Special focus: Bosnia and Herzegovina, Bulgaria, Romania and Serbia.36 http://www.unido.org/index.php?id=5650.37 http://www.ifc.org/ifcext/pepse.nsf/Content/ISTR_Home.
Academia’s role in promoting CSR can vary:• Higher education institutions can promote CSR;
preparing CSR qualified graduates by offeringCSR-related courses;
• It can get involved in partnership programmesand projects with public, private and civil sectorsaiming to promote the CSR agenda throughcountry/culture specific research initiatives, CSRpublications, policy formulations etc.; and
• Academia may also offer a number of profession-al CSR-related courses for business and publicauthority representatives.
There are a number of educational institutions whichprovide curricula related to CSR across the WesternBalkans. In some countries academia is actively engagedin CSR development.
Academic instruction on CSR in Albania is in a veryearly stage of development. In 2005, the AlbanianInstitute for Research and Development Alternatives(IDRA) conducted research showing that students ineconomic departments at public universities are notfamiliar with CSR terminology and lack understandingof responsible business practices. In the spring of 2008,though, the subject of Corporate Governance wasintroduced by the Economic Department at TiranaUniversity; the course integrates some aspects of CSRin its outline. The same university also offers classes on
Environmental Engineering and Business Ethics. TheInstitute of Training for the Public Administration hasrecently started providing business ethics trainingcourses.
In Bosnia and Herzegovina, the Economic Faculty ofthe University of Sarajevo has incorporated CSR teach-ing in its curriculum. The university is also engaged inpromoting CSR among the general public and business-es and offers a Masters degree in Environment andIndustrial Ecology.
Kosovo has experienced a recent increase in the num-ber of private higher education institutions. However,the American University of Kosovo is the only universi-ty offering classes related to CSR.
Teaching CSR classes is not part of the education sys-tem in Montenegro and there is no evidence of uni-versities teaching subjects related to CSR.
In Serbia, there are a number of classes and degrees avail-able at private universities that have direct linkage to CSR.The Faculties of Law38 and Organization Science39 at theUniversity of Belgrade, for example, offer Business Ethicsclasses. Business Ethics is also taught at three differentfaculties (Faculty of Business40, Faculty of Informatics andManagement41, and Faculty of Tourism and HospitalityManagement42) at the Singidunum University in Belgrade
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What would you say that CSR in your country is primarily about? (N=8)
Figure 6. Academia perception of CSR
Meeting international standards 100%Solving local social problems 75%
Increasing profitability 63%Philanthropy-charitible giving 63%Envrionmental preservation 50%
Combating corruption 50%
38 http://www.ius.bg.ac.yu.39 http://www.fon.bg.ac.yu/.40 http://www.pfb.singidunum.ac.yu.41 http://www.fim.singidunum.ac.yu.42 www.fthm.singidunum.ac.yu.
as well as at Megatrend University43 (Faculty of Business),University of Academy of Economics (Law andManagement Faculties), and Braca Karic University44
(Faculty of Management, Faculty of Trade and Banking).There are also classes on Environmental Protection at theBelgrade University, Novi Sad University45 andSingidunum University. In addition to academic institu-tions, CSR classes are available for managers and employ-ees at many companies. In March 2008, the MBCCompany46 started providing introductory seminars onCSR for managers. The Centre for Monitoring andEvaluation47, in cooperation with the Serbian Chamber ofCommerce48, offers free CSR seminars for representa-tives of the business community.
Overall, academia views CSR differently from govern-ment representatives (Figure 6). CSR is primarily viewed
as an initiative to reach international standards, solve localproblems, and increase profitability. Only half of the aca-demic institutions think environmental preservation andtransparency are the primary CSR values in the region.
In conclusion, although no academic institution in theregion offers a CSR degree, there are many classes onbusiness ethics and environmental protection offered byvarious universities throughout the Balkans. Compared tothe rest of the region, universities in Serbia have doneconsiderable work in incorporating business ethics andenvironmental protection into their education process.Preparing professionals knowledgeable about CSR is oneof the contributing factors for increasing competitivenessof the economies of the region in the future and, as such,particular attention should be paid to further main-streaming CSR concepts in education curricula.
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CSR Related Degrees and Courses in the Region49
Academia Course/Degree
AlbaniaTirana UniversityTirana UniversityThe Institute of Training for the Public Administration
Corporate Governance course Environmental Engineering and Business Ethics degreeBusiness Ethics course
Bosnia &Herzegovina
University of Sarajevo – Faculty of Economics CSR teaching (Marketing and Strategic Management course)Environment and Industrial Ecology degree
Kosovo American University of Kosovo Business Ethics course
Montenegro - -
Serbia
University of Belgrade – Faculty of Law University of Belgrade – Faculty of Org. Science
Singidunum University – Faculty of BusinessSingidunum University – Faculty of Informatics Mnt.Singidunum University – Faculty of Tourism &Hospitality
Megatrend University – Faculty of BusinessUniversity of Academy of Economics – Faculty of Law University of Academy of Economics – Faculty of Mnt. Braca Karic University – Faculty of ManagementBraca Karic University – Faculty of Trade and BankingNovi Sad University
Business Ethics courseBusiness Ethics courseEnvironmental protection course
Business Ethics courseBusiness Ethics courseBusiness Ethics courseEnvironmental protection course
Business Ethics courseBusiness Ethics courseBusiness Ethics courseBusiness Ethics courseBusiness Ethics courseEnvironmental Protection course
43 http://www.megatrend-edu.net/institucije.php.44 http://www.uni-bk.ac.yu.45 http://www.ns.ac.yu.46 http://www.mcb.co.yu.47 http://www.csr-online.info.48 http://www.pks.co.yu.49 The list of CSR related classes and degrees is an overview of the situation and is not exhaustive.
V. Civil Society and theNon-profit Sector
CSOs are traditionally important in bringing new ideasand innovations into society. The experience of othercountries has demonstrated that CSOs play a key rolein raising awareness, promoting CSR practices, andhelping hold government and business accountable fortheir activities.
CSOs in the region have developed rapidly since the1990s. There are many NGOs and business associationsthat run programmes and campaigns dealing with CSRareas such as human rights, protecting the environ-ment, etc. However civil society’s interest in CSR is rel-atively new in the region. A comparatively small num-ber of non-profit organizations currently implementspecific programmes and projects focused on CSR pro-motion and development. In most cases those projectsare funded by international donors and the govern-ments of EU countries. Business involvement in fundingsuch projects in the region is limited.
Civil society is involved in CSR in mainly four differentways:
I. Watch-dog function – Some organizations act aswatch dogs by organizing public campaigns to pre-vent/stop company malpractices covering humanrights, environmental protection, consumer rightsprotection etc.. The potential of CSOs in theregion to pursue more assertive tactics to fightagainst company malpractice is yet to be realized.Limited financial self-sufficiency, dependency on
donor money, bad public image reflected by limit-ed ability to influence public opinion creates obsta-cles for civil society organizations, especially watch-dogs to ensure responsiveness and accountabilityof the private sector. Nevertheless, there are somecases in the region where NGOs created coalitionsto prevent environmental pollution or publicly crit-icized companies and successfully prevented com-pany malpractice.
II. Bringing CSR knowledge into the business com-munity and building business and governmentcapacity in CSR. These activities include promot-ing CSR among businesses, raising awareness ofbest practices, organizing conferences and work-shops, delivering awards for good CSR attain-ment, etc.
III. CSOs are also involved in teaching and promot-ing different practices that may not be describedas CSR but fall under its scope. Activities such asprotecting human rights, fighting against discrim-ination towards vulnerable groups, workingtowards equal income distribution, etc, may notbe clearly communicated as actions related tocompanies’ social responsibilities, but nonethe-less contribute to making businesses more social-ly aware and active.
IV. Seeking common ground and building partner-ships with businesses. Companies and CSOs canlearn from, and work with each other on imple-mentation of joint social responsibility projects.Through establishing closer cooperation and part-nerships, CSOs can exert significant influence onCSR behaviour of companies and make themmore sensitive towards the needs of communities.
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What would you say that CSR in your country is primarily about? (N=16)
Figure 7. Civil society and NGO perception of CSR
Environmental preservation 69%Meeting international standards 67%
Solving local social problems 60%Combating corruption 53%
Philanthropy-charitible giving 50%Increasing profitability 33%
Civil society in Albania is less engaged in direct CSRpromotion than in other countries in the region.However, there are some newly developed CSR proj-ects funded by Development partners and implement-ed by local NGOs and CSOs. The Regional De -velopment Agency of Tirana, in partnership withInWEnt/ILTIS, implemented a project which involvesrecognition and award for the best socially responsiblecompany in the country. More than 70 companies par-ticipated in the initiative in 2007. Moreover, several ini-tiatives that fall within the CSR agenda in fields such asenvironmental protection, anti-corruption and humanrights have been carried out by NGOs during recentyears.
Bosnia and Herzegovina has a great number ofNGOs and business associations working on CSR activ-ities, such as promoting human rights, environmentalprotection, transparency, and rights of minorities, suchas: Transparency International BiH50, Balkan HumanRights Network51, Centre for EnvironmentallySustainable Deve lopment52, the South East EuropeanYouth Network53, Women Economic Network54, etc.The best example of a CSR engaged CSO isFoundation MOZAIK which has organized a numberof seminars on different CSR topics for business lead-ers and established CSR awards for the business com-munity55. These awards covered: (i) CorporatePhilanthropy, (ii) Good Cause Marketing, and (iii)Responsible Business Practices. Another good exampleis the Civil Society Promotion Centre56, which organ-ized a Regional CSR Conference in 2005 and prepareda country strategy on improving cooperation betweencivil society and businesses. The conference hostedbusinesses, civil society and government representa-tives from Croatia, Serbia and Montenegro, and B&H57.
CSOs involvement in promoting CSR in Kosovo is notoperating at its full potential. One of the CSR areaswhere CSOs have a more significant role is fightingagainst corruption and promoting transparency. In2007, the American Chamber of Commerce organizedthe first Business Ethics Week in Kosovo and involvedvarious international experts teaching local businessesbest practices of ethical business. The NGO Cohu hasconcentrated its activities on promoting environmentalstandards among businesses.
A few CSOs in Montenegro are running specific pro-grammes and projects promoting CSR, including theCentre for Development of Non-Governmental Orga -nizations (CRNVO)58 which can be considered as theleader in advancing the CSR concept. The Centre hasimplemented a number of programmes promotingCSR and philanthropy and conducted several CSR stud-ies among business representatives, the general public,media and civil society. In 2005, an NGO called MOST59
created a coalition of more than 25 civil society organ-izations protesting the creation of an environmentallyharmful hydro-plant on the Drina River. The Centre forConsumer Protection of Montenegro60 has organizedseveral projects protecting consumers’ rights.
Although Serbia has a relatively active civil society, onlya few organizations implement concrete CSR projects.The Centre for Monitoring and Evaluation61 publishesmonthly news bulletins on CSR and promotes the bestCSR examples. In addition, in cooperation with theSerbian Chamber of Commerce and other partners, theCentre conducted a number of CSR teaching seminarsfor business leaders, organized CSR conferences and ranevaluations of CSR programmes. Another NGO, SmartKolektiv, conducted the first Serbian research on CSR in
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2006 and promotes cooperation among businesses,NGOs and the government. For the first time in Serbia,The Balkan Community Initiatives Fund (BCIF) launcheda programme on Corporate Philanthropy in 2007 andawarded a number of companies for their philanthropywork. NGO Hajde da62 also organized training in CSR foryoung people and implemented a number of CSR proj-ects. The Serbian Association of Managers63 worked withbusinesses to facilitate development of ethics and pro-fessional codes of conduct for companies. Last but notleast, the American Chamber of Commerce64, theForeign Investors Council65, and the Business LeadersForum are among the business associations that activelypromote CSR in Serbia.
As shown in figure 7, perception of CSR among civilsociety organizations is primarily related toEnvironmental protection and meeting internationalstandards. This perception is also reflected in the coun-try examples mentioned above.
It is important to note that although NGOs and busi-ness associations have been among the pioneers inbringing the CSR concept to the region, the surveyrevealed that their efforts have not created substantialchanges in business behaviour and attitudes, nor havethey been recognized as an equal partner at nationallevels. The business community is yet to considerNGOs activities as a significant factor in the CSR agen-da. The possible reasons for such low grading are fur-ther explained in the next section of this report.
VI. The Media
The media has significant potential to shape public opin-ion, educate people on different issues and have an influ-ence on policy decisions. In many countries, the media hasdemonstrated that it can be a powerful tool for advanc-ing social responsibility, such as by exposing examples of
good/bad practice, and airing different viewpoints.However, according to the findings of the study, themedia’s role in CSR promotion in the region is limited.
Although more than half of the actors in the regionconsider the media’s role as important in promotingCSR (Figure 2), there were very few examples of thishappening. In general, the media in the region isinvolved in CSR promotion in three different ways.
(I) Control of company performance. Media is keento highlight scandals and company malpractice –in most cases, media covers issues that have pos-sible negative consequences to the public such ascorporate scandals, criminal cases, and/or pollut-ing activities committed by businesses.
(II) Companies use media exposure to promotetheir best CSR practice to enhance their reputa-tion and public image. This usually happensthrough paid (or other mutually beneficialarrangements) advertising, media outlets, TVprogrammes, newspaper articles, etc.
(III) Few media institutions have a specific objectiveof promoting CSR and educating the public andbusiness community on socially responsiblepractices. Media that purposefully promote CSRare usually electronic or paper newspapers andmagazines specialized in business and economicdevelopment.
The best examples of media focused on CSR promotioncould be found in Serbia. Ekonomist Magazin66 has con-sistently published articles aiming to educate the businesscommunity on CSR. Ekonomist Magazin, with approxi-mately 10,000 copies issued each week, is part of theleading Ekonomist Media Group (EMG) that focuses onissues related to economic, financial and business activi-ties in Serbia. Broadcasting Corporation B9267, besidesregularly informing the public in Serbia on CSR activitiesand issues, has also developed and implemented its ownCSR programme, where it identifies important social
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62 http://www.hajdeda.org.yu.63 http://www.sam.org.yu.64 http://www.amcham.yu.65 http://www.fic.org.yu/cms/item/about/en.html.66 http://www.emportal.co.yu.67 http://www.b92.net/eng.
issues, offers solutions and stimulates other companies toparticipate in solving social problems. Moreover, E-Magazin68 publishes weekly CSR promotional articleswhile the electronic bulletin, CSR Monitor, publicizes reg-ular CSR articles from the international press aiming toeducate Serbian businesses on the international best CSRpractices. Some other newspapers (Danas, Blic, Politika,Vecernje Novosti) have also been active in incorporatingCSR-related articles in their publications in Serbia.
In Albania, Monitor Magazine69 has published articles onCSR and its implementation since 2002. MonitorMagazine’s main focus has been introducing the conceptof CSR, examples of companies engaged in CSR inAlbania, publishing a series of educational articles on ISOcertification, and producing updates on the topic of qual-ity certification in the country’s private sector.
There is no data available from other study countries onmedia institutions that focus on promoting the CSRagenda.
It is clear from the analysis that the media’s potential inpromoting CSR has not been fully utilized in the region.Media needs to be further educated and encouraged tosupport CSR promotion.
VII. Trade Unions
Apart from the labour dimension, trade unions in theregion do not usually promote CSR or engage in CSRactivities. As demonstrated in Figure 2 above, less than 32percent of actors in the region consider trade unions’CSR efforts as substantial. But trade unions have animportant role to play in promoting the rights, wages andworking conditions of employees in the region.
VIII. Conclusion
There are a number of non-corporate promoters ofCSR in the region. Among them, development part-
ners, NGOs and business associations are consideredmost active. However, the non-profit organizations’approach to engaging the business community in CSRhas not yet reached its potential.
Overall, governments have not fulfilled the expecta-tions of businesses and other actors to provide supportfor CSR engagement. Although governments have cre-ated the basic regulatory foundations on which CSRcan be built, they often lack the capacity to promoteand enforce their legislation. CSR activities are usuallynot coordinated between ministries and/or govern-ment institutions. The majority of actors do not seegovernments as the current key driver of CSR promo-tion in the region.
Development partners are key players in bringing CSRto the region through partnership projects, funding ini-tiatives and advocacy efforts. The most influentialinternational entity in the region is the EuropeanCommission that demonstrates significant influence ongovernments to adopt and reform policies and legisla-tion. UNDP is also one of the most active developmentpartners engaged in CSR development in the region.
Academia’s role in incorporating CSR in the process ofeducation is in its infancy but rapidly growing.Academia is becoming more active in incorporatingCSR in the education process. Courses on businessethics, corporate governance, and environmental man-agement are now part of the educational curriculum atmany universities in the region.
Non-corporate actors’ involvement in CSR promotioncannot be precisely compared across countries.However, there are some trends that should be men-tioned. Overall, Albania has the most comprehensivelegal framework in areas pertaining to CSR in compari-son to other research countries, yet the Albanian gov-ernment lags behind with regard to implementing andenforcing those laws and regulations. Montenegro andSerbia have relatively more civil society organizationsactively involved in CSR promotion and development.However, there is not a single higher education institu-
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68 http://www.emagazin.co.yu.69 www.monitor.al.
tion in Montenegro that teaches CSR or business ethicsrelated classes. B&H and Serbia are doing slightly betterin incorporating CSR in education. B&H is the onlycountry where CSR is taught at university level. Due torecent history, Kosovan non-corporate actors’ involve-ment in CSR is significantly weaker in comparison withall research countries from the region.
Non-corporate actors’ engagement in CSR promotionin the Western Balkans is somewhat similar to theresults of the CSR study conducted in the eight othercountries from the CEE region70. The previous researchdocumented weak government capacity to promoteCSR, inactive media and limited capabilities of civil soci-ety to hold business accountable for their impact onsociety and communities. The research also identifieddevelopment partners and multinational companies asthe main drivers of CSR development in the region.Despite similarities, there are some differences betweenthe countries with regards to actors’ roles in CSR devel-opment that need to be acknowledged. Countries stud-ied under the previous research are already members ofthe EU (Bulgaria, Lithuania, Poland, Hungary, andSlovakia) or candidate countries (Turkey, FYROM) andthey have managed to accomplish more socio-econom-ic and political reforms. Many of the countries havealready appointed government bodies responsible forcoordinating and promoting CSR-related activities andare in the process of conducting multi-stakeholders dia-logue and adopting national action plans for CSR devel-opment71, whereas, countries in the Western Balkans areonly at a very early stage of this process.
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70 Baseline Study on CSR Practices in the New EU Member States and Candidate Countries; Bulgaria, Croatia, Hungary, Lithuania, FYROM, Poland, Slovakia, and Turkey.71 Conference Report: Accelerating Corporate Social Responsibility (CSR) Practices in the new EU Member States and Candidate Countries as a Vehicle for Harmonization,
Competitiveness, and Social Cohesion in the EU - International Conference “Public Policies On Corporate Social Responsibility (CSR) In Eastern And Central Europe” 9 -10September 2008, Vilnius, Lithuania.
Irrespective of the work done by non-corporate stake-holders in promoting CSR, businesses are the key play-ers in CSR. Since CSR is by definition a voluntary activ-ity, it is the businesses’ ultimate decision whether to beinvolved in socially responsible activities and to selectwhich of them they will pursue. Therefore, thisresearch explores companies’ CSR engagementthrough assessment of multiple variables providing adetailed picture of this engagement.
I. Overall CSR Engagement andUnderstanding
a. Level of Engagement
One of the most important goals of this research is toassess the level of company engagement in CSR activi-ties and the factors influencing it. As shown in Figure 8,only 3 percent of sample companies express no inter-est in CSR at all. A great majority (73 percent) are either‘somewhat’ or ‘very actively’ engaged in CSR.Interestingly, an additional 20 percent are not yet
engaged but are interested in being involved72. Not sur-prisingly, perhaps, more than 60 percent of the compa-nies which rated their CSR involvement as ‘highlyactive’ are branches of multinational corporationsoperating in the region. The majority of private-nation-al and government companies are only ‘somewhatactive’ (50 percent and 46 percent) in their CSR activi-ties. All 3 percent of companies who reported to haveno interest in CSR are private-national businesses(Figure 8).
At first sight, the figure of 73 percent of companiesengaged in CSR seems very high. However, there areseveral aspects that need to be taken into account ininterpreting this number.
Firstly, as mentioned in the methodology section, theresearch sample contained a high proportion of com-panies that had previous CSR engagement and whichallocated resources to promotion and networking.
Secondly, the percentage is based on companies’ ownself assessment, which is significantly affected by com-panies’ own perception of CSR. There are specific
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72 Please refer to the methodology section and Annex II. to see how representative the research sample of the companies in the region was.
3. CORPORATE ENGAGEMENT IN CSR
How actively do you think your company is engaged in CSR-related activities as you define them? (n=179)
Figure 8. Company engagement in CSR
Not active, not interested to engage 3%Not active, but interested/willing to engage 20%
Somewhat active 46%Highly active 27%do not know 3%
Refused 1%
aspects of CSR understanding among companies thatare defined by the political and socio-economic back-ground of the region that need to be taken intoaccount. As the Baseline Study on CSR practices in thenew EU Member States and Candidate Countriesreports: “Since the transition, economic sustainabilitywas a continuous challenge for entrepreneurs so ingeneral local enterprises, mainly SMEs, had no timeand resources to pay attention to social or environ-mental responsibility – the general public did not putpressure on companies to be any more than prof-itable. Companies had never experienced applying theprinciples of good corporate governance or consider-ing their wider impacts, so there was a lack of knowl-edge, instruments and tools. Nobody knew how to beefficient, profitable and socially and environmentallyresponsible at the same time. Privatization and thenew economic agenda resulted in “wild capitalism”,where profit became the most important goal formost companies in the region73.” This situation hadbeen very similar in the Western Balkan countries andstarted changing at the turn of this century. As part oftheir EU integration process, governments adopted anumber of laws and regulations on environmental pro-tection, employee health and safety, corruption andtransparency, etc., that companies are obliged to fol-low. However, those laws and regulations are oftennot being supported, implemented and enforced, atan adequate level. Only the more progressive compa-nies are either aware of the requirements or able toinvest in compliance measures.
As a result, in many cases, companies would reportbeing engaged in CSR activities, when actually theirCSR activities consisted mainly in compliance (e.g. pro-viding benefits to employees, ensuring occupationalsafety, taking environmental precautions in their oper-ations). Companies that are performing relatively wellin some aspects of socially responsible business prac-tices and very poorly in others would still rate them-selves as CSR engaged. For example, NETs encoun-tered companies that regularly donated money for
charitable purposes, while at the same time, did nottreat consumers fairly e.g. by monopolizing the mar-ket. In the absence of clear guidelines or incentives onconsumer protection (or possible penalties in case ofnon-compliance), a company might not consider it aproblem to abuse consumer rights. The same compa-ny would still claim to be engaged in CSR throughcharitable donations they made. This is part of theprocess of transition from ‘wild capitalism’ to a social-ly responsible business community, where someaspects of CSR are emerging but others are not yetacknowledged.
In order to determine types and specific characteristicsof CSR activities that companies in the region areengaged in, the survey asked businesses to describeCSR-related best practices that they implement.Overall, responses from companies can be divided intofour categories74: (i) Philanthropy, (ii) Preserving theEnvironment, (iii) Investing in Local Communities,and (iv) Supporting Employees.
PHILANTHROPYVoluntary financial contributions by the business sectorto cultural, sporting and other non-profit bodies andevents in their communities have long played a part inCSR globally. While there has been some questioning inrecent years about whether philanthropic investmentsare always the best strategy for companies to buildbrand and value, philanthropy continues to play animportant role in the suite of CSR instruments a com-pany can use. Based on company responses, philanthro-py is the most widespread CSR activity practiced in theregion. The donation of money and goods is the mostconvenient and visible way of being ‘CSR active’.Donations to schools, hospitals and other educational,art and healthcare related activities are the most wide-spread. Donations to vulnerable communities (disabled,victims of disasters, minorities, etc.) are also common.As our research suggests, the building of companybrand/reputation is the main stated incentive for CSRengagement in the region (Figure 11).
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73 UNDP 2007. Baseline Study on CSR Practices in the New EU Member States and Candidate Countries.74 It should be noted that there is no clear cut methodology to categorize different best practice activities. In most cases, community development activity can also be related to
environmental protection and philanthropy. The most important point is that the range of all best practice activities mentioned by companies does not go beyond four cate-gories.
PRO MONTEPro Monte is the first mobile operator inMontenegro. Company Pro Monte’s slogan“We are here to help” best describes theirintensive activities in social support. Pro Monteis involved in a number of community and sup-port activities:
• Pro Monte has been the general sponsorof the prestigious music festival “SuncaneSkale” as well as the sponsor of the chil-dren’s music festival “Na a Radost”;
• Pro Monte is the sponsor of plays at theHerceg Novi Film Festival, Podgorica CityTheatre as well as a series of other cultur-al events such as Summer Carnival inKotor, Mimosa festival in Herceg Novi andmany others. Besides the above men-tioned, Pro Monte is also the sponsor ofthe International Book fair which is held inPodgorica for the second time;
• General sponsorship of the fashion Week– the most significant event of this kind inthis area – is evidence of Pro Monte’s con-cern for the Montenegrin fashion scene;
• Pro Monte is actively involved in the fieldof sports and is supporting theMontenegrin Handball Association as wellas prominent individuals: Ivan Strugar (thewinner of numerous state, European andWorld medals in kick boxing) and MilutinVujosevica (champion racing driver); and
• In the field of education and youth guid-ance – it offers significant support toCASAZ and the Office for Drug AddictionPrevention in carrying out their activitiesand programmes.
ENVIRONMENTThe reports of the Intergovernmental Panel on ClimateChange (IPCC), high profile government agreements onCO2 reduction, and worldwide awareness-raising cam-paigns on climate change have placed environmentalconcerns at the top of the global agenda. Around theworld, companies are showing a greater interest in meas-uring, reducing and reporting their environmental
impacts. This can be seen in the popularity of sustainabil-ity reporting instruments, which provide specific environ-mental indicators which companies can use to assess theirimpacts, and develop appropriate response strategies.The majority of best practice environmental activities inthe region are related to waste recycling and energy sav-ing as well as promoting environmental protection
Vodafone Albania Vodafone Albania established the VodafoneAlbania Foundation in January 2008 as part of itscommitment to social responsibility. The founda-tion receives its funding from Vodafone Albaniaand the Vodafone Group Foundation, which rep-resents an international network of 24 founda-tions. The foundation is one of the first of thistype of initiatives in Albania where local business-es strategically target the needs of communities.The Foundation has several priority funding areasincluding improving quality of life in communitiesby investing in technological innovations, educa-tional, healthcare, and environmental projects. The company tries to take environmentalconcerns seriously:– It has installed solar panels to reduce pollutionfrom the use of power generators;– It applies methods for the recycling of paper,mobile phones and other materials used duringwork processes; and– It conducts regular assessment of the electro-magnetic radiation of its antennas.Since its establishment, the Vodafone AlbaniaFoundation has funded several projects:– Financial support of Lek 24,000,000 (approx.200,000 EUR) – to address the needs of thepeople affected by the explosion in Gërdec vil-lage (Vorë);– Financial assistance (Euro 295.000) for theimplementation of several cultural and commu-nity support projects; and– Sponsorship of the annual competition “TheWorld of Change”, a unique and innovativeexperience that aims to promote passion anddevotion in individuals for responding to thesocial needs of the surrounding community.
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Vodafone Albania is one of the pioneering com-panies in the region that is trying to work on CSRprinciples with its suppliers. The company has acode of ethics in purchasing policy and assistedsome of its suppliers to adopt similar ethics princi-ples in their purchasing process.
COMMUNITY DEVELOPMENTBusinesses around the world are recognizing that theycannot prosper in communities that are not them-selves prospering. The communities in which business-es work provide potential employees, customers,investors and critics. Therefore, it is in a company’sinterest to understand the needs and concerns of localcommunities and attempt to respond to these, evenwhere this is not specifically required by regulations.
This appears to be well understood within the region.Supporting and investing in communities is a widespreadCSR activity, with the majority of community develop-ment activities concentrated in areas that produce visi-ble and tangible results such as constructing and reno-vating community facilities, roads, etc. Activities thatattract publicity and visibility for companies, such as sup-porting sport events and clubs, are also common.
Raiffeisen Bank, headquartered in Austria, is thesecond largest commercial bank in Kosovo. Apartfrom being focused on providing banking productsand services, RBK is also committed to contributingto Kosovo society. RBK supported several CSR-related activities during 2007. The bank donated acheque for EUR 5,000 to SOS KinderdorfInternational in Kosovo which takes care of aban-doned children and provides them with a home anda new family. Also, in cooperation with theAmerican Chamber of Commerce in Kosovo, RBKorganized a dinner charity event called “For a BetterLife” with the purpose of raising funds for Children’sPaediatric Hospital in Pristina, the capital of Kosovo.As a result of this initiative the Children’s PaediatricHospital has been remodelled and now offers muchbetter conditions for the Kosovo children in need ofmedical treatment.
EMPLOYEE WELL-BEINGEmployees are critical to the success of a company. Toattract, maintain, and get the best out of its workforce,companies worldwide are using a CSR approach to gofurther than simply applying local labour laws. Increasingly,companies see employees as vital sources of ideas, inno-vation and efficiency, and put in place training and com-munication strategies to develop their human resourcesto the full. Companies in the region also report spendingmoney to support employees and create better workingconditions for them. Some have special policies to inte-grate disadvantaged groups into their workforce.However, these types of activities are not as popular ascommunity development or philanthropy.
In conclusion, analysis of best practice CSR engagementdemonstrated an emphasis on activities that have short-term tangible targets. What was less clear was how com-panies approached longer-term sustainability goals,including sustainability risks to their operations (e.g. risingenergy and raw material costs) and opportunities fromthe growing global markets for more sustainable goodsand services. Among the 180 surveyed companies, nonementioned best practice activities in some key areas relat-ed to CSR (e.g. fair treatment of customers, good corpo-rate governance, stakeholder engagement, transparencyand accountability, risk management, social inclusion,socially responsible investing, etc.), which suggests greatpotential for companies in the region to broaden theirapproach. The concept of CSR is new and not manycompanies have been able to integrate all aspects of it.However, since CSR offers a wide menu of options, it isnormal for companies to seek out those activities thatdeliver the quickest and lowest cost returns. There is no‘one size fits all’ for CSR: to decide what is most materialto them, companies are well advised to consult widely onstakeholder perceptions and expectations, and prioritizeresponses that reduce risk and build business value.Usually these will include internal pollution reductionmeasures (e.g. energy efficiency), improved employeetraining and awareness, and helping build sustainable localcommunities.
Among those companies that reported best practices,private-national and state-owned companies were inthe minority, while local branches of multinationalcompanies made up the majority.
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Bosnalijek is the biggest industrial producer ofmedicines in B&H with a production programmethat includes generic medicines for use in humanmedicine and disinfectants.
• In 2008, Bosnalijek conducted an EmployeeSatisfaction Survey. The aim of the survey wasto assess the employees’ satisfaction, but alsoto consider possible improvements of busi-ness processes and suggest necessary preven-tive and corrective measures. The companyalso encourages professional training of itsemployees and invests in their specialist andpost-graduate studies. Bosnalijek entered2008 with 9 specialists and 38 employees whowere attending different post-graduate edu-cation programmes.
• In 2008, Bosnialijek is providing scholarships to203 university and high school students, whichis the greatest number of scholarships award-ed so far. The above number includes 71 uni-versity and high school students who hadbeen awarded Bosnalijek scholarships during2007- 2008 academic year.
b. CSR Understanding
As demonstrated in Figure 9, environmental concerns,improved wealth distribution and philanthropy were the
main definitions of CSR given by business respondents.The list corresponds with the list of best CSR practicesfrom the region described above. Here transparencyappears to be an exception, with 51 percent of respon-dents citing it as an important CSR definition, but notidentifying any best practice transparency activities.
Understanding CSR as environment, philanthropy andcommunity support is a general phenomenon acrossCEE. Several studies have tried to define the under-standing of CSR among businesses in the region andreached the same conclusions. As the Baseline Study onCSR Practices in the New EU Members States andCandidate Countries reports “In most countries in theregion, CSR is generally seen as an addition to the corebusiness activity of companies, and is often connectedwith philanthropy and sponsorship, it is not seen ascentral to risk management and stakeholder relation-ships75.” A study conducted in 2006 by Smart Kolektivin Serbia concluded that the majority of businesses inSerbia viewed CSR as addressing only environmentalconcerns, philanthropy and community support76.Other research by the World Bank which studiedMontenegrin and Serbian businesses found that com-pliance with the law and business ethics were the topCSR priorities.77 A report written by the AlbanianInstitute for Research and Development Alternatives in2005 confirmed that philanthropy was the main notionof CSR in the country78. Another study by UNIDO in2007 stated “at this stage CSR in the Central and
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What would you say that CSR is about? (N=179)
Figure 9. Company perception of CSR
Preserving the environment 81%Economic benefits for all 72%
Philanthropy 61%Anti-corruption 51%
75 UNDP 2007. Baseline Study on CSR Practices in the New EU Member States and Candidate Countries.76 Mazurkiewicz P. et all. 2006. Business Perspectives about Corporate Social Responsibility: Attitudes and practices in Serbia and Montenegro, Smart Kolektiv.77 World Bank. 2005. Republic of Montenegro: Economic Memorandum. A Policy Agenda for Growth and Competitiveness Report No. 32623-YU.78 http://www.idra-al.org/pdf/en/BizEthics2004-2005FinalNarrativeReport_Web.pdf.
Eastern Europe region is still commonly understood ascorporate philanthropy or charity, or associated withpublic relations and marketing strategies, and not as acompany’s responsibility to all its stakeholders.”79 Finallya study by the World Bank in three regional countriesin 2005 revealed that the majority of businesses in theregion viewed CSR as a ‘public relations issue’ and‘compliance to existing laws’80. A relatively lower per-centage of companies recognized environmental con-cerns as a CSR issue.
However, in contrast to previous studies, our researchsuggested that companies’ perception of CSR as envi-ronmental protection rated higher than communitysupport and philanthropy. This apparent shift in CSRperception within the business community mayhave several drivers. It is probable that recent interna-tionally-funded environmental initiatives implementedin the region (involving international standards), pres-sure from the European Commission to adopt environ-mental standards, and worldwide media attention toissues such as global warming have affected corporateattitudes. This is generally in line with evolving businessperceptions worldwide, and can be considered as apositive shift towards taking environmental concernsmore seriously in the region.
II. Barriers and Drivers
a) Barriers
There are a number of barriers to companies engagingin CSR activities. Many of these barriers are associatedwith the economic and political environment in whichthey operate. Factors mentioned above include: weakpromotion and enforcement of laws and regulations;issues related to pre-transition legacy such as a lowlevel of trust between public and private sectors, thebelief that social welfare is governments’ sole responsi-bility; and relatively disengaged civil society and media.Together, these have a strong influence in shaping thebusiness environment of the region.
There are further constraints related to companies’own competencies to develop and implement CSRactivities, such as lack of capacity (e.g. knowledge andexpertise), lack of resources and leadership. The studyasked companies to rate the reasons hampering theirCSR engagement (Figure 10). According to the results,lack of company knowledge of CSR and lack oftechnical support in CSR development and imple-mentation are the primary barriers preventing com-
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79 UNIDO. 2007. On the state of corporate social responsibility (CSR) in Central an Eastern Europe (CEE). Special focus: Bosnia and Herzegovina, Bulgaria, Romania and Serbia.80 World Bank 2005. Opportunities and options for governments to promote corporate social responsibility in Europe and Central Asia: Evidence from Bulgaria, Croatia and
Romania.
You responded that your company is not very actively engaged in CSR.What do you think is the main reason? (n=47)
Figure 10. Barriers to CSR engagement
Lack of knowledge about CSR 53%Lack of technical assistance for implementation 49%
Insufficient funds 34%Lack of government support 28%
Lack of customer support 21%Lack of industry/peer support 21%
Lack of investor/owner support 13%Lack of NGO support 9%
panies’ involvement in CSR. Financial considerations– such as lack of government incentives and insuffi-cient financial resources are cited as additional hin-drances.
Companies’ ownership characteristics also provide aclue as to barriers to engagement. Private-nationalcompanies, for example, are more likely to identify lackof CSR knowledge, technical assistance, and govern-ment support as major obstacles for engaging in CSRthan multinational and state-owned companies.
b) Drivers
There are various drivers that may lead companies totake CSR principles and standards more seriously. Themost important driver is a company’s perception ofthe short- and long-term economic benefits of invest-ing in CSR activities. Not all businesses can find direct
linkages between current social expenditures andfuture economic benefits and/or have enough under-standing and resources to implement those activities.Usually multinational companies are better able tomake the connection between CSR investments andbusiness value.
The study tried to assess which drivers were the mostinfluential in helping companies become more sociallyresponsible. Figure 11 shows the ranking of influentialfactors across all types of companies – multinational,national and government owned. Reputation,enhancement, concerns over the environment,being able to hire skilled employees, and expandingboundaries of current market were the main rea-sons that induced companies to engage in CSR.
Understandably, companies rate highest those factorsrelated to future competitive advantage and prof-itability. Reasons related to external pressures were
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SFigure 11. Reasons for CSR involvement
Please rank the importance of the following factors in your company decision to be involvedin CSR activities (n=115)
ALL companies National Multinational Government
Reputation enhancement 4.37 4.23 4.50 4.37
Environmental protection* 4.23 3.94 4.56 4.58
Management request * 4.20 3.95 4.41 4.71
Attract “best” employees 3.91 3.70 4.20 3.83
Market/trade expansion 3.80 3.75 3.90 3.66
Local/international competition 3.74 3.66 3.93 3.36
Consumer requirement 3.71 3.66 3.64 4.21
Shareholder/parent company pressure 3.50 3.27 3.59 4.38
Risk management 3.48 3.20 3.78 3.77
Government legislation/requirement * 3.48 3.44 3.19 4.57
Government financial incentives * 2.71 2.57 2.62 3.83
International organization pressure * 2.56 2.17 2.90 3.25
NGO pressure 2.34 2.15 2.57 2.58
Understanding Figure 11. Companies were asked to rate a number of specific factors that influenced their decision to be involved in CSR ona five-point measurement scale where: 1 – Not important at all; 2- somewhat unimportant; 3- neither important nor unimportant; 4- some-what important; and 5- very important. The numbers shown on the table represent the average mean value of those values for each factor.For example, all companies in the sample on average reported that ‘reputation enhancement’ was ‘very important’ (4.37) for their CSR involve-ment, whereas, those companies reported that NGO pressure on average was ‘somewhat unimportant’ (2.34). * -indicates statistical signifi-cance in <.050 level.
rated the lowest81. The conclusion – that profitabilityand competitive advantage are the main incen-tives/drivers leading companies to become sociallyresponsible – is consistent with attitudes elsewhere inthe world. CSR needs to be financially sustainable. Forthis reason, it is appropriate that CSR approaches leadto both short (e.g. reduced energy costs, improved cus-tomer satisfaction), and longer term benefits (e.g.improved capacity to deliver more sustainable goodsand services).
While governments in the region are not viewed as themain drivers of CSR, lack of government support isseen as a problem. Companies see the absence of gov-ernment support as one of the major barriers to theirCSR involvement (Figure 10), but existing government
policies and regulations as providing limited incentiveto increase CSR activities (Figure 11).
The fact that companies overall rated NGO pressure in theirdecision to be involved in CSR as ‘unimportant’ (Figure 11) oreven a reason for not engaging in CSR (9 percent – seeFigure 10) has strong implications for the work of NGOs inthe region. Analysis of NGO activities in CSR suggests theymay not focus enough on communicating the business casefor CSR, which is crucial for businesses to understand, andwhich is the starting point to their CSR engagement.Additional efforts by NGOs are required to help businessesunderstand that CSR is an investment that will create long-term profitability rather than short-term cost and will increasetheir chances of becoming more sustainable and thereby gaincompetitive advantage in local and global markets.
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81 Among the external factors, the research did not offer companies a choice to rate the influence of development partners in their decision to engage in CSR related activities.Therefore, we cannot assess the extent to which companies consider development partners’ role in their CSR engagement. Development partners do more work in influenc-ing and changing policies and laws, brining international expertise, standards and research to region and do less work with individual company capacity building and CSR engage-ment. Therefore, the low rating of external factors is not an argument against development partners being one of the main drivers of CSR promotion in the region.
In your interactions with businesses, which of the following “business case” factors are influentialin making them take CSR seriously? (N=53)
Figure 12. Actors’ perception on CSR
Reputation enhancement 3.96Market/trade expansion 3.79
Government legislation/requirement 3.77Government financial incentives 3.60Local/international competition 3.60
Environmental protection 3.53Consumer requirement 3.46
Attract “best & brightest” employees 3.26Risk management 3.10
Anti-corruption 3.10Shareholder or parent company pressure 2.98
Supply chain improvement 2.94
Understanding Figure 12. Actors of CSR promotion were asked to rate a number of specific factors that influenced companies’ decisions tobe involved in CSR on a five-point measurement scale where: 1 – Not important at all; 2- somewhat unimportant; 3-neither important norunimportant; 4- somewhat important; and 5- very important. The numbers shown on the figure represent the average mean value of thosevalues for each factor. For example, all actors in the sample on average reported that ‘reputation enhancement’ was ‘somewhat important’(3.96) for companies to take CSR seriously, whereas, those actors reported that supply chain improvement on average was ‘neither impor-tant nor unimportant’ (2.94).
It is worth mentioning that as companies in the regionengage in the global economy, it would be consistentwith international best practice to pro-actively seek outNGO perspectives and develop dialogues and partner-ships where appropriate.
The research also examined non-corporate stakehold-ers’ perceptions of drivers that encourage business toengage in CSR (Figure 12). According to non-corpo-rate respondents, it is generally difficult to getbusinesses to take CSR seriously. Non-corporaterespondents rated the importance of each factormuch lower than those of businesses82. Furthermore,although companies reported environmental protec-tion as one of the main factors affecting their CSRdecision, non-corporate stakeholders did not think thatbusinesses took environmental precautions very seri-ously. On average, non-corporate stakeholders report-ed that environmental concerns were of little per-ceived relevance to the businesses – somewherebetween ‘neither’ and ‘somewhat important’ level(3.53). The difference can be explained by non-corpo-rate stakeholders’ critical view of the business sector’sefforts to protect the environment.
Further breakdown of the non-corporate respondents’sample suggests that national government agencies(regulators), NGOs and development partners reportbusiness interest in environmental protection at thelowest level, while business associations and tradeunions reported the opposite. Actors in Montenegro,Kosovo and Serbia are more likely to think negativelyabout the business commitment to environmental pro-tection than those in Albania and Bosnia andHerzegovina.
It is clear that there is a division of opinion betweenbusiness corporations and non-corporate actors on thebusinesses’ role in protecting the environment. This
underlines the importance for the business sector ofreassessing its standing in society and using CSR tools(e.g. dialogue, engagement) to better understand soci-etal expectations.
Further analysis suggests that among the companiesthat believe environmental concerns are ‘very impor-tant’ or ‘somewhat important’ to their involvement inCSR, only 13 percent state that they are involved inmeasures to prevent climate change at any level, 29percent use environmental or eco labels on their prod-ucts, 27 percent develop environmentally friendlyproducts or methods in running their businesses and 33percent have recycling facilities. Over two thirds, how-ever, state that they try to reduce the amount of pol-lution that they produce. A conclusion that can bedrawn is that although companies report environ-mental concern to be one of the top priorities intheir CSR engagement, there is still significantscope for incorporation of environmental protec-tion measures in their operations.
This finding is consistent with previous publicationsfrom the region. The UNIDO Issue Paper in 2007 con-cluded that although all countries in the region hadadopted environmental laws and legislations in line withEU standards, the actual implementation activities andstandards required by those laws were only in anemerging stage of development.83
III. Accountability Rating
The research measured business engagement in CSRpractices utilizing the AccountAbility RatingTM, devel-oped by Csrnetworks, a CSR consultancy andAccountAbility, an international think-tank, and firstapplied in 200484. This rating was applied in order to keep
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82 Both companies and actors rated the factors on the same 5 point scale. Overall actors gave lower rating for each factor that makes companies take CSR seriously. For exam-ple ‘Reputation Enhancement’ mean score for companies was 4.37 (figure 11) but for non profit ratings only 3.97 (Figure 12). The same pattern is true for each factor that wasrated by both sides.
83 “Nowadays, environmental protection is one of the most important political and economic issues that needs to be addressed in the region. However, governments and busi-nesses have not yet resolved how to share the costs of mitigating the negative environmental impacts of business and restructuring technological processes to make them moreenvironment-friendly. Even though environmental protection in the new EU member States in Central and Eastern Europe has progressed remarkably well in terms of meet-ing the requirements for accession, many problems still need to be tackled, particularly in the remaining countries in the region”. UNIDO. 2007. On the state of corporate socialresponsibility (CSR) in Central and Eastern Europe (CEE).
84 For more information please review http://www.accountabilityrating.com.
findings consistent with prior research conducted in thefield and to have a single common framework to assessthe level of company engagement. The AccountAbilityRatingTM is applied annually to the world’s largest com-panies (the Fortune Global 100, or ‘G100’), and the head-line results are published in Fortune magazine85. TheAccountAbility RatingTM measures company engage-ment in CSR activities in the following six domains:86
– Strategy looks at how well a company’s manage-ment recognizes its main social, ethical and environ-mental impacts and sets relevant performance tar-gets and objectives in a way that integrates thesewith the core business strategy.
– Stakeholder Engagement looks at the level and natureof systematic dialogue and engagement processes withthose who have the ability to influence a company’soperations or may be affected by its business.
– Governance looks at responsibility and accountabilitywith the company for CSR policies and performance,from the highest level throughout the organization.
– Performance Management looks for processes,standards and incentives used to achieve social andenvironmental goals, as well as financial ones.
– Public Disclosure looks at how reporting on the com-pany’s social and environmental performance is con-
ducted, including transparency on policies and per-formance.
– Assurance looks at internal and external processesthat build the credibility and effectiveness of CSRprocesses and reporting87.
In 2006 the AccountAbility RatingTM was applied to60 large global companies88. The overall results fromthe evaluation are shown in Figure 13 below. Overall,companies received the highest scores on the Strategy,Governance and Public Disclosure domains. Companyscores on Assurance and Stakeholder Engagementwere considerably lower. The results of the global 2007rating were similar. The large global companies werestrongest in the Strategy domain, and weakest in rela-tion to the Assurance domain. Based on the 2007 rat-ing, European companies were performing consider-ably better than companies from other regions. Amongthe 20 companies that scored the highest in alldomains, 18 were from Europe. Companies from theUnited States lagged behind in comparison toEuropean businesses.89
Accountability rating results from the 180 companiesfrom the Western Balkans investigated under thescope of this study are highlighted on Figure 14.
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Overall average score for each domain in G50+
Figure 13. Overall average score for each domain for 50+ large global companies in 2006
Strategy 54%Stakeholder Engagement 26%
Governance 41%Performance Management 35%
Public Disclosure 37%Assurance 10%
85 Ibid.86 AccountAbility has updated its domain classification in 2008 but this report uses the old version in order to compare the results with the those of the Basline Study on CSR
Practices in the New EU Member States and Candidate Countries. For more information on the current classification please visit AccountAbility webpage.87 Accountability Rating 2006. Summary Report of Results.88 These comprised Fortune Global 50 companies and additional 10 large companies selected by AccountAbility). Accountability Rating 2006. Summary Report of Results.89 Accountability Rating 2007. Key findings from annual study of the world’s largest companies.
The rating was conducted based on company respons-es to different survey questions as well as NETs’ assess-ments of company backgrounds. NETs rated everycompany as having ‘little/no evidence’, ‘on the way’, or‘good practice’ engagement in each domain. Theresults were cross-checked by international experts onconsistency with the company answers to differentsurvey questions. (See Annex IV and V on how compa-nies were rated within each domain and a detaileddescription of scoring methodology).
As shown in Figure 14, companies scored the lowest inAssurance and Stakeholder Engagement domains,whereas the results for the Public Disclosure,Governance and Strategy domains were the highest.Less than 4 percent of the companies were ‘good’ atassuring their work with independent experts and only12 percent had good stakeholder engagement. Nearlya quarter, however, were ‘good’ at producing CSR-related reports, 22 percent had well developed CSRgovernance mechanisms, and 19 percent incorporatedCSR in their overall business strategy.
The results for the Western Balkans were somewhatsimilar to ratings produced for the 2007 CSR research
covering Bulgaria, Croatia, Hungary, Lithuania, FYROM,Poland, Slovakia, and Turkey90 – relatively higher levelgovernance, and strategy, lower performance manage-ment, and very low assurance practices. However, com-panies from CEE were rated to have better stakehold-er practices. Companies in the Western Balkans scoredslightly higher in their CSR reporting practices than didcompanies in CEE. The previous research from theeight CEE countries mentioned receiving conflictingresults on company reporting. On the one hand, deskresearch revealed low levels of company reporting inthe public domain; on the other hand, company inter-view results suggested greater public disclosure activi-ties. The previous research report provides no furtherclarification on the issue; however these conflictingresults point to a possible misinterpretation of PublicDisclosure by the company respondents. Indeed,although what is being measured here is companies’CSR/sustainability reporting, there may have been con-fusion with public relations activities such as media‘reporting’ of business philanthropic donations. In theWestern Balkan context, where philanthropy is consid-ered a key CSR activity, this misinterpretation may havebeen even more acute, leading to the differenceobserved in the results between the eight CEE coun-
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Company Engagement in CSR (n=180)
Figure 14. Western Balkan companies’ engagement in CSR activities across all six domains
StrategyStakeholder Engagement
GovernancePerformance Management
Public DisclosureAssurance
Understanding Figure 14. Company engagement in six CSR domains was assessed on a three-point measurement scale where: 1 – No/Littleevidence; 2- On the way; and 3- Good practice. The numbers shown on the figure represent the percentage distribution of the companiesacross all six domains. For example, only 4% of all 180 companies were rated to have ‘good’ CSR Assurance practices, whereas, about 23% ofcompanies have the same level (good) reporting practice.
No/Little evidence On the way Good practice
37% 43% 19%
49% 12%
43% 22%
54% 12%
40% 23%
27% 4%
39%
35%
34%
37%
69%
90 UNDP 2007. Baseline Study on CSR Practices in the New EU Member States and Candidate Countries.
tries Baseline study and the present one. In addition,the following points may explain this difference:
1. Differences in methodologies used in selectingboth samples and rating.91
2. Except Albania, the four others have mandatoryfinancial reporting requirements for all publiclyfunded companies. This may positively influencegeneral reporting behaviour among businesses.
3. The number of multinational corporations in thesample, which are characterized by well devel-
oped international CSR reporting practices cover-ing their operations in the region (but not neces-sarily involving country-specific reports).
Annex V. provides more information on companyreporting behaviour.
A company’s size can have a significant effect on its CSRengagement. As indicated in Figure 15, large companieswere rated much better than SMEs across all domains.One explanation is that larger companies have access togreater staff and financial resources, and may have alonger history in understanding the significance of CSRactivities. Larger companies are more likely to be heldaccountable for their activities due to: their significancein the national and international economies (e.g. basedon their higher use of natural/environmental resourcesand corresponding impacts); and their capacity to affectlives of a large number of stakeholders. The effect ofcompany size on CSR engagement holds true for allcountries that were studied under this research project.
Company ownership also has a significant effect on itslevel of CSR involvement. Multinationals and subsidiariesof international companies operating in the region showconsiderably higher CSR engagement across all domainsthan do national private and state-owned companies(Figure 16). As shown in Figure 16, branches of multina-tional companies’ CSR performance, averages close tothe ‘good practice’ (mean more than 2.00) level acrossall domains, except for Assurance.
State-owned companies appear to perform a little bet-ter in the Assurance and Public disclosure domains.Most state-owned companies in the region are large-sized companies that provide public services (e.g. elec-tricity, water, natural gas distribution, banking, manu-facturing, etc.) on a national level. As noted earlier, larg-er companies are usually more likely to be engaged inCSR activities than SMEs. Therefore, company size hasan influence on the higher performance rating of state-owned companies; it generally does not affect as many
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CSR engagement by company size (n=180)
Figure 15. Company engagement in CSR activitiesacross five domains by size of company
Strategy
Stakeholder Engagement
Governance
Performance Management
Public Disclosure
Assurance
Understanding Figure 15. Company engagement in six CSR domainswas assessed on a three-point measurement scale where: 1 –No/Little evidence; 2- On the way; and 3- Good practice. The num-bers shown in the figure represent the average mean value of thosevalues for all companies taken together. For example, if an averagesmall company scored 1.23 on Strategy domain, an average largecompany operating in the region scored much higher – 2.09 in thesame domain. The difference across company sizes for all domainsis statistically significant at <.050 level.
Small Medium Large
1,231,892,09
1,361,761,91
1,511,892,06
1,441,801,94
1,381,822,16
1,101,411,43
91 As described in the methodology section (Annex II), we tried to adjust our sample to be representative of national economies of the countries rather than individual compa-nies based on their sizes. We are not sure whether such adjustment was made in previous research. Furthermore, the previous research did not include small (less than 50employees) companies in their sample. We do not have information on the proportion of government, private national and multinational companies in the previous researchsample which might also have affected the results.
aspects of CSR engagement of the multinational com-panies. Overall, medium multinational companies per-form better than large-sized private and government-owned national companies in all domains. The smallsample size of this study however does not permitmore detailed analysis.
As shown in Figure 17, companies in the (i) water, elec-tricity and gas supply, (ii) transport, storage and com-munication, (iii) financial, and (iv) manufacturing sectorsare champions in integrating CSR into their operations.Meanwhile, companies in the (i) wholesale and retailtrade, motor repair, (ii) construction, (iii) hotels andrestaurants, and (iv) education and private schools sec-tors are lagging behind. Company size may affect theabove findings. The first set of industries tends to berepresented by larger corporations, with largerresources, international links, and access to relevantexpertise. In comparison, restaurants, hotels, construc-tion companies, and private educational institutions areusually smaller and with limited resources.
The AccountAbility RatingTM has classified companiesbased on the distribution of rating scores into four differ-ent categories92: (i) Leaders – are pioneering companiesthat integrate CSR practices into their operating culture;(ii) Challengers – are the companies keen to integrateCSR into their business practice and usually follow theleaders; (iii) Participants – are the companies engaged innon-financial aspects of CSR and most often demon-strate accountability to some of their stakeholders suchas customers and employees; (iv) Bystanders – are thecompanies not yet seriously involved in CSR activities andthat usually do not report non-financial performance.
To the extent possible, this study has adopted the scor-ing methodology to assess regional performance. Notsurprisingly, local branches of multinational companiesare either Leaders or Challengers of CSR promotionand implementation in the Western Balkans region. Thisapplies particularly to multinational subsidiaries withmore than 250 employees; and predominantly in publicservice industries. National privately-owned companiesare usually Bystanders or Participants of CSR imple-
mentation, in particular the ones with less than 50employees and primarily in the sectors of trade, con-struction, hotels and restaurants, and education.
Appendix V presents an analysis of how surveyed com-panies are rated within each domain.CONCLUSION
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CSR engagement by company size (n=171)
Figure 16. Engagement in CSR activities across fivedomains by type of company
Strategy
Stakeholder Engagement
Governance
Performance Management
Public Disclosure
Assurance
Understanding Figure 16. Company engagement in six CSR domainswas assessed on a three-point measurement scale where: 1 –No/Little evidence; 2- On the way; and 3- Good practice. The num-bers shown on the figure represent the average mean value ofthose values for all companies taken together. For example, if anaverage private company scored 1.60 on strategy domain, an aver-age international company operating in the region scored muchhigher – 2.08. The difference across company types for all domainsis statistically significant at <.050 level.
Private-National
Private - multinationalor subsidary/branch of internationalorganization
Government
1,602,082,09
1,522,031,86
1,622,182,14
1,642,001,77
1,622,082,27
1,271,431,50
92 Accountability Rating 2006: Summary Report of Results.
Nearly three quarters of the companies operating in theregion report some level of involvement in CSR.However, involvement usually consists of expected legalcompliance, supplemented by acts of philanthropy,community support, environmental projects and activi-ties related to occupational health and employee sup-port. Only a few companies engage in the wider CSR
activities that are becoming mainstream in the EU, suchas stakeholder dialogue, fighting against corruption,elimination of employment discrimination and partici-pation in private/public partnerships. Private multina-tional companies are far more involved in CSR than pri-vate-national and state-owned companies. Overall,multinational companies are the main drivers of CSR inthe region. Due to their global experience and supply
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CSR Engagement by Industry (n=171)
Figure 17. Company engagement in CSR activities across five domains by industries
Strategy
Stakeholder Engagement
Governance
Understanding Figure 17. Company engagement in six CSR domains was assessed on a three-point measurement scale where: 1 – No/Littleevidence; 2- On the way; and 3- Good practice. The numbers shown on the figure represent the average mean value of those values for allcompanies taken together. The difference across industries for all domains is statistically significant at <.050 level except in PerformanceManagement domain
Manufacturing
Electricity, gas andwater supply
Construction
Wholesale and retail trade,motor repair
Hotels andrestaurants
Transport, storageand communications
Financial intermediation
Education: private univer-sities
Other community, socialand personal service
2,002,091,621,581,822,252,181,501,71
1,971,641,621,681,642,172,121,331,55
2,092,091,921,681,552,252,291,331,79
Performance Management
Public Disclosure
Assurance
2,062,001,771,741,641,921,821,831,58
1,852,551,851,531,822,252,292,171,76
1,451,911,461,161,091,581,471,331,24
chains, they are more likely to understand CSR as along-term investment that will generate profit, and haveexperience, expertise and capital to be able to engage inthose activities.
There are a number of barriers to CSR engagementbut also numerous drivers that can provide furtherstimulus for enhanced CSR activities. Lack of compa-ny knowledge of CSR and lack of technical support inCSR development and implementation are the pri-mary barriers reported by businesses. Financial consid-erations – insufficient financial resources, and lack ofshort-term benefits – are additional problems. Majordrivers, such as reputation and competitive advan-tage, have direct linkages to short- and long-termprofitability. Companies that view expenditures asso-ciated with socially responsible programmes as long-term investments are more likely to be involved invarious CSR activities. Drivers such as NGO supportand government – are reported as having only minorinfluence on business’ decision to get involved in CSR.These findings underscore the need for governmentand NGOs to be more involved in supporting busi-nesses as well as putting pressure on them to engagein CSR.
Company engagement in CSR was rated in six differentdomains: Strategy, Governance, Stakeholder Enga -gement, Performance Management, Public Disclosure,and Assurance. According to the results, 19 percent ofthe companies in the region are ‘good’ at having incor-porated CSR strategy in their overall company strate-gy, 12 percent of companies have the same results inengaging their stakeholders in company activities, 22percent of companies have incorporated CSR in theirgovernance, but only 12 percent have sound perform-ance in implementing CSR plans and strategies, 23 per-cent are ‘good’ at making their company informationpublicly available, and only 4 percent assure that theirCSR work meets accepted standards. The majority ofthose companies are large multinational corporationsthat work in public services and manufacturing sectors.Multinational businesses apply various internationalCSR-related standards in their business processes, usual-ly based on their corporate experience in other devel-oped countries.
It can be concluded from the data that assurance of CSRwork by external experts is almost completely lacking inthe region and that stakeholder engagement by business-es is very weak. Businesses are not the only ones to be‘blamed’ for limited stakeholder engagement. Low stake-holder pressure and activity is among the reasons whystakeholder opinion is not incorporated in company deci-sion making and points to the need for stronger cooper-ation between the private sector and civil society. Thebusiness sector needs to explore how it can better alignits performance with societal expectations using volun-tary CSR approaches. Meanwhile, CSOs representing var-ious stakeholders need to invest more effort into build-ing a positive reputation to ensure that business acceptsthem as equal and influential partners.
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This section summarizes the main findings of the report.
I. Business Corporations
The majority of businesses across the Western Balkans (73percent) claim to be engaged in some aspects of CSR; only23 percent of the companies in the region report thatthey are not involved in any CSR-related activities; and anadditional 4 percent do not know or declined to answer.The percentage of company self assessment on CSRengagement is strongly influenced by the regional under-standing of CSR. As analysis demonstrates ‘CSR involve-ment’ usually consists of donations to charities and com-munities, engagement in environmental projects andfinancial support and training towards a company’s ownstaff members. Furthermore, as many laws, regulationsand standards are not implemented and enforced at anadequate level, many companies would report having CSRengagement when their socially responsible activities con-sist mainly of compliance. As CSR is a voluntary activity,companies usually engage in CSR areas that are more suit-able to their situation and interest. Consequently, compa-nies that are engaged in some aspect of socially responsi-ble business behaviours and are not doing well in someother areas are still eager to report as being involved inCSR. The pattern can be considered a standard transitionfrom non-existence of CSR into an emerging stage of CSRdevelopment in the region.
CSR projects implemented in the region by companiescan be categorized into four groups:
1. Engaging in philanthropy;2. Supporting community initiatives;3. Implementing environmental projects; and4. Investing in employee welfare and education.
Business involvement in many other CSR-related activ-ities (such as engaging stakeholders in decision-making
processes, working on consumer protection andobserving consumer rights, operating transparently,good corporate governance, socially responsible invest-ing etc.) is only in an emerging stage of developmentwhich suggests there is potential for companies tobroaden their CSR approach.
Compared to previous studies conducted in the region,there is evident change in company perception andunderstanding of CSR. Under the influence of recentinternationally funded environmental projects and ini-tiatives implemented in the region, and worldwidemedia attention to issues such as global warming andclimate change, more companies recognize environ-mental concern as a CSR issue, which is a shift from theresults of the previous studies in the region. Businessesput environment as one of the top CSR issues andacknowledge the importance of environmental protec-tion. However, wide-scale business involvement inactivities related to preserving the environment has yetto be developed.
Building the company’s reputation, engaging in sustain-ability, and gaining competitive advantage are the maindrivers influencing businesses’ decisions to be involvedin CSR. Businesses point out the major barriers that dis-courage companies from being involved in CSR activi-ties as i) general lack of knowledge of CSR and ii) lackof technical skills on how to implement CSR activities.In addition, a lack of (internal) funds and limited gov-ernment support hinder the CSR-involvement process.The enabling environment for businesses to becomesocially and environmentally responsible is generally notin place. Non-corporate stakeholders, especially civilsociety and government have not yet realized their fullpotential to put significant pressure on companies tobecome accountable.
The research rated CSR engagement of companies in theWestern Balkans region according to six internationally
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4. SUMMARY OF FINDINGS
accepted categories: Strategy, Stakeholder Engagement,Governance, Performance Management, PublicDisclosure and Assurance. According to these findings, atpresent, only 19 percent of the companies in the regionincorporate CSR into their overall business strategy, 12percent of the companies involve all internal stakeholdersin company activities and decision-making processes, 22percent have governance and management systems thatintegrate CSR into the work process, 23 percent havegood reporting behaviour, and 4 percent utilize inde-pendent experts services to assure CSR-compliance lev-els. The ratings provide an accurate picture of companies’overall engagement in CSR – companies which receivebetter ratings across the six categories, are also the oneswhich offer high salaries and benefit packages to theiremployees, are prone to engage in community projects,and invest in CSR training.
Generally, large multinational corporations operating inthe Western Balkans along with development partnersare the main drivers and champions of CSR engage-ment, while, privately-owned national SMEs are‘bystanders’. State-owned companies’ engagement inCSR falls in between national-private and multinationalcompanies. Multinational corporations usually incorpo-rate CSR practices and standards that have beenapplied by their head offices in other countries. Havingnecessary financial and human resources, technicalcapacity and skills, and international experience givemultinational companies an advantage over other com-panies. SMEs are lagging behind in all aspects of CSRengagement in the region. Lack of necessary resources,and technical skills, experience and understanding,along with a non-enabling environment are among themany factors hampering SMEs’ involvement in CSR.SMEs (in our sample) usually operate in industries suchas wholesale and retail trade; construction; hotels andrestaurants; and private schools. Taking into accountthe fact that SMEs are large contributors to the econ-omy and employment, efforts should be expanded tosupport their engagement in CSR.
II. Non-corporate Stakeholders
Non-corporate stakeholders’ involvement in CSR variesacross societies. In Serbia and Montenegro, civil soci-
ety organizations are most actively involved in promot-ing CSR among the business community. In Kosovoand Albania there is a general lack of CSR involvementfrom members of civil society organizations, govern-ment, and academia. At the same time, B&H is the onlycountry where CSR is being taught at university level.The strong presence of development partners inKosovo, however, is having a significant influence onthe accelerated adoption of international values andgovernance practices. Albania has the most progres-sive legislative background and laws in the regionwhich, if implemented accordingly, can be a greatresource for further development of CSR practices.
The five governments in the region do not meet theexpectations of business or civil society in ensuring anenabling environment for CSR implementation. Noneof the states in the region has a specific CSR pro-gramme or government strategy that has clearlydefined goals and objectives of incorporating CSR val-ues in business practices. Among many roles (mandat-ing, facilitating, partnering, endorsing) that governmentcan play in promoting CSR, governments have donemore work on mandating – by passing laws and regu-lations, covering almost all areas of CSR, aligned withEU standards and requirements. However, legislation isinadequate to create an enabling environment for CSRdevelopment. All other areas of potential governmentactivity are only in their infancy. A recent positivedevelopment is that some government bodies havestarted assuming a leadership role in CSR promotion.
CSOs are not the main drivers of CSR implementation.The full potential of civil society in promoting CSR isyet to be realized. NGO activities in promoting CSRusually include awareness campaigns, research activi-ties, training, publications etc. but do not focus enoughon the business case for CSR, which would producebetter results with the business sector. Substantialefforts also need to be invested in developing overallcivil society capacity and influence at national level tobe able to hold business accountable for its impact onsociety and the environment. Partnership and cooper-ation among private and civil society sectors needsfurther facilitation and development in order for busi-nesses to acknowledge NGOs as important and equalpartners.
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Along with multinational corporations, developmentpartners are the main drivers of CSR in the WesternBalkans region. The EU has significant influence in theregion and all governments of the region have con-ducted reforms and adopted a number of progressivelaws and regulations with the view to getting closer toEU standards. Provided they are adequately imple-mented those reforms will create a favourable environ-ment for substantial CSR development. A number ofother development partners are implementing variousCSR programmes in the study region. In most cases,these programmes are implemented in partnershipwith NGOs, businesses, and sometimes with govern-ments.
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This section is aimed at recommending a set of con-crete actions for the consideration of businesses, gov-ernments and other non-corporate actors to facilitatefurther development of CSR in the region. The recom-mendations were derived from the findings of thisresearch and evidence-based best practices in othercountries, especially in CEE, available in the literature93.
I. Businesses
Businesses and corporations should realize that beingsocially responsible is not an extra cost or burden butrather an investment and key to future success andsustainability. Around the world, society is looking tothe business sector to help meet the world’s econom-ic, social and environmental challenges. Consumers,investors and multinational enterprises have a prefer-ence for businesses whose activities are of the higheststandards, actively managing their risks and maximizingthe good that they do. Looking at the current trends,e.g. in the automobile industry94, wind turbine indus-try95 etc., it appears that companies which incorporateCSR practices in their business strategy and operationscan gain tangible results within a relatively short timeperiod.
1. Businesses should consider investing more finan-cial and human resources in learning and incorpo-rating different CSR practices in their work.Designating a CSR department or responsible personenables better learning, coordination and implementa-tion of CSR activities within the company. The person
responsible for CSR should have very close access andinteraction with company executives.
2. Businesses can benefit from supporting think-tanks, professional organizations and businessassociations who promote CSR practices. Thoseorganizations play a vital role in bringing internationalpractices and standards into the region and in support-ing business engagement in CSR. Investing in thoseorganizations will significantly reduce the cost and bur-den associated with the development of in-house CSRlearning and knowledge management programmes.
3. Businesses should consider entering into dia-logues with civil society and government on differ-ent CSR-related issues. Those are a rich source ofinformation and provide the basis for future partner-ships with the public sector. They enable businesses tolearn about best CSR practices (including those of theircompetitors), contribute to identify the needs of keystakeholders, and can help identify risks and businessopportunities.
4. There are many evidence-based CSR businesspractices that need to be incorporated in businessstrategy and operations. So far, philanthropy and com-munity support, environmental protection, and employ-ee well-being are the only practices that are common inthe region. Businesses should invest more time in learningand implementing other types of best practices.
5. Businesses should incorporate internationallyaccepted CSR standards in their processes.
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5. RECOMMENDATIONS
93 The findings and recommendations from the previous CSR baseline research in the region have been incorporated. UNDP 2007. Baseline Study on CSR Practices in the NewEU Member States and Candidate Countries.
94 Automobile companies that incorporated fuel efficient and hybrid car production in their businesses in late 1990s when the price of the oil was around $10 US are becomingleaders in the industry after only 10 years. By contrast, the companies that focused on short term gains 10 years ago and did not incorporate environmental concerns in theirproduction are currently running out of business and losing the edge in the industry.
95 The wind turbine industry is among the fastest growing in Europe and North America due to its ability to produce low cost energy. According to research results by HillpointEnergy’s Ben Spitz. („Wind Turbines: The US Market“, 2008) wind turbine industry in the USA will increase from $7.9 billion in 2007 to $60.9 billion in 2013.
Implementing those standards will enhance competi-tiveness and facilitate integration into the global econ-omy, ensuring access to world markets, either directlyor through the supply chain.
6. Businesses themselves are and should remainthe key drivers of CSR in the region. By embeddingCSR principles at all levels of a company managementand operations, and reaping the benefits, sociallyresponsible businesses can become models for otherbusinesses and in particular SMEs. This reflects positive-ly on a company’s reputation and image, can lead tothe creation of a culture of socially responsible busi-nesses in a given country, which will eventually result inimproved competitive advantage and sustainable eco-nomic development.
II. Governments
As the research shows, governments are not seen asthe main drivers of CSR in the region. Companies donot feel that governments are encouraging them toaccept and adhere to socially responsible business prac-tices. In order for governments to play a key role in cre-ating an enabling environment for CSR, and in this wayaligning business behaviour with government objectivesand widely accepted international standards, it is rec-ommended that governments:
1. Designate a national state body to be responsi-ble for encouraging and creating an enablingenvironment for CSR promotion and develop-ment. The government body should functionunder the jurisdiction of the most relevant ministry(e.g. ministry of economic development, ministry ofEuropean integration). A key point is that it must beseen as having national influence, and able to leadand coordinate all other line ministries and govern-ment agencies on the national CSR agenda. In addi-tion, this body should be responsible for promotingCSR within the business community and among thewider public, overseeing any national CSR strategy.It is important that this body coordinates its activi-ties with, and is accountable to a multi-stakeholdercommittee consisting of representatives from pri-vate, public and civil society sectors. It should also
ensure that public agencies also ‘walk the talk’ interms of their own respect for international CSRstandards and accountability.
2. Start a multi-stakeholder dialogue process todevelop a national CSR agenda. It is recom-mended that governments of Western Balkancountries launch multi-stakeholder forums toinform a potential national CSR agenda. Theseshould include representatives from all sectorsand disciplines including civil society, private andpublic sectors. The experience of some Europeancountries (e.g. Lithuania) in preparing a nationalCSR strategy should be explored and used in thisprocess. The forums should aim at identifying pri-ority areas for CSR development. The final out-come of the dialogues should be a proposednational CSR agenda and action plan clearly linkedto any sustainable development strategy that thecountry may have developed.
3. Governments should consider creatingprocesses to monitor and enforce laws per-taining to basic standards relevant to CSR. Agood body of progressive laws and regulationsare on the books in the region, however, as theresearch has demonstrated, in many cases legisla-tion is not being implemented and enforced.Adequate implementation of the laws will createenabling conditions for CSR development.
4. Governments should create clear financialand non-financial incentives for companies topromote their involvement in CSR. It isbelieved that governments do not offer enoughincentives for businesses to engage in sociallyresponsible activities. Most often companies aremore interested in short-term economic benefitsrather than long-term sustainability. Therefore,governments should create incentives for com-panies such as tax cuts, non-financial recognitionand financial awards for environmentally cleanproducts, community activities, etc
5. Awareness-raising and promotion of dialogueon CSR. One of the main reasons why companiesare not involved in CSR activities is related to alack of knowledge and available information.Governments could encourage universities toinclude CSR research and education in their cur-ricula. They can also help develop research on
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best practices and disseminate data on how supe-rior CSR performance can result in improvedbusiness value. Finally, Governments could facili-tate dialogues among civil society, public and pri-vate sectors on the benefits of CSR involvement.
6. It is recommended that governments in theregion review and revise their public procure-ment rules and procedures to make themmore environmentally and socially friendly.Governments are well placed to be pioneers inincorporating environmentally and sociallyresponsible practices – especially when govern-ments act as consumers or suppliers. There aremany such public procurement procedures fromEU countries that governments can refer to indeveloping their own policies.
III. Other Non-corporate Actors
Despite a significant number (48 percent) of non-corpo-rate actors viewing CSOs, including NGOs, as a key play-er in CSR promotion, the research showed that very fewcompanies saw NGO activities as the reason for theirinvolvement in CSR. This is an important finding forNGOs when building their programmes and activities.
1. More NGOs’ efforts should be invested incommunicating the business case for CSRthat helps demonstrate concrete short andlong-term gains from CSR involvement.Businesses are interested in tangible benefitsfrom CSR involvement. The media should alsobe encouraged to air debates on the topic.
2. Multi-stakeholder partnerships are needed.As research demonstrated, the level of partner-ship among private, public and civil society sec-tors is not at an adequate level to produce signif-icant results. Businesses are yet to acknowledgecivil society as equal partners. CSOs should try toengage in more discussions, common projectsand initiatives with businesses on different social,environmental issues including CSR. Deve -lopment partners and governments should facil-itate and support such partnership initiatives.
3. CSOs and development partners should worktowards making international standards and
expertise available to businesses. With an eyeon the international supply chain and access to for-eign investment, it is important to implement glob-ally accepted standards with regard to environ-mental management and labour rights.
4. CSOs and development partners could focusmore of their efforts on influencing andbuilding government capacity to implementreforms and CSR incentives. In order to have anational-level impact, the effort should be ledand coordinated by government. However, theresearch shows that government involvement inpromoting CSR is currently very limited due to alack of knowledge and skills. Therefore, CSOsand development partners should consider howthey can help governments to take a leadershiprole in CSR promotion.
5. Universities and higher education institu-tions should incorporate CSR-related cours-es in their curricula and build their capacityaccordingly. It is expected that CSR skills willbecome a requirement for any progressive busi-ness employee. Universities should make surethat their graduates (Business, Public and NGOmanagement fields) have those skills in order tobe able to compete in the global market andcontribute to national sustainable development.Higher education institutions might also want toconsider offering CSR and business-ethics-relat-ed degrees and preparing specialists and expertsin this field. As economies integrate into globalmarkets there will be more need for CSR expertsand consultants.
6. Non-profits, research institutions and devel-opment partners should research and incor-porate more CSR evidence-based practices intheir teaching in order to facilitate furtherCSR implementation. CSR is only in the earlystages of development in the region. Researchcould be conducted in different areas dealingwith CSR and should be region, country, sector,and industry specific. Research that focuses on aspecific sector or industry would create detailedevidence and insights of the problems andopportunities in that sector. The findings of suchresearch could become instrumental for the pro-motion and application of CSR in the field.
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7. Development partners should invest moreresources in building civil society’s capacityas a watch-dog to evaluate, analyse andreport on company social and environmentalactivities. The fact that civil society is not veryactively involved in making business accountableis one of the contributing factors for companiesnot to feel any pressure to be involved in CSR.
8. Special attention should be paid to takeSMEs interests and needs into account whenimplementing CSR programmes and initia-tives. Civil society organizations and develop-ment partners should be aware that nationalSMEs are less likely to be engaged in CSR activi-ties and might need extra support in adoptingstandards of socially responsible business.
9. Development partners, donors in partner-ship with NGOs should consider paying moreattention to engaging and training nationalmedia in different CSR issues. The researchhas demonstrated very limited media involve-ment in CSR promotion. Media has a greatpotential to educate businesses and the public inCSR.
10. CSOs and international donors should con-sider creating non-financial incentives. Theresearch has demonstrated that the lack ofincentives is a factor limiting businesses’ engage-ment in CSR-related activities. Such incentivescould be awards, certificates and recognition forCSR performance and ethical businesses.
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Annex I.National Expert Teams
ALBANIA
Research Centre Monitor (RCM)Bulevardi “Zogu I”, Pallati 13-katesh, Hyrja 5/C,Tirane, ShqiperiTel: + 355 4 250653Fax: + 355 4 250654e-mail: [email protected]
Research TeamElda Dakli, Team Leader, Co-author of NationalReportOrnela Liperi, Researcher, Co-author of NationalReport
BOSNIA AND HERZEGOVINA
PRISM ResearchSarajevo, 71000Obala Kulina Bana 15tel: +387 33 251 230www.prismresearch.ba
Research TeamAida ·tetaSnjeÏana Kojic HasanagicDino D–ipa
KOSOVO
Management and Development Associates (MDA)Ulpiana, Rr. Zija Shemsiu 25Pristina, Republic of Kosovo 10000Tel: + 381 38 500 147Fax: + 381 38 500 247
Email: [email protected]: www.seemda.com
Research TeamLuan Dalipi, Project Manager& All staff members of (more than 20 persons) MDA
MONTENEGRO
Centre For EntrepreneurshipAnd Economic Development (Ceed)
Kralja Nikole 27a/4, Business Centre “âelebic ”81000 Podgorica, MontenegroTel/fax: +382 20 620 611, 633 855e-mail: [email protected], web site: www.visit-ceed.org
Research TeamDragana Radevic, PhDMilijana KomarBudimka GolubovicMarija Lazarevic
SERBIA
Centre for Monitoring and EvaluationStreet address: Stojana Protica 14, 11000 BelgradePhone/fax: +381 11 2447 987Mobile: +381 65 8321 258http://www.cme.org.yuhttp://www.csr-online.info
Research TeamMarko Savic, Programme Director, Project ManagerMarina Zivic, Executive Director, ResearchCoordinatorBranko Radan, President, Senior analystGoran Cetinic, Research ConsultantDjordje Nakic, Junior Research Associate
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ANNEXES
Annex II.Methodology andSample Description
I. Desk Research
Desk research was conducted by NETs in each countryin accordance with questionnaires created by the con-sulting international experts. The following areas werecovered by the desk research:
• Perception of CSR: CSR understanding in local lan-guage and culturally specific drivers of CSR;
• Legislative background: existence and implementa-tion of laws and legislations that cover issues relat-ed to CSR (analysis of legislation);
• CSR incentives and control mechanisms: existinggovernment financial and non-financial incentivesto encourage company engagement in CSR as wellas mechanisms to monitor performance and ensureaccountability;
• CSR data and statistics: previous reports, studies,publications, etc., demonstrating level of CSR prac-tices in the region (literature review);
• CSR-related negative events: recent CSR-relatedscandals, cases of pollution, etc., (media analysis);
• CSR best practices: utilization of international CSRstandards by businesses, best practices in stakehold-er engagement, philanthropy, community engage-ment, environmental protection, etc. (media analy-sis, expert opinion, CSR literature in the country);
• key players of CSR promotion: main drivers of CSRin the country (media analysis, CSR-related litera-ture, expert opinion); and
• CSR resources: existing resources in the countriesthat companies can utilize in engaging in CSR.
The detailed analysis of desk research results fromeach country was prepared by NETs and submittedto the international experts. The latter independent-ly conducted a further country specific and regional
review of CSR literature available in the opendomain. The results were then cross checked forconsistency.
II. Surveys
In each research country, surveys were conducted withcompanies and non-corporate actors of CSR promo-tion. The surveys were carried out based on commonquestionnaires prepared by international experts andtranslated into local languages by the NETs. Thedetailed description involved in the sample and inter-viewing process is given below.
CORPORATIONS
A sample of 180 companies was selected and inter-viewed by NETs. As demonstrated on Figure 18, thedistribution of samples across region was almost equal(19 percent – 22 percent).
The system of business registration differs in eachcountry, with the result that there is no comparabledatabase of companies across the countries. In thesecircumstances, NETs were given the flexibility to iden-tify the most appropriate sources to draw the samplefrom. As demonstrated in Figure 19, sources of samplesare different in each country.
In many cases NETs had to utilize a number of methodsfor selecting the sample and contacting companies for
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Numberof companies
Percentage
Albania 40 22%
Bosnia & Herzegovina 34 19%
Kosovo 32 18%
Montenegro 34 19%
Serbia 40 22%
Total 180 100%
Figure 18. Business sample distribution96
96 Samples from each country were also similar with regards to company size and ownership variables.
the interviews. For example, in Kosovo, the NET usedthe database of companies registered under }KosovoBusiness Associations to select the sample. However,the NET was not able to retrieve contact informationfrom the same database and utilized a number of othersources (UNDP Kosovo, Kosovo Chamber ofCommerce and American Chamber of Commerce) toreach the companies selected for the interview. Suchdifficulties in accessing companies’ information have leftout of the sample many of the companies that are notmembers of those Chambers of Commerce in Kosovo.Other NETs faced similar problems. Many companiesthat were not listed under MBA in Montenegro, theSerbian companies’ database and Top 300 in Serbia,Global Compact and Government Business Registry inB&H had no chance of being included in the sample98.
The sample was adjusted to sizes of companies.Company size was identified based on the number ofemployees (Figure 20); and not on financial aspects –e.g. profits, assets, or market capitalization. A cut off ofsix employees was used for the small company catego-ry. This threshold was used in order to eliminate verysmall companies, which presently make up the majori-ty of businesses in the region. Due to their profile in theeconomic landscape, the number of medium and largecompanies in the sample was comparatively overly-rep-resented. The study sample was therefore adjusted tobe representative of national economies rather thanindividual number of companies.
Distribution of Sample based on industry is given onFigure 21.
NON-CORPORATE STAKEHOLDERS
The main non-corporate stakeholders for CSR promo-tion in the region were identified by desk research. Thefindings of the desk research were also taken as thebasis in selecting the actors’ sample. The non-corporatestakeholders’ sample was selected based on each orga-nization’s position in society, relevance to CSR agendaand previous engagement in CSR promotion. A total of76 actors from various fields were interviewed.Distribution of non-corporate stakeholders’ sample isprovided below, Figures 22 and 23.
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97 National market of goods and services is a national project initiated and supported by Serbian Ministry of Economics and Regional Development. For more information, pleasevisit http://www.trzistesrbije.com.
98 Other limitations of the report are explained in the Limitation section.
Number ofcompanies
Percentage
Small (6 to 49 employees) 39 22%
Medium (50 to 249 employees) 71 39%
Large (above 250 employees) 70 39%
Figure 20.Business sample distribution across size categories
Figure 19. Company sampling source
Albania Enterprise Register of the National Statistics Institute
Bosnia & Herzegovina Government Business Registry database and UNDP Global Compact Local Network
KosovoKosovo Business Associations’ company member databases, UNDP Kosovo, Kosovo Chamber ofCommerce and the American Chamber of Commerce in Kosovo
MontenegroMontenegro Business Alliance (MBA) and Business Guide – published by governmental Directorate forDevelopment of Small and Medium Enterprises
SerbiaSerbian companies’ database from the National market of goods and services97 and Top 300 companiesin Serbia list published by the Serbian Economist magazine
III. Interviews
NETs were given a margin of flexibility on how to con-duct interviews. Some NETs conducted interviews pri-marily over the phone; some other corporations/non-corporate actors were initially contacted over thephone and then interviewed in person. When NETsmade initial contact with the companies, the companymanagement was informed of the purpose of theinterview, the voluntary nature of participation, and theorganization-specific anonymity of survey results. As ageneral observation, companies that had already
engaged in or had an understanding of CSR appearedto be more willing to participate in interviews thancompanies that had no prior engagement in CSR. Forthis reason we believe that our sample tends to leanslightly towards companies that already employ someCSR practices or understanding.
Interviews were conducted in accordance with ques-tionnaires developed by the international experts. Priorto interviews, the NETs translated the questionnairesinto national languages in each country. Interviewswere conducted using semi-structured questionnairesconsisting of a number of closed and open-endedquestions which allowed interviewers to obtain bothquantitative and in-depth qualitative information. EachNET entered collected information into databases andinternational experts merged data from the region foraggregate analysis.
IV. Analysis
No weighting was applied in analysing the data. Most ofthe analysis presented in the report was developedthrough cross-tabulations of unweighted data.
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Numberof companies
Percentage
Agriculture, hunting and forestry 4 2%
Mining and quarrying 2 1%
Manufacturing 35 19%
Electricity, gas and water supply 11 6%
Constuction 13 7%
Wholesale and retail trade, motor repair 23 13%
Tourism, hotels and restaurants 13 7%
Transport, storage and communications 12 7%
Financial intermediation 17 9%
Real estate, renting and business activities e.g. computing 3 2%
Education: private universities 6 3%
Health and social work 1 0.6%
Other community, social and personal service 40 22%
Total 180 100%
Figure 21. Business sample distribution across industries
Number oforganizations
Percentageof total
Albania 20 26%
Bosnia & Herzegovina 13 17%
Kosovo 15 20%
Montenegro 13 17%
Serbia 15 20%
Total 76 100%
Figure 22. Actors sample distribution
Significance was examined through chi-square andANOVA statistics. The threshold for reporting relation-ships as statistically significant was set as p<.0599.
The internationally accepted standard AccountabilityRatingTM was used in assessing the level of companies’engagement in CSR practices. The rating100 was appliedas a means to compare results with the sister UNDPproject’s study – Baseline Study on CSR Practices inNew EU Member States and Candidate Countries,completed in 2007, and allowed for wider regionalcomparison. For more information on how companieswere rated, please see Annex IV.
All survey percentages displayed in the report reflectrespondents’ opinions based on survey questions.Therefore, many percentages rely on self-assessmentof company representatives, rather than on evaluationsconducted by the research team. However, percent-ages describing Accountability RatingTM are the onlynumbers that were calculated by the research teambased on both survey questions as well as secondarydata sources.
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Number ofcompanies
Percentageof total
Business associations local 9 12%
Business associations(local branch of international)
2 3%
Trade Unions (national) 4 5%
Local government / Municipalities 7 9%
National government / regulators 14 18%
Non-governmental organizations 16 21%
Media 8 11%
Education: Higher(universities, colleges)
8 11%
Development partners 8 11%
Total 76 100%
Figure 23. Actors sample distribution sectors
99 p <.050 is statistical significance threshold referring 95% of assurance that relationship between variables is true and not due to chance.100 The same rating was applied in assessing the baseline CSR engagement in a number of other countries in the region. For more information on the previous work please review:
UNDP 2007. Baseline Study on CSR Practices in the New EU Member States and Candidate Countries. The report recommends further research in the field to apply the samemethodology (recommendation #1).
Annex III.Country Specific Overviews
Albania
Albania’s past has considerably affected present socio-economic conditions in the country. In comparison tothe rest of the region, Albania experienced, more iso-lation from the outside world, and a more regulatedand centralized economy which led to higher levels ofpoverty and suffering in the country when goingthrough the political and economic transition process.Albania elected its first transition government in 1992.The new government immediately started reforms inthe public and private sectors and achieved significantresults by the late 1990s. As a result, the GDP grew atan average rate of 6.6 percent per year between 1992and 1997101. In 1997, the collapse of pyramid savingschemes hindered economic growth. In 1998, theeconomy resumed its growth. On average, GDPincreased 7 percent between 1998 and 2006102.According to the World Bank, the percentage of pop-ulation living below the poverty line declined from 25percent in 2002 to 19 percent in 2005, lifting morethan 230,000 people out of poverty103. Despite theseimprovements, the Albanian economy experiences aconsistent trade deficit, with exports amounting toonly 25 percent of imports104. It also has a high level ofcorruption: the country’s transparency index ranks105th among 179 countries in the world105.
Awareness and development of CSR practices inAlbania is very limited. In 2003, The Albanian Institutefor Development Research and Alternatives (IDRA)with support from OSCE launched a project calledIntroduction of Business Ethics at AlbanianUniversities106. The project aimed at introducing con-
cepts of business ethics at Albanian Universities. Theproject was carried out until 2005. According to itsfinal report, the students and faculty at the universi-ties demonstrated significant interest in the subject ofbusiness ethics. However, students had the percep-tion that Albanian businesses do not adhere to anyprinciples of business ethics and that the understand-ing of social responsibility is very limited among stu-dents. As stated in the report: “It has almost createdthe perception that in order to prosper in theAlbanian Business Environment one should avoidethics as much as possible. You can prosper only ifyou are amoral, bribe or cheat, engage in unfair com-petition and so on.”107
According to the desk research results, there has beenno study, survey or other research project conductedin Albania in order to investigate the CSR developmentin the country. There are few CSR initiatives (seebelow) in the country that are supported by develop-ment partners and are often implemented by CSOs.However, the scale of those projects is usually not atthe level to affect national policies or create significantpublic awareness. The Global Compact implementedby UN, ECSRSE by InWent, Southern EuropeInternational Standards and Technical Regulations byIFC are among the few aimed at developing CSR initia-tives at the national scale. Besides development part-ners there are several pioneering multinational andnational companies (e.g. Raiffeisen Bank, Pespa Alumil,Bankers Petroleum, Floryhen, National CommercialBank, Vodafone. etc.) in the country that are activelyengaged in various CSR-related activities.
The term CSR has not been officially translated intoAlbanian. However, direct translation of CSR as“Pergjegjshmeria Sociale e Korporatave” is used alongwith the English version among businesses and otherstakeholders engaged in CSR.
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101 World Bank. 2007. Albania Urban Growth, Migration and Poverty Reduction: A Poverty Assessment Report. No. 40071-AL.102 Ibid.103 Ibid.104 Foreign trade, December 2007, INSTAT.105 Transparency International 2007. http://www.transparency.org/policy_research/surveys_indices/cpi/2007.106 http://www.idra-al.org/pdf/en/BizEthics2004-2005FinalNarrativeReport_Web.pdf.107 IDRA. 2005. Business ethics at Albanian universities: Final Report. Main finding point #7.
Bosnia and Herzegovina
Bosnia and Herzegovina suffered considerably fromthe armed conflict in the 1990s. B&H declared its inde-pendence in 1991, which was followed by a civil warthat lasted almost four years. More than 200,000 peo-ple were killed or went missing and over a million fledthe country108. By 1995 the country’s economy shrankby more than 70 percent and industrial productiondropped by more than 90 percent109.
B&H economy started gaining positive momentum justafter the war’s end in 1995 and the declaration of theDayton agreement. The unemployment rate decreasedby 10 percent and average wages doubled during the12 month period between 1995 and 1996110. The econ-omy has grown steadily by about 5 percent per yearsince 2000 and real GDP growth was 5.8 percent in2006111. But there are still many problems with the socialwelfare of the population and economy. The officialunemployment rate is close to 28 percent112 and morethan half of the national income is earned by 20 largecompanies113.
In 2004, a mission from the UNDP Nordic Office andUNDP B&H conducted the first CSR assessment in B&Hin order to determine the possibility of launching theGlobal Compact network in the country114. The assess-ment included more than 70 businesses, developmentpartners and CSOs to gauge their knowledge andengagement in CSR115. The results demonstrated (i) avery low level of CSR awareness among businesses andother stakeholders, and (ii) business community con-cerns over the high corruption rate and lack of trans-parency. The Global Compact was launched in 2005 bythe UNDP and had recruited 31 members by June 2008.
In 2004, the International Rescue Committee (IRC)started an initiative to engage business, governmentand non-profit sectors in a dialogue on CSR. Severalround-table discussions and training events were heldwith representatives of different sectors. Many com-panies blamed time-constraints for not being able toparticipate further in discussions116.
In 2005, a regional non-profit, Civil Society PromotionCentre117 (CSPC), in cooperation with IRC organized aregional conference on CSR in Sarajevo, including rep-resentatives from B&H, Croatia, Serbia, andMontenegro. The conference reached several keyconclusions with regards to strategies on developingCSR in the region. They included recommendations to(i) increase cooperation between all sectors of society(government, private, civil society), (ii) exchange evi-dence based best practices among countries in theregion, (iii) raise public awareness on CSR, (iv) adoptnecessary legislation for CSR promotion, (v) stress theimportance of CSR in European integration, (vi) investin communities and support NGO development, (vii)strengthen media involvement in CSR promotion, and(viii) increase the level of government CSR promotion.
Among all research countries B&H is the only one thatwas included in calculating National CorporateResponsibility Index (NCRI) in 2005, that assessed thelevel of corporate responsibility in 80 countries118.According to the results, NCRI in B&H fell behind notonly in comparison to developed European countriesbut also to that of other countries in the region such asBulgaria, Croatia, the FYROM, Slovenia, etc.
Currently, the main drivers of CSR in the country aremultinational and some national companies (e.g. Coca
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S108 World Bank. 1997. Bosnia and Herzegovina from poverty to sustainable growth: country study.109 Ibid.110 Ibid.111 World Bank 2006.112 B&H National Report (2008).113 Mesanovic E. 2005. Corporate Social Responsibility: Leading aspects of CSR concept in Bosnia and Herzegovina.114 Global Compact Network Bosnia – Herzegovina. 2007. Annual Report.115 UNIDO. 2007. On the state of corporate social responsibility (CSR) in Central and Eastern Europe (CEE). Special focus: Bosnia and Herzegovina, Bulgaria, Romania and Serbia.116 Ibid.117 www.civilnodrustvo.ba.118 UNIDO. 2007. On the state of corporate social responsibility (CSR) in Central and Eastern Europe (CEE). Special focus: Bosnia and Herzegovina, Bulgaria, Romania and Serbia –
do you think would be possible to add the web-link (not applicable if it is stated in the references).
Cola, Vitinka from Zvornik, Bobar Group, ·irbegovicGroup, Violeta, Bosnalijek, Energoinvest) that haveincorporated some CSR principles in their businesses,development partners such as UNDP, UNIDO, UNGlobal Compact, and local CSOs such as FoundationMOZAIK119, CSPC, Chamber of Commerce, etc.
The term “dru‰tveno odgovorno poslovanje”, a directtranslation of Corporate Social Responsibility into locallanguages, as well as another term “dru‰tveno odgov-orno poslovanje”, are used in describing CSR.
Kosovo
The conflict in the territory of Kosovo in the late 1990s,led to a NATO intervention in 1999. In the aftermath,the United Nations Security Council passed Resolution1244 which placed Kosovo under temporary UN rule.Kosovo declared its independence in February 2008,although the mandate of the UN Mission in Kosovo(UNMIK) continues to be in force.
The war in 1999, ethnic tensions, unstable political situa-tion, and economic sanctions during the 1990s severelydamaged the economy of Kosovo. After the conflictended, the Kosovo economy started to grow rapidly dueto a large volume of international assistance and eco-
nomic reforms spearheaded by the UN administration.During the war, most infrastructure was damaged andthus a significant portion of the international aid wasinvested in the public sector. As demonstrated in Figure24, between 2001 and 2006 Kosovo received more than43 percent of total EAR grants on a per capita basis120.
However, the economy of Kosovo still remains underde-veloped compared to other countries in the region.According to the World Bank, Kosovo has the pooresteconomy in Europe (2006) and approximately 37 percent
of the population still lives under the poverty line.121
Remittances from Kosovars living abroad – mainly inGermany and Switzerland – make up more than 12.9 per-cent of GDP122.
As in other countries in the region, the CSR concept wasbrought to Kosovo by development partners and multi-national corporations operating in Kosovo. There are anumber of CSR-related initiatives in Kosovo. Kosovo’sMinistry of Trade & Industry123 and the Kosovo Chamberof Commerce124 organize an annual event called‘Company of the Year,’ aiming to promote leading busi-ness engagement in CSR activities. The Kosovo TaxAdministration125 and the American Chamber ofCommerce126 give an annual ‘Best Taxpayer’ award to the
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Figure 24 Western Balkans Populations and EAR Grants’ Disbursement Comparison
Countries Population EAR Grants 2001-2006
Kosovo 2,126,708 16% 698 € 43%
Serbia 8,032,338 62% 527 € 32%
Montenegro 678,177 5% 188 € 11%
Macedonia 2,061,315 16% 226 € 14%
Total 12,898,538 100% 1,638 € 100%
Source: CSR Kosovo National Report 2007
119 www.mozaik.ba.120 EAR’s Annual Report 2006.121 http://siteresources.worldbank.org/INTKOSOVO/Resources/Kosovo_AAG.pdf.122 IMF Aide-Mémoire, April 2008.123 www.mti-ks.org.124 www.odaekonomike.org.125 www.atk-ks.org.126 www.amchamksv.org.
company that scores best in tax compliance. In addition,there are several UNDP initiatives such as the UN GlobalCompact and of course this particular project. Prior tothis study there has not been any study conducted inKosovo that investigates development of CSR initiatives.
Kosovo has one advantage over other countries in theregion with regards to CSR integration. During the lasteight years, the dominance of international organiza-tions in the public, private and civil society sectors hassignificantly influenced the culture of ‘doing business’ inKosovo. European values on social responsibility areembedded in many sectors of society, which offergreat potential for rapid CSR development.
Montenegro
Montenegro declared its independence in 2006 in apopular referendum vote; prior to that it was part ofthe Serbia and Montenegro union. Similar to othercountries in the region, Montenegro’s economy under-went major tremors in the 1990s. Economic sanctionsby the UN, civil conflict in Bosnia and Herzegovina andin Kosovo, and hyper-inflation were among the factorsthat hampered economic development. However, it isto be noted that Montenegro was not affected asmuch as the other countries of former Yugoslavia.Economic reforms were initiated in the early 1990s, buta real economic up-turn began only after 2000.Between 2000 and 2004 the real GDP grew at an aver-age of about 2 percent a year and inflation droppedfrom 25 percent to 4 percent127.
The concept of CSR, as defined by the EU, was firstintroduced in the middle of this decade by develop-ment partners as part of European Union integration.In 2006, the Centre for Development of Non-Governmental Organizations128 in cooperation with theUS Consulate conducted the first CSR study inMontenegro129. The survey included 57 companies and
51 NGOs from 2 Montenegrin cities (Podgorica andBar). Among the businesses interviewed 79 percentstated that they knew what CSR was about, but only 27percent of them believed that CSR concepts could beapplied in Montenegro. More than two thirds of com-panies from the survey (69.6 percent) reported thatthey have implemented some CSR-related activities inthe past which mainly included charitable donations tochildren and youth related initiatives. The findings ofthe survey demonstrated very weak cooperationbetween businesses and civil society. Almost two thirdsof companies interviewed (63.6 percent) did not reportcooperation with the NGO sector. The study was fol-lowed by a number of consultations and round tablediscussions with various stakeholders with the purposeof raising awareness among the general public andbusiness community on CSR issues.
In 2006, another similar CSR study was conducted byNGO Smart Kolektiv130 and supported by the WorldBank131. The study assessed CSR practices in Serbia andMontenegro. According to the results, the majority(50-70 percent) of companies defined ‘being sociallyresponsible’ as complying with existing laws and regula-tions, and being ethical and transparent. Few compa-nies (less than 40 percent) thought stakeholderengagement and environmental concerns were relatedto CSR. For the majority of surveyed companies, lack ofgovernment support – such as non-existence of gov-ernment regulations and incentives – was a major hin-drance to engagement in CSR activities. Further, com-panies thought that lack of short-term visible financialgains, and high engagement costs were among themain impediments to CSR involvement.
Another step in promoting CSR in Montenegro camein 2007 through the Corporate Social Responsibility inSouth-Eastern Europe regional project132. The project isstill active and supported by a number of developmentpartners (InWEnt, ILTIS), and is implemented locally bythe Directorate for Development of Small and
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127 World Bank. 2005. Republic of Montenegro: Economic Memorandum. A Policy Agenda for Growth and Competitiveness Report No. 32623-YU.128 http://www.crnvo.cg.yu/eng/.129 CRNVO. 2006. Projekat dru‰tvena odgovornost preduzeca u crnoj gori http://crnvo.cg.yu/istrazivanja/drustvena_odgovornost_preduzeca_izvjestaj.pdf.130 http://smartkolektiv.org.131 Mazurkiewicz P. et all. 2006. Business Perspectives about Corporate Social Responsibility: Attitudes and practices in Serbia and Montenegro. Smart Kollektiv.132 InWent 2008. Establishing Corporate Social Responsibility in South East Europe: Programme Update.
Medium-Sized Enterprises under the Ministry ofEconomic Development of Montenegro. The pro-gramme includes establishment of a CSR resource cen-tre, regular CSR publications and awareness raisingactivities, as well as the introduction of the Best SociallyResponsible Company Award. The UN GlobalCompact is also being actively promoted among theMontenegrin business community by UNDP office inMontenegro.
The Montenegrin Commercial Bank (CKB), Mon -tenegrin Telecom, Pro Monte (the first mobile opera-tor in Montenegro), and the First Bank ofMontenegro (Prva Banka Crne Gore) are among thecompanies whose names are frequently mentioned asthe champions in incorporating CSR principles in theirwork.
The term ‘CSR’ has already been translated intoMontenegrin as “Social responsibility of companies”(Drustvena Odgovornost Preduzeca) and is widely uti-lized among businesses and civil society promoting CSRstandards.
Serbia
Serbia experienced a tough political and economictransition process into democracy and the market-based economy. The socio-economic situation in thecountry was devastated by armed conflicts, UN sanc-tions, an economic embargo, and political instability.The country’s economy was profoundly damagedbetween 1989 and 1994, and again in 1999 due to thecivil conflict in Kosovo.
The political instability significantly affected the eco-nomic reforms and privatization of state-owned com-panies and property that started after 2000. According
to the NET desk research some of the largest state-owned companies (National Oil Industry, AirportNikola Tesla, Jugoslav Airport Transport, Telekom,National Power Supplier – EBS, National Phar -maceutical Company – Galenika) are yet to be priva-tized, which creates obstacles for economic develop-ment133.
The national economy started gaining positive momen-tum in 2000 due to rapid economic reforms. Theeconomy grew an average of 4 percent134 a yearbetween 2000 and 2003 and up to 7.5 percent in2007135. Agriculture and the agro-processing industryaccount for the greatest share of the national econo-my136. The World Bank named Serbia a champion ofeconomic reform in the ‘Doing Business 2006’ reportfor reforms implemented between 2004 and 2005137.
The first CSR initiative in Serbia was conducted in 2004by the national non-profit Balkan Community InitiativesFund (BCIF)138. In November 2004 BCIF organized aconference called ‘Concept of Corporate SocialResponsibility: Serbia and Comparative Experiences’.The conference concluded that cooperation betweenthe private sector and civil society was very limited andthe need for CSR promotion and informationexchange between sectors was great139. Another CSRconference was organized in Serbia in 2005 by theForeign Investors Council of Serbia and Montenegroand the Swedish Embassy. During the conference, thePresident of Serbia acknowledged growing support ofinternational companies in implementing CSR-relatedprojects and activities and stressed the need for com-panies to invest more in social and environmental initia-tives.
There have been several attempts to investigate thelevel of CSR engagement in Serbia. In 2005, a local non-profit organization called Smart Kolektiv, as part of aResponsible Business Initiative, in cooperation with the
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133 Privatization of the state-owned enterprises was considered as one of the major reform initiatives implemented by almost all former socialist countries as part of the transi-tion from state-run economy to market economy.
134 World Bank. 2004. Republic of Serbia: An Agenda for Economic Growth and Employment. Report No. 29258-YU.135 Republic of Serbia Republic Statistical Office. 2007. Communication. No 326.136 Dragana Gnjatovic (2007), Capacities for Serbian foreign debt financing, Economic financial relations of Serbia with abroad, Faculty of Economics in Belgrade, Belgrade.137 http://www.doingbusiness.org/documents/DoingBusines2006_fullreport.pdf.138 http://www.bcif.org.yu.139 UNIDO. 2007. On the state of corporate social responsibility (CSR) in Central and Eastern Europe (CEE). Special focus: Bosnia and Herzegovina, Bulgaria, Romania and Serbia.
Fund for an Open Society in Serbia (FOSS) and theEconomic Chamber of Serbia, conducted the firstattempt to research the CSR situation in Serbia140. Thesurvey included more than 2000 respondents from allsectors of Serbian society. According to the results,business representatives understood CSR as addressingenvironmental concerns, philanthropy and communitysupport, as well as compliance with the law. However,the research further revealed that only philanthropyand participation in different community-support proj-ects were among the CSR activities undertaken bycompanies. Only a small number of businesses (31 per-cent) implemented any environmental protection proj-ects. The general public also reported that they did nottrust businesses to be accountable and work for thebenefit of society. The level of trust for local compa-nies was 16 percent, multinational enterprises – 11 per-cent, and the government – 18 percent. In 2006, anoth-er study conducted by Smart Kolektiv (see section onMontenegro), analysed CSR development among busi-nesses in both Serbia and Montenegro141. The findingswere similar to the ones in the previous research: themajority of companies identified philanthropy, compli-ance and environmental concerns as the major CSRissues. Businesses also reported that lack of govern-ment support and incentives along with limited knowl-edge of CSR were among the main factors hamperingtheir engagement in CSR.
There are several international initiatives implementedin Serbia aimed at CSR promotion at the national level.These include the UN Global Compact, UNIDO’sDevelopment of CSR in CEE project, IFC initiatives onintegrating international standards and technical regu-lations in Southern Europe, and ECSRE by InWent. Inaddition, there are pioneering national and multination-al companies (e.g. National Bank of Serbia, B92 –Serbian private Broadcasting Corporation, Soko Stark,Hemofarm, Holcim, EFG Euro Bank in Serbia, Telenor,Delta Holding, Erste Bank a.d. Novi Sad, Coca-Cola HBCSerbia) in Serbia that are integrating CSR principles intheir work.
As in other countries in the region, CSR is a relativelynew concept in Serbia. There is no official definitiongiven to CSR. Despite many translations of the term‘CSR’ in the local language, the English term is frequent-ly used among CSR promoters and the business com-munity.
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140 Smart Kolektiv. 2005. Corporate social responsibility in Serbia: Attitudes of profit, general public, non profit, and public sectors leaders in Serbia towards the concept of cor-porate social responsibility.
141 Mazurkiewicz P. et all. 2006. Business Perspectives about Corporate Social Responsibility: Attitudes and practices in Serbia and Montenegro. Smart Kollektiv.
Annex IV.Company Scoring AccountabilityRating TM142
Each company respondent was assessed in six differentdomains143 using the Accountability Rating TM.
1. Strategy2. Stakeholder engagement3. Governance4. Performance Measurement5. Public disclosure6. Assurance
The rating for each domain has three (3) values: 1)Little/No evidence, 2) On the Way, 3) Good practice.Below is the description of each domain.
STRATEGY• No / little evidence: there is no specific strategy
for managing CSR risks and opportunities; thereare no guidelines, toolkits and policies related toCSR; there is no specific budget for CSR activities.
• On the way: there is some evidence of strategyfor managing CSR risks and opportunities but theCSR programme does not / partly supportsstrategic goals of the company; there is somebudget allocated for CSR activities and CSR com-munication.
• Good practice: there is a specific strategy formanaging CSR risks and opportunities; the CSRprogramme supports strategic goals of the com-pany; CSR has been taken into consideration as atool for achievement of strategic goals; there aretoolkits, guidelines that help implementing CSR inbusiness strategy.
STAKEHOLDER ENGAGEMENT• No / little evidence: there is no / very limited inter-
action with stakeholders, stakeholders are not clear-ly defined, stakeholder relations are not managed.
• On the way: there is ad hoc interaction withstakeholders, communication of stakeholder con-
cerns regarding CSR is reactive; company feelspressure from stakeholders, but stakeholders’ pri-orities are not identified.
• Good practice: there are existing processes formanaging stakeholder relations and conductingstakeholder dialogues; points of view of stake-holders’ issues are prioritised and are takenaccount in the business strategy.
GOVERNANCE• No / little evidence: there are no policies related to
transparency, accountability, or CSR issues; there isno executive/manager responsible for CSR issues;CSR does not appear on Board agenda.
• On the way: there is an executive/managerresponsible for CSR issues in the company, butreporting to Board on CSR is ad hoc, not requiredor regular; collaboration between departmentson CSR issues is not expected.
• Good practice: there is a named individualaccountable for CSR issues on board level/ seniormanagement; there are regular reports to theBoard on CSR; there are policies to promotetransparency and accountability of the company.
PERFORMANCE MANAGEMENT• No / little evidence: there are no management
systems relevant to CSR; performance improve-ments on CSR issues are not quantified; there areno set/specific goals, objectives and targets todrive improvement; CSR issues are not managedin supplier relations.
• On the way: there are several management sys-tems that are relevant to CSR; there is somequantification of performance improvements onCSR issues.
• Good practice: there are management systemsthat are relevant to CSR; performance improve-ments on CSR issues are quantified; there areset/specific goals, objectives, targets to driveimprovement; CSR issues are managed in thesupplier relations; environmental, social or fair-trade labels are used on products.
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142 http://www.accountabilityrating.com. The rating methodology is exactly the same from previous research.143 Note that the Accountability Rating TM has been modified from the six-domain approach to a four-domain approach. However to maintain comparability with the new EU
Member States and Candidate Countries CSR Baseline Study report, we are using the old six-domain approach here.
PUBLIC DISCLOSURE• No / little evidence: no / very limited information
in public domain (report or web), beyond legalrequirements.
• On the way: ad hoc information on CSR in publicdomain; measurement systems are being set upto structure information on CSR performance.
• Good practice: structured/standardized informa-tion on CSR and related policies, performance inpublic domain
ASSURANCE• No / little evidence: there has never been any
assurance process by an independent organisa-tion at the company.
• On the way: an assurance process by an inde-pendent organization is planned or being pre-pared/indicated at the company.
• Good practice: CSR / SD / Environmental Reporthas been assured by an independent organisation.
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Annex V.Analysis of Companieswithin Each AccountabilityRating TM Domain
STRATEGY
Having a clear CSR strategy is essential for effectivelyimplementing sustainable growth and development. Astrategy defines the types of outcomes and targets tobe achieved while using specific methods and tools.Going further and incorporating CSR into a company’svision and strategy makes it easier to mainstream CSRinto the company’s everyday business processes. Inaddition, companies with appropriate integrated CSRstrategies are more likely to understand and respondto future social, environmental, political and economicrisks and challenges.
As shown in Figure 26, more than 70 percent of com-panies from the sample report somewhat or fully tak-ing CSR into account when developing their businessstrategy and 58 percent see CSR as an integral part oftheir business (Figure 25).
Multinational corporations operating in the region aremore likely to report integrating CSR into their businessstrategy than national private and national governmentcompanies.
The findings imply that companies are self-rating theirown CSR strategy efforts higher than the NETs.Although 24 percent of companies report having CSRfully integrated in their strategies, NETs assessed only 19percent of companies having well integrated CSRstrategies. The difference, which is admittedly not large,is not surprising taking into account the fact that, acompany’s own assessment is subjective and based onthat company’s understanding of the concept of CSRstrategy, whereas NETs used more objective methods.
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When developing the strategy for your business, has CSR been taken into considerationas a tool for achievement of strategic goals? (n=148)
Figure 26. CSR part of company strategy
Yes, fully 24%Yes, somewhat 48%
Not at all 16%Do not know 9%
Refused 4%
Integral to your business strategy 58%
A contribution to society, but not integratedwith your business strategy
Do not know 11%Refused or N/A 2%
Do you see CSR-related activities as: (n=132)
Figure 25. CSR Companies’ views on CSR
30%
Having a good strategy has an effect on the overallcompany CSR outcomes (Figure 27). Like all businessactivities, a good strategy can also result in effective CSRactivities. As seen in Figure 27 below, 71 percent of com-panies with good CSR strategy are actively engaged incommunity support whereas, only 42 percent of thecompanies with an ‘on the way’ strategy level and 31percent of companies with a ‘no/little’ level areinvolved in community development. On average thedifference between ‘no/little’ strategy and ‘on the way’strategy is smaller than the difference between ‘on theway’ and ‘good’ strategy rating for almost all outcomevariables (Figure 27). This finding suggests that in orderfor a company’s CSR strategy to be seen as effective, itshould be developed and incorporated at all levels ofcompany business operations. A CSR strategy becomesmore effective when it is an integral part of overallcompany strategy and is considered as an instrument toachieve company strategic goals.
Holcim/Serbia is strongly committed to sus-tainable development. This company mostlyworks in three areas: environmental protection,community development and sustainable con-struction. Related topics also include: health andsafety protection and use of alternative sourcesof energy. Holcim was the first company inSerbia to print a full CSR report. The companyhas its commitments to CSR and current activi-ties updated regularly on its website. It imple-ments part of the global Holcim CSR strategy,adjusting it for local needs.(http://www.holcim.com/cs)
STAKEHOLDER ENGAGEMENT
Stakeholders can be individuals, other businesses (e.g.suppliers or customers), or organizations that eitheraffect company activities or are affected by them.Engaging stakeholder concerns at all levels of businessdecisions and activities is a key component of CSRengagement. By considering stakeholders’ opinions inthe decision making process, businesses can use thisinformation to ensure that their operations and activi-ties respond to societal expectations and needs, affectpositively the lives of people and communities, and donot harm or produce negative consequences that mayexpose the company to increased risks. Informationacquired this way can be a very cost-effective way ofimproving any company’s risk management practices.Furthermore, systematic stakeholder engagement cancreate direct economic benefits to companies. Whencompanies are fully aware of the evolving needs anddesires of their customers, they can shape their prod-ucts and services better to meet market needs. As theliterature demonstrates, companies that build system-atic stakeholder engagement and dialogue can gaincompetitive advantage in the market place, improvenetworks and reputation, and in so doing enhancevalue.
As explained above, among the six accountabilitydomains, Stakeholder Engagement is the one wherecompanies usually score very low (Figure 14 above). Inorder to assess the characteristics of stakeholderengagement in the region, the study asked businessrespondents to rate specific issues that stakeholdersdiscuss with them. The stakeholder groups consideredwere internal (business owners, shareholders, employ-ees, management) and external (customers, local com-
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StrategyHas written code
of ethics (%)
Employee healthbenefits above
industrystandards
Companypension above
industrystandards
Employeesgiven time off
from workto volunteer
Engagedin community
support(very often)
Has a policyto create jobs
locally
No/Little evidence 50% 19% 17% 19% 31% 48%
On the way 82% 21% 22% 27% 42% 78%
Good practice 88% 42% 34% 40% 71% 80%
Figure 27. Effect of strategy on CSR Outcomes
munities, suppliers, NGOs and environmental interestgroups, investors, and local and national governmentbodies). Human rights, labour standards, environmentalconcerns, and transparency were selected by theresearch team as priority issues that might be promot-ed by stakeholders. The findings demonstrate a lowlevel of stakeholder dialogue around all selectedissues. As shown in Figure 28 below, no stakeholdersreportedly discuss human rights with 51 percent ofcompanies, labour standards with 39 percent of com-panies, environmental protection with 47 percent ofthe companies, and transparency with the 61 percentof companies144.
As demonstrated in Figure 28, only 3 percent of com-panies reported that human rights were promoted by10-12 stakeholder groups, 6 percent reported labourstandards, 8 percent reported environment, and 6 per-cent reported promotion of transparency by the samenumber of stakeholders.
For the reasons mentioned, regular dialogue andengagement with both internal and external stakehold-ers is an important tool in helping companies tobecome more socially responsible and more effective.
Previous regional research concluded that businesses inthe region generally focused more on internal stake-holders than external ones145. Similar results were foundin this study. The majority of businesses report havingsome pressure to be socially responsible from theirinternal stakeholders; whereas a very low percentageof companies report the same about their externalstakeholders. It is obvious that taking into account theviews of managers, employees, and shareholders ismuch simpler and apparently more appealing thandoing the same with communities and civil societyorganizations. As noted, third party stakeholders can bea source of potential risks (e.g. NGO campaigns), andconstructive ideas (e.g. consumer feedback on productperformance and ideas).
The level of company external stakeholder engage-ment also strongly depends on the environment inwhich businesses operate. In countries where civil soci-ety organizations, and governments are more activeand dynamic, the chances that companies accept civilsociety opinion in decision making are higher. Activestakeholders can always hold companies accountable.However, as mentioned in Section II., civil society posi-tion is very weak in the region; governments do not
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144 The findings cover Montenegro, Kosovo, Serbia and Bosnia and Herzegovina. The results for this particular question from Albania are not included in the analysis.145 World Bank 2005. Opportunities and options for governments to promote corporate social responsibility in Europe and Central Asia.
What issues, if any, do your stakeholders promote with you? (N=180)
Figure 28. Stakeholder role in promoting specific CSR issues
Human rightsLabour standards
EnvironmentAnti-corruption
Understanding Figure 28. Companies were asked which stakeholders promote what kinds of CSR issues with them. The results have beengrouped into 4 categories for each CSR issue: zero-no stakeholders promote the issue, 1 to 4 – at least one and max 4 stakeholders promoteissue, 5 to 9 – from 5 to 9 stakeholders promote the issue, and 10 to 12 – from 10 to 12 stakeholders promote the issue. For example, 61%of companies have reported that no stakeholder has ever promoted transparency with them and 6% reported that at least 10-12 stakehold-ers promoted the same issue with them.
No stakeholder 1 to 4 stakeholders 5 to 9 stakeholders 10 to 12 stakeholders
51% 24% 22% 3%
26% 29% 6%
28% 17% 8%
16% 17% 6%
39%
47%
61%
have clear mechanisms and strategies to implementCSR incentives and/or enforce CSR-related standards;and business owners and shareholders have compara-tively limited knowledge and understanding of CSR.The findings that more than 61 percent of compa-nies do not feel any encouragement or incentivesto be more transparent and more than 47 percentsee no motivation from stakeholders to preservethe environment should be of concern to govern-ments, business associations and civil society inter-est groups in the region. Transparency about policiesand performance is essential: for governments wantingto know whether their policies are on track; forinvestors who want to know about the quality of man-agement; for business leaders who want the privatesector to be trusted as a social partner; and by thewider community, who want to know that business isbeing a responsible citizen. Besides a low level of com-panies’ own stakeholder engagement efforts, this find-ing also suggests that the company operating environ-ment is not stimulating CSR practices. Businesses inthe region operate in an environment where theydo not feel sufficient encouragement or incentivefrom their stakeholders to engage in CSR activitiesas a routine practice.
Of equal concern is the finding that the majority ofcompanies that reported they have no stakeholderinvolvement in specific activities belong to thenational-private companies group. State-ownedcompanies report better stakeholder engagement intheir activities. However, stakeholders engaged withgovernment-owned companies are government insti-tutions themselves. That government companiesreported a high level of government involvement intheir activities is to be expected.
On key social issues such as disadvantaged communi-ties, only 23 percent of companies have specific poli-cies to promote employment of ethnic minorities, 19percent persons with disabilities and 34 percentwomen (Figure 29). All types of companies (govern-ment, multinational and national) have almost thesame level of policies to employ women and ethnicminority groups. By contrast, multinational companiesdo much better at providing work-opportunities forpersons with disabilities (28 percent) than are state-owned (18 percent) and national businesses (14 per-cent).
Policies towards disadvantaged groups also differacross the research countries. Generally, these policiesare influenced by recent political history/governmentin power and the percentage of ethnic groups in thecountry. Overall, Kosovo businesses have moreadvanced practices of integrating disadvantagedgroups. The difference is especially prevalent amongstate-owned companies in Kosovo. As mentionedabove, the fact that Kosovo has been under the influ-ence of development partners has positively affectedmany business practices in the country. In addition,although Albanian companies have very similar resultsto other research countries with regards to employingwomen and disabled persons, only 5 percent of thecompanies in Albania reported having employmentpolicies towards ethnic minorities.
Figure 30 examines the extent to which companyengagement of stakeholders has a direct effect on thelevel of companies’ overall CSR engagement. It showshow stakeholder engagement affects the overall levelof companies’ social responsibility. Companies with‘good’ stakeholder engagement are more likely to have
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Do you have an employment policy place that addresses the needs of:
Figure 29. Company policies toward disadvantaged groups
Ethnic minorities 23%Persons with disabilities 19%
Women 34%
a written code of ethics, allocate funding to CSR train-ing of members of their staff, pay more benefits toemployees, encourage employees to volunteer in com-munities, and have more than 10 percent of the com-pany expenses invested in socially responsible activities.
In conclusion, less than 12 percent of the compa-nies in the region have what is assessed as goodstakeholder engagement in their activities.Multinational companies with international links andlonger CSR history are much better at incorporatingstakeholders in their decision making. State-ownedcompanies have relatively higher stakeholder engage-ment scores than national private companies due tothe fact that most of them are directly accountable tothe state. Finally, the more a company takes stakehold-ers’ opinions and ideas into account, the more likely itwill understand its operating environment and canbecome a socially responsible company.
GOVERNANCE
Good governance is all about setting the “tone fromthe Top”. As with any organization, having strong lead-ership and committed management is important forthe successful setting and achievement of goals. Anaccountable, ethical and committed management isthe cornerstone of a credible and effective governancestructure. Strong leadership on CSR is especially impor-tant, particularly where tangible short-term benefits arenot always readily visible. Good governance requiresclear accountability for CSR policies and performance,with leadership from the most senior levels of theorganization. It includes having a designated high-levelrepresentative responsible for CSR integration, devel-opment, monitoring and evaluation across the compa-ny’s entire operations.
Although CSR is a very new concept in the region,good leadership and management practices have a rel-atively longer history. Companies that have well estab-lished sound leadership practices should find it easier toincorporate many aspects of good CSR governance in
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Is there one named individual accountable for CSR issueson your board or among senior management committee? (n=148)
Figure 31. Company has CSR responsible individual
Yes 36%No 41%
Refused 1%Do not know 6%
Stakeholderengagement
Has written codeof ethics
Training budgetinclude funds
for CSR training
Company pensionabove industry
standards
Employees giventime off from work
to volunteer
Has more than10% of overallexpenses going
on CSR
No/Little evidence 64% 13% 19% 20% 8%
On the way 74% 33% 21% 26% 12%
Good practice 88% 56% 40% 68% 25%
Figure 30. Effect of stakeholder engagement on CSR outcomes
their business processes. Overall 22 percent of thecompanies were rated as having ‘good practice’ levelCSR governance and an additional 43 percent are inthe process of developing it (Figure 14).
As noted, an important aspect of good CSR manage-ment is having a designated person in the companyresponsible for leading and coordinating CSR activities.As shown in Figure 31, almost 36 percent of the com-panies in the region have designated someone to beresponsible for CSR development, integration, andmeasurement. The number is the same for state-owned companies, much higher for the branches ofmultinational companies operating in the country (65percent) and lower for private-national companies (28percent). There is a clear relationship between the sizeof the company and the existence of a CSR-responsi-ble individual. Larger companies (56 percent) are morelikely to employ someone directly accountable for CSRthan medium-sized (39 percent) and small companies(19 percent). In most cases those responsible individualsare employed in
– Public Relations and Marketing (31 companies);– Human Resources (9 companies);– Administration and Strategy (5 companies);– Quality Assurance (5 companies); and– Dedicated CSR Section (3 companies).
Only 3 companies in the sample have specialized CSRdepartments. In most cases, the person responsible forCSR implements a number of other duties and worksin the Public Relations (PR) and Marketing depart-ments. Furthermore, in only a few cases are the respon-sible staff members in senior management positions.While there is no reason why PR staff cannot be high-
ly competent, there is a risk that the focus on market-ing aspects might prevent them from being open towider business risks and opportunities.
As mentioned earlier, good leadership and governanceincrease the prospects of favourable outcomes. Asshown in Figure 32, there is a substantial effect of goodCSR governance on a company’s CSR outcomes. Thecompanies rated as having ‘good’ CSR governance arethree times more likely to have a budget for CSRtraining, and three times more likely to have a higherhealth and retirement pension package for employ-ees; they are also twice more likely to give employeestime for volunteering than are companies with ‘nolittle’ governance practice.
In conclusion, almost 22 percent of all companies in theregion are rated to have good CSR governance structurein place and 36 percent have a designated person respon-sible for CSR activities. In a majority of cases, CSR staffmembers work in marketing and public relations depart-ments which seems to confirm the findings in the sectionabove that companies view CSR as related to buildingtheir public image and enhancing reputation. Ideally, how-ever, to ensure that CSR is embedded across a company’soperations, CSR leadership should be as close to theBoard as possible and not associated exclusively with PRand Marketing. This ensures a more coherent and coor-dinated approach that draws on all the company’sresources and addresses the full spectrum of its chal-lenges.
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Governance Company very
actively engagedin CSR
Training budgetincludes funds
for CSR training
Employeeretirement
pension aboveindustry
standards
Employee healthbenefits
above industrystandards
Employeesgiven time
off from workto volunteer
Engagementin community
support(very often)
No/Little evidence 15% 18% 13% 15% 22% 33%
On the way 27% 23% 22% 22% 30% 48%
Good practice 49% 54% 39% 46% 41% 54%
Figure 32. Effect of governance on CSR outcomes
PERFORMANCE MANAGEMENT
Neither the existence of a comprehensive strategy norof a dedicated and knowledgeable leadership alone canachieve company CSR goals, if the necessary processes,standards and incentives to achieve those goals are notestablished, implemented and measured. Performancemanagement evaluates the existence and quality ofCSR procedures, standards, and incentives. It measuresthe extent to which a company sets and implementssocial and environmental goals in its interactions withsuppliers, customers and other stakeholders; it evalu-ates company procedures in treating stakeholders,recycling, producing environmentally friendly products,using fair-trade marks in its products, etc.
As demonstrated in Figure 14, only 12 percent of thecompanies in the region have ‘good practice’ in per-forming their CSR activities. Most – 57 percent – are inthe developing stage, and the remaining 30 percenthave ‘no/little’ level of CSR performance management.Overall a relatively bigger percentage of companieshave good CSR governance and strategy than goodCSR performance management. One conclusion thatcan be drawn is that while companies are doing rela-tively well in preparing plans and strategies, they arelacking in proper processes to implement those plans.
This may in part be due to the lack of specialized staffand high level leadership, coordination and follow-up.As discussed throughout the report, it seems that com-panies in the region are beginning to recognize theimportance of CSR engagement but do not haveenough understanding, resources, skills and enablingenvironment to actually implement socially responsibleactivities.
Having CSR-related procedures and policies integratedin daily business activities is an important indicator ofgood CSR performance management. This studyexplored the extent to which companies integrateddifferent social, environmental and sustainable devel-opment procedures and policies in their businessprocesses.
As shown in Figure 33 above, the majority of compa-nies scored very low in many of the performancemeasurement indicators. Less than 30 percent of thecompanies give priority to suppliers that incorporateCSR in their work, use recycling facilities, consume envi-ronmentally friendly goods, use environmental or ecoand fair-trade labels in their products, help improveCSR with suppliers or get involved in climate changeinitiatives. At the same time, some encouraging factsare that almost 60 percent of companies state that
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CSR performance Indicators
Involved in climate change initiatives 9%Help suppliers improve their Triple Bottom Line 20%
Use social or fair-trade labels on products 22%Use environmental or eco labels on products 23%
Use environmentally friendly products 26%Have recycling in place 29%
Manage CSR with suppliers 30%Use international standards and guidelines in CSR strategy 40%
Try to reduce pollution 60%Deliberately buy local products 71%
Try to save energy and resources 85%
Figure 33. Company ranking in performance management indicators
they attempt to reduce pollution from their work,more than 71 percent deliberately buy local products,and more than 85 percent save energy and otherresources.
Understandably, short-term-profitability-related fac-tors scored high – i.e. saving energy, buying local prod-ucts, etc. At the same time, the majority of factorsrelated to preserving the environment and engagingstakeholders and suppliers were rated lower than 30percent.
Having good performance management had a stronginfluence on company outcomes related to CSR. Asshown in Figure 34, companies that have good per-formance management are almost four times morelikely to have a budget for CSR training, five timesmore likely to have better health benefits and twice aslikely to be engaged in community support as compa-nies with ‘no/little’ level of performance management.
In conclusion, a relatively low percentage of compa-nies in the region are doing well in incorporatingprogressive CSR performance management prac-tices into their business processes. Understandingthe importance of CSR, having a CSR strategy and aperson accountable for its implementation is importantfor a company, but having actual processes and proce-dures in place to implement different CSR activities inrelation to the strategy, and to evaluate performanceagainst targets are equally important. Not many com-panies in the region have achieved that progress. TheCSR-related procedures that have been adopted bythe majority of businesses have direct linkages to costsavings and short-term financial benefits. Having goodperformance management practices significantly influ-
ences a company’s overall CSR engagement and thechance to build long-term value.
Violeta is a leading firm in producing and dis-tributing hygienic products in B&H. Most of itsresponsible activities are in the area of environ-mental protection:
• Sorting, pressing and delivering wastematerials,
• The company has bought ’Grune Punkt’,a packaging recycling programme, and
• It has carried out energy efficiency assess-ments in its manufacturing and tradecentres.
Besides environmentally responsible activities,the company donates a package of hygienicproducts for every baby that is born in B&H,which is around 32,000 packages per year, giftingalso a brochure on healthy nutrition that sup-ports nursing.
PUBLIC DISCLOSURE
Public disclosure examines the extent to which compa-nies report on their performance and making informa-tion on their governance, mission, goals, key policiesand performance available to the public. Reporting isan essential component of transparency and accounta-bility for any company. By producing CSR reports, com-panies make a statement about the importance theyattach to stakeholders’ views. Businesses also use theCSR report as a tool to measure and better managetheir internal operations, and to build their positive
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PerformanceManagement
Company veryactively engaged
in CSR
Trainingbudget includefunds for CSR
training
Employeeretirement
pension aboveindustry
standards
Employeehealth benefitsabove industry
standards
Employees giventime
off from workto volunteer
Engagementin community
support(very often)
No/Little evidence 16% 12% 10% 10% 12% 31%
On the way 31% 27% 26% 27% 34% 48%
Good practice 52% 62% 43% 57% 33% 62%
Figure 34. Effect of performance management on CSR outcomes
image and reputation. Since the 1990s, CSR or ‘sustain-ability’ reporting – facilitated by the use of instrumentssuch as the Global Reporting Initiative (GRI) – hasbecome a widely used tool among leading businessorganizations around the world. This trend has beenencouraged by legislation in several countries thatrequires reporting on environmental and social per-formance (e.g. Britain and France, and the EU AccountsModernisation Directive), and by increased interestfrom the investor community in non-financial perform-ance.
As shown in Figure 14 above, almost a quarter of thecompanies in the region report on their CSR perform-ance. A further 42 percent have some reporting expe-rience; while a third have no evidence of reporting.Overall companies are more likely to report on theirfinancial performance, statement of values and code ofethics than they are on CSR and the environment(Figure 35). While financial reporting is mandatory forpublicly financed companies in all countries in theregion (except Albania), there is no legal requirementto have a code of conduct, statement of values, or toreport non-financial performance. Although manycompanies do have own-company codes or valuestatements, a minority issue CSR reports. The fact thatabout 30 percent of companies produce reports ontheir environmental performance is driven by manda-tory reporting requirements for many industries in theregion. The companies that use natural resourcesand/or have the potential to damage the environmentare required to prepare a report on their environmen-tal performance. Purely voluntary reporting on envi-ronmental performance is very low: an estimated one
in 5 companies that report on environmental perform-ance do so voluntarily.
Multinational corporations are more likely to produceCSR reports (37 percent) than national private (22 per-cent) and state-owned companies (27 percent).However, state-owned companies do slightly better inproducing environmental reports than multinationalcompanies. The main reason state-owned companiesare more willing to report on environmental activitiesmay be related to the industry in which they operate.The majority of the state-owned companies operate inthe energy sector (supply and distribution), natural gasand water. These are sectors that have a greater poten-tial for exploiting and damaging the environment, andconsequently have the highest level of legislative require-ments, including a mandate to produce environmentalreports. Therefore, more state-owned companies reporton their efforts to preserve the environment.
Using widely recognised internationally accepted stan-dards for reporting on CSR performance is the pathoften taken by companies interested in improving theirCSR performance. Research on the level of utilizationof international standards by companies in the regionshowed that 40 percent of the companies use anyinternational standards in implementing their CSRwork. As shown in Figure 36, among those companiesthat use international standards, only 8 percent use theGRI framework, which enables companies to report ontheir social, environmental and economic performance.The ISO 14001 environmental management standard,which is not a reporting standard, is the most widelyused international standard (43 percent), followed by
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Which of the following information on your company is publicly available? (n=148)
Figure 35. Company public reporting
CSR report 28%Environmental report 30%
Code of ethics 53%Statement of values 61%
Financial reports 64%
reporting for the Global Compact Communication onProgress (26 percent). Some other reporting initiativesand standards followed by companies include:
– Bologna declaration,– HACCP,– ISO 9001:2000; 2002; 2001,– ISO/TS 16949:2002,– OHSAS 18000,– OECD Guidelines for Multinational Enterprises,
and– other standards that multinational companies
have developed for internal use.
By way of comparison, recent surveys of the practiceof leading international companies tend to show wideuse of ISO 14001 (for environmental management); theGRI for CSR or sustainability reporting (GRI reports arealso accepted by the UN Global Compact as Commu -nications on Progress); and the Global Compact princi-ples or the OECD Guidelines for MultinationalEnterprises for guidance on applicable internationalstandards of good behaviour. In some sectors, thereare specific codes of conduct that have been devel-oped. A list of the kinds of international standards avail-able was recently published by the OECD146.
Overall, large multinational companies in the region aremore likely than state-owned and private-nationalcompanies to accept and use recognized international
standards. There is often no direct explanation whycompanies use particular international standards intheir work process. Usually branches of multinationalcorporations operating in the region use the interna-tional standards accepted and implemented by theirhead offices. It also usually depends on a company’ssector, and on the applicability and popularity of a cer-tain standard in the company as well as skills, technolo-gy and resources required in using that particular stan-dard.
The standards that are easily and widely applicable aremore likely to be utilized. For example, the UN GlobalCompact has been widely adopted in the region. Theten principles and values promoted by the GlobalCompact can be applied to a wide variety of business-es working in different fields and industries147.Furthermore, if the company is interested in becomingpart of the initiative there is always help and supportavailable as there are Global Compact focal points ineach of the study countries. By contrast, the Bolognadeclaration would only be relevant to businesses thatoperate in the field of higher education and teaching.The declaration sets the principles for operating in theEuropean educational system.
Utilization of recognized international standards canbecome a strong tool in enhancing a company’s publicimage and reputation, and draw on the experience and
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146 Overview of Selected Initiatives and Instruments relevant to Corporate Social Responsibility, OECD, June 2008.147 Please visit Global Compact webpage for detailed information on its principles and values. www.unglobalcompact.org.
Do you use any international standards and guidelines do you use in the implementation of yourCSR strategy? If yes, which ones? (n=74)
Figure 36. Companies use international standards in their CSR work
AA1000 4%SA8000 5%
Global Reporting Initiative 8%EMAS 12%
Global Compact 26%ISO 14001 43%
credibility that comes with them. Many companies thathave applied internationally accepted quality and envi-ronmental standards communicate a use of these stan-dards for marketing purposes to attract customers andbuild trust in their products and services.
International Standards in the RegionISO 14001 – specifies for an environmentalmanagement system to enable an organizationto develop and implement a policy and objec-tives which take into account legal requirementsand other requirements to which the organiza-tion subscribes, and information about signifi-cant environmental aspects. It applies to thoseenvironmental aspects that the organizationidentifies as those which it can control andthose which it can influence.(www.iso.org)ISO 9001 – specifies requirements for a qualitymanagement system where an organization (i)needs to demonstrate its ability to consistentlyprovide products that meet customer and appli-cable regulatory requirements, and (ii) aims toenhance customer satisfaction through theeffective application of the system, includingprocesses for continual improvement of thesystem and the assurance of conformity to cus-tomer and applicable regulatory requirements.(www.iso.org)The UN Global Compact – is the UN initiativethat encourages business to engage in sociallyand environmentally responsible activities andreport on their performance. Global Compactasks companies to embrace 10 principles in areasof human rights, labour standards, the environ-ment, and anti-corruption.(www.unglobalcompact.org)EMAS – Eco-Management Auditing System– is a voluntary init iative designed toimprove company environmental perform-ance. Its aim is to recognize and rewardthose organizations that go beyond mini-mum legal compliance and continuouslyimprove their environmental performance.In addition, it is a requirement of the
scheme that participating organizations reg-ularly produce a public environmental state-ment that reports on their environmentalperformance. (www.emas.org.uk)GRI – The Global Reporting Initiative, a multi-stakeholder initiative involving business, employeeorganisations and NGOs, has developed theworld’s most widely used sustainability reportingframework. This framework sets out the princi-ples and indicators that organizations can use tomeasure and report their economic, environmen-tal, and social performance.(www.globalreporting.org)SA 8000 – Social Accountably 8000 Standard isan auditable certification standard based oninternational workplace norms of InternationalLabour Organisation (ILO) conventions, theUniversal Declaration of Human Rights and theUN Convention on the Rights of the Child. It isa credible, comprehensive and efficient tool forassuring humane workplaces.(www.sa-intl.org)AA1000 – AccountAbility's standards, theAA1000 Series, are principles-based standardsthat provide the basis for improving the sustain-ability performance of organizations. They areapplicable to organizations in any sector, includ-ing the public sector and civil society, of any sizeand in any region. (www.accountability21.net)Bologna declaration – was signed by Ministriesof Education from 29 European countries in1999. The aim is to create the European highereducation area by making academic degreestandards and quality assurance standards morecomparable and compatible throughoutEurope. OHSAS 18000 – is an international occupationalhealth and safety management system specifica-tion. It is intended to help an organization to con-trol occupational health and safety risks. It wasdeveloped in response to widespread demand fora recognized standard against which to be certi-fied and assessed.(www.ohsas-18001-occupational-health-and-safe-ty.com)
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OECD Guidelines for MultinationalEnterprises are part of the OECD Declarationon International Investment and MultinationalEnterprises and consider companies’ voluntaryengagement in responsible business practices inthe areas of employment, human rights, envi-ronment, disclosure, transparency, consumerrights, science and technology, competition, andtaxation. Companies from the member nationsrecommended adhering to principles regardlessof geographical location of their operations.
Public disclosure has a generally positive effect on theoverall company CSR outcomes. As described in Figure37 below, compared to companies with ‘no/little’ and‘on the way’ level public disclosure, companies rated ashaving a ‘good’ practice of reporting are more likely toreport being actively engaged in CSR, have a trainingbudget for CSR, introduce better pension and healthpackage for employees, and engage in community sup-port. Recent international research also suggests thatcompanies that report on their CSR performanceenjoy higher levels of trust and credibility among stake-holders148.
In conclusion, although the level of companies report-ing on CSR activities is somewhat favourable in theregion, the majority of reporting took place when itwas required by law, legislation or/and company proce-dures. Multinational corporations are the champions inCSR reporting. Reporting on environmental perform-
ance mainly takes place among the companies thatwork in the industries with potential to damage theenvironment and where mandatory reporting require-ments are in place. There is not enough information onquality and cohesiveness of the companies’ CSR orEnvironmental reporting. ISO14001 and GlobalCompact are the most widespread international stan-dards utilized by businesses in the region.
ASSURANCE
The Assurance domain explores the extent to whichcompanies use external independent organizations orexperts to assess the rigour and credibility of their CSRprocesses, performance and reporting. Every companycan create its own way of engaging in CSR and claim tobe accountable and in compliance with accepted CSRstandards. Using third-party stakeholders and expertsto evaluate the company CSR performance is regardedas the best way of ensuring that the company’s effortsare verified. Assurance is an important tool in buildingcompany reputation and trust among its stakeholders.The most common assurance utilized by the businesscommunity around the world is related to assuringcompany reporting.
As noted above, the literature suggests that Assuranceis the CSR dimension where most global companies inthe world are lagging behind. It is not surprising there-fore that in the region only 7 companies (4 percent) inthe sample are rated as having ‘good’ practice of usingexternal experts to assess their CSR engagement and
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148 See, for example, the KPMG/SustainAbility Readers Choice Survey Report, May 2008.
Public Disclosure Company very
actively engagedin CSR
Training budgetinclude funds
for CSR training
Employeeretirement
pension aboveindustry
standards
Employee healthbenefits above
industrystandards
Employees giventime off from
workto volunteer
Engagementin community
support(very often)
No/Little evidence 19% 16% 14% 17% 21% 22%
On the way 25% 22% 25% 24% 25% 50%
Good practice 49% 49% 32% 39% 39% 66%
Figure 37. Effect of Public Disclosure on CSR Outcomes
29 percent had some plans and strategies to use assur-ance in the future (Figure 14). The majority of compa-nies (67 percent) have done almost nothing in thisdomain. Here, company ownership does not appear tohave a significant impact on the results. In terms ofcompanies’ size, smaller companies are doing muchworse than medium and large businesses with regardto use of assurance services.
Overall, very few companies reported that there wereassurance companies in the country that they wereaware of. And even fewer of them (7 percent) were ableto name any assurance organization or company operat-ing in their country. Among the 7 percent that listedactual names of assurance organizations, some compa-nies use general terms such as Government, Local gov-ernment, NGOs and other names of organizations thatare not involved with CSR assurance in the region (e.g.UNICEF). Only a few of the companies could recall thenames of the companies that provide CSR assuranceservices in their respective countries. While some assur-ance processes (such as AA100) do use stakeholder con-sultations in the assurance context, accounting firms orspecialist consultancies commonly provide assurance.
In conclusion, assuring CSR implementation and reportingby using external consultants and companies is the leastdeveloped practice in the region. Moreover, many com-panies have no stated intention to use external consult-ants and very few have knowledge of such services.
Annex VI.CSR Leadersin the Western Balkans
In an attempt to identify the CSR leaders in theWestern Balkans region, we asked companies to list thenames of companies that are champions in integratingCSR. Company names, compiled in alphabetical order,are listed on Figure 38.
Multinational corporations operating in the region(Coca Cola, Philip Morris, Vodafone etc.) make up themajority of companies mentioned. Nevertheless, anumber of large private national companies (ProMonte, Bosnalijek, B 92 Broadcasting Corporation etc.)usually with international ties are also mentioned.There are some important considerations to be madein interpreting these findings. The companies men-tioned most frequently do not necessarily score high-est in all domains. As explained previously, the under-standing of CSR in the region is characterized mainly byphilanthropy, community support, environmental proj-ects, and initiatives on employee well-being.Furthermore, most companies in the region use CSRengagement to promote their reputation by publicizingtheir CSR work through the media. Therefore compa-nies that are engaged in philanthropy and communitysupport and advertise their work through open mediaare more likely to be mentioned.
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SFigure 38. Can you give any specific names of companies who can show particularly good practice examplesof CSR in your country / industry in the last two years?
Representing country # of times namewas mentioned
Albpetrol, Albania 1
Aluminijum B&H 1
AMC Albania 1
B 92 Broadcasting corporation Serbia 3
Bimal Brcko, Dk Trade, Grupacija Mims, Omv B&H 1
Bosnalijek B&H 5
Calivita International, Dunav Osiguranje Serbia 1
Calsberg Serbia; Coca Cola Serbia 1
Coca-Cola in B&H B&H 1
Delta Holding Serbia 2
EFG Euro Bank Serbia 2
Erste bank Serbia 1
Euromax; Prima Albania 1
Farmavita B&H 1
Fabrika Duhana Sarajevo, Sarajevska Pivara B&H 1
Feronicelly, Procredit Kosovo 1
Hemofarm Serbia 3
Holcim Serbia Serbia 2
Knjaz Milos, Nektar, Imlek Serbia 1
Kosovo Commercial Banks Kosovo 1
Montenegrin Telecom, Hypo Alpe Adria Bank, Atlas Bank, NLBMontenegro Bank, Montecco L.L.C. Montenegro 1
Oriflame, Avon Serbia 1
Philip Morris; Kavex Elbasan, Tobacco Enterprise Albania 1
Phillip Morris Serbia 2
Pro Credit Bank Kosovo 3
Promonte Montenegro 5
Telenor Serbia 2
Tigar, Erste bank Serbia 1
Tirana International Airport Albania 1
Vodafone Albania Albania 6
US Steel Serbia 1
Annex VII.Selected References
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Websites
csrnetwork and AccountAbility, 2004-2008http://www.accountabilityrating.com
European Agency for Reconstructionhttp://www.ear.eu.int/
ILTIS GmbH - Strategy based actionhttp://www.iltis.de/index.php?&L=0
International Finance Corporationhttp://www.ifc.org/ifcext/pepse.nsf/Content/ISTR_Home
Inwent, Capacity Building International, Germanyhttp://www.inwent.org/index.php.en
United Nations Industrial and DevelopmentOrganizationhttp://www.unido.org/index.php?id=5650
UN Global Compactwww.unglobalcompact.org
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Eyyub Hajiyev
Eyyub Hajiyev is an Evaluation Consultant at theOutcomes Research Institute – a leading Canadian ins-titute specializing in research and evaluation. He alsoworks as a research analyst consultant with the EthicsResearch Centre in Washington. Mr. Hajiyev has exten-sive experience and expertise in investigating and eva-luating corporate social responsibility, business ethics,and accountability and compliance practices. He is a co-author of the National Business Ethics Survey–2007,which is considered the most comprehensive evalua-tion of trends in business ethics and compliance practi-ces in the United States. Mr. Hajiyev holds a Master inSocial Science from Columbia University in New Yorkand a Master of Business Management from AzerbaijanState Oil Academy/Georgia State University (UnitedStates).
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