SOCIAL RESPONSIBILITY: part 1.

Human Resources Departments (HR) play a key role in the corporate social responsibility (CSR) formation and development in a company. However, little attention is paid to this aspect today, involving mainly Public Relations or Management Departments. At the same time, taking into account international tendencies, the place of “localization” of the “CSR Manager” in a company shows the company’s attitude to this issue in general and helps answer the question why the company implements the social responsibility policy. This survey initiated and conducted by the Centre of CSR Development with full financial and technical support from Japan Tobacco International Ukraine (JTI) is the first attempt to rethink the HR Department’s role in the corporate social responsibility strategy formation and implementation by Ukrainian companies. This initiative is also a response to international challenges because the formula obtained by Canadian experts, CSR – HR = PR, has been known since long ago. Based on the survey’s results, it is planned to set up a “HR Role in the Company’s Sustainable Development” Laboratory under which a guide, the second part of this publication, will be developed for the most advanced companies. Its goal is to build up a partnership between CSR and HR Departments and also use the Human Resources Management Department’s potential in order to enhance the image of a socially responsible company. When conducting our survey, we found two companies where the CSR Manager belonged either to the HR Department (DTEK) or carried out those functions (BDO). This practice has resulted in successful CSR activities of these companies. Other companies we surveyed have cross-functional CSR structures1 which include representatives for various departments. However, the HR Department’s role is downplayed here as well: the Department is assigned rather an external advisory function at the project and program implementation stage and not that of proposal initiation. In this case, the company loses one of its major advantages: CSR will never be inscribed in the company’s DNA without the HR Department’s participation. The Centre of CSR Development is grateful to our Partner, JTI, for the possibility to implement this unique initiative. We hope that our survey and guide will help improve corporate social responsibility in Ukrainian companies by establishing a partnership between HR and CSR Departments.

Maryna Saprykina, Centre of CSR Development

1Committees. Management, working groups

By making people your priority, you will never make a mistake even when it comes to earning money. – Michael Marx

“Growing a Future Global Leader” report: “HR leverage is important for development of the company’s CSR organizational possibilities: building up knowledge and skills through programs of leadership development, career planning, performance management, competence stimulation and development system, and also search for CSR knowledge and skills when hiring new talents in an organization”2.

SHAREHOLDERS: Shareholders try to make companies connect the compensation package for top managers with the results of the sustainable development work explaining it by the need to expand the practice of orienting bonuses to short-term listing indicators only3, namely to include the following indicators4 in valuation: staff satisfaction level (71%), leadership development (78%), client satisfaction (84%), and sustainable development (89).

STAFF. Relationships between the HR and CSR Departments are important in the context of the “Facebook” generation: 75% of young people in North America wish to work longer, and 60% of them would like to do “good” things5; this makes up 30 million people able to change something in this world; their participation in the CSR policy gives them this chance.

HR-MANAGERS. Survey by SHRM: 2/3 of HR professionals in Canada are directly involved in CSR activities and 6% of them are responsible for the CSR strategy creation whereby 17% are in charge of its implementation6.

We could cite the results of various surveys, but the answer to the question of whether the HR Department’s active participation in the corporate social responsibility policy implementation is a business case for the company will be a key one. And from this perspective, the real advantages for the staff and, accordingly, for the company are the most quoted and reasonable argument.

5

International CSR Tendencies: Survey Results

2 Ashridge, 2008, p. 10 3 The Ethical Funds Company, 2006, p. 8 4 2005 survey of Canadian board directors, conducted by McKinsey & Company and HRI Corporation on behalf of the Canadian Coalition for Good Governance 5 Julia Moulden, in her book “We are the New Radicals: A Manifesto for Reinventing Yourself and Saving the World” 6 Society for Human Resources Management, 2007, pp. 17 – 19

Advantages for a Company:

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1. failing to involve and focus on the staff, the company’s key stakeholders, corporate CSR programs will not be successful and trust in them will be low;

2. failing to inform and listen to the staff’s opinion, corporate CSR programs will not be well-known as the staff are the company’s main communicators and can sometimes do more than the whole PR Department;

Novo Nordisk recorded a 5% decrease in the staff turnover after introducing

the Values in Action program which connected the company’s business

goals and the triple bottom line principle; and this is a company which is considered a source of manpower in

Denmark. Another company, Sears, records a 20% figure after CSR programs were implemented.

As the results of the Canadian market survey show7, CSR practices are

important for the improvement of the moral climate for the staff (50%), loyalty (41%), employee retention

(29%), top employee recruiting (25%), and productivity (12%).

Financial benefits of a company from CSR

implementation in partnership with the HR Department:

Business Case for the Company

A systematic partnership between the CSR and HR Departments results in a number of advantages the most important of which is that the HR Department’s involvement helps inscribe CSR in the company’s DNA which brings financial profits. And this is a real business case for companies. We hope that there will be more supporters of this approach in companies after this publication.

1. the staff’s loyalty improvement and the recruitment and training cost reduction. Figures: the cost of dismissal, recruitment, and training may vary from USD 3,500 to USD 50,0009; therefore, an employee’s loyalty may result in financial benefits.

2. a victory in the war for talents: experts believe that the CSR component, but not money, may bring a victory in employing the best professionals; moreover, the latter are willing to be helpful for society. Figures: on average, the MBA graduates are ready to accept a compromise reduction of their wages by USD 13,700 solely in order to work for a socially responsible company;

3. reduction in the operational expenses and a profit growth as a result of the staff’s improved loyalty and productivity. Figures: a company may expect the staff’s productivity growth by 2% thanks to their association for CSR goals, regardless of departments, and a 2% productivity growth thanks to the corporate culture improvement as a result of CSR program implementation. And this makes 4%!

4. consumer loyalty growth which depends on your staff as well. Figures: 68% of consumers may refuse to buy the products of a company in the event of its staff’s indifferent attitude to buyers, and one unsatisfied buyer will tell at least eight people about that.

3. failing to involve the staff in CSR projects, the company loses their loyalty (people are willing to work for a company which does good for society) and breaks the staff’s emotional attitude to the brand of a “socially responsible employer”; this may lead to the staff turnover;

4. failing to implement the practice of a partnership between CSR and HR, the company diminishes its chance of recruiting talents as 65% of respondents on the global level, including students, are willing to work for a socially responsible company8.

7 SHRM, 2007, p. 27 8 Grant Thornton, 2008A, p. 4 9 Blake, R. 2006. WebProNews. Employee Retention: What Employee Turnover Really Costs Your Company. www.webpronews.com/expertarticles/2006/07/24/employee-retention-what-employee-turnover-really-costs-your-company accessed Feb. 9, 2009

7

The corporate social responsibility (CSR) concept has been developing for years in Ukraine. The Centre of CSR Development distinguishes five stages of development for the last five years which attests to the dynamic and popularity of both the concept and efficiency among organizations implementing it. At present, it is mostly related to Ukraine’s largest companies. Relationships and attitudes to CSR have changed both on the global and national levels for the last five years and the concept has become systematic and complex. In our opinion, 2010 may become one of the turning points in CSR development:

firstly, the international community (99 countries and 400 experts) is looking forward to adoption of the ISO26000 social responsibility international standard after 5 years of development;

secondly, the Global Reporting Initiative (GRI) at its third conference this year set ambitious goals: all the large and medium-sized companies submit non-financial reports by 2015; a guide on non-financial and financial reporting integration will be developed by 2020;

thirdly, governments of various countries are playing a more active role in the CSR national strategy development.

For a specific organization, this can mean only one thing: enhancement of the CSR role in an organization’s operation and initiation of structural changes in governance10. Undoubtedly, companies will change their interpretation of CSR. Taking into account expectations of the interested parties is one of the most important prerequisites for the implementation of an “enlightened”12 social responsibility strategy. An “interested party” (a stakeholder) is “an individual or a group interested in any decisions or activities of an organization”13. And their interest is taken into account through the interaction with stakeholders: “actions taken in order to create possibilities of a dialogue between an organization and one or more interested parties with the purpose of providing an information basis for an organization’s decisions14”.

According to ISO 26000, social responsibility is an organization’s responsibility for the impact of its decisions and activities on society and the environment through a transparent and ethical behaviour which: - contributes to sustainable development, including the health care and well-being of society; - takes into account expectations of the interested parties and complies with the effective laws; - and also conforms to the international standards of behaviour and is integrated in activities of the whole organization11.

Introduction

10 Various structures may be created (they may have different names: committee, board of directors, council). 11 ISO 26000 social responsibility guide (international standard draft), www.iso.org/wgsr 12 Enlightened: a term proposed by the Minister of Corporate Affairs of India at the GRI conference, 2010. 13 ISO 26000 social responsibility guide (international standard draft), www.iso.org/wgsr 14 Ibid.

Interested Parties

8

Interested parties (hereinafter stakeholders) may include:

shareholders (interested in profits, indicators, strategy); government authorities (interested in payment of taxes, compliance with

laws, low unemployment rates); staff (the rate of interest depends on the level of the position held: if top

managers are interested in indicators, achievement of set goals and development, the staff in non-management positions are interested in the level of wages and salaries, safety);

trade unions (working conditions, minimum wages and salaries, compliance with the laws);

consumers (quality, price, attitude to consumers); suppliers (price, partnership level, and attitude to them); creditors (credit rating, new agreements, liquidity); community (jobs, social infrastructure, environmental issues).

This list may be extended; however, employees of various levels are direct key stakeholders.

One day General Motors conducted a poll among buyers in order to find out why they buy and remain loyal to the

same product. The results were so shocking that the company hesitated

to publish them. The first reason in the list of secrets having an impact on

purchases was the company’s telephone operator, the second reason

was the Client Service Department’s Manager, and the Accounting

Department was the third reason. Nothing was said about the product16.

The United Nations Industrial Development Organization considers three key CSR components for small

and medium-sized businesses: workplace organization, labour

relationships, and environmental protection. The staff plays a key role

in all three components.

An attitude to employees and interaction with them form a basis for the company’s sustainability and an attitude to it on behalf of other stakeholders, including buyers.

If top managers used to be the key players, now we can witness transformations consisting in involvement of all the employees. From this perspective, the HR Department plays a very important role in encouraging CSR practices which results in new opportunities for companies15.

Therefore, HR and CSR policy development must be clearly connected between them and the company’s business strategies. This is also attested by numerous surveys, for example, a “Qualified Personnel Management” survey by Ernst & Young (Global Talent Management Report) which covered over 340 representatives of the company’s executive, financial, and operating management included in the Fortune 10001 rating17. The Report showed that the financial results of companies having personnel management programs as agreed with the business strategy proved to be significantly better: their annual return on capital ratio grew by 20% within a five year period as compared to other respondents. In the foreseeable future, respondents are planning to implement three staff management initiatives which are directly related to CSR:

1. 64% of them are ready to create an internal human resources reserve to meet an acute need for specialists which means the staff growth and development. In 2009, JTI Ukraine was awarded for a similar project at the First National CSR Business Case Contest18 – 2009.

2. 33% of them will study the situation and coordinate global human resources to fill the key positions: from the CSR perspective, these are principles of diversity and mobility which are used on a global level.

3. 31% of them will offer additional work flexibility to their staff (for example, as a

result of common fulfillment of duties, possibility to perform work at home, flexible working hours, and gradual retirement programs) which means a balance between family and work in terms of CSR which is currently implemented by large companies19.

15 Suparn Sharma, Jyoty Sharma, Arti Devi CORPORATE SOCIAL RESPONSIBILITY: THE KEY ROLE OF HUMAN RESOURCE MANAGEMENT// Business Intelligence Journal. January 2009. pages 205 – 213, p.207 16 M. Pervushyna, HR development system as a component of successful business http://www.romver.ru/services/services.php?razdel=45 17 http://biz.liga.net/news/E1005539.html 18 The Contest is held by the Centre of CSR Development 2010 under the auspices of Ernst & Young, SAN InBev, and MTC Ukraine. The Contest webpage: www.csr-ukraine.org 1 9M. A. Saprykina, D. Kaba, Balance between family and work – a new competitive advantage for business. – K. 2010, 30 p.

9 At the same time, in Ukraine measures to increase a company’s attractiveness as an employer (HR branding20) are required from HR Departments by management of most Ukrainian companies (80% of respondents surveyed by HeadHunter, an international human resources portal (hh.ua) among Ukrainian HR21). The purpose of such measures is as follows:

It is interesting to know that only 25% of respondents carefully plan HR branding measures and three quarters of respondents confessed that HR projects emerge occasionally as a result of the tasks and problems they face. At the same time, commentators emphasized high investment in such measures. Furthermore, 50% of respondents would like to obtain significant support in the area of HR brand development from the company’s communication departments. The other half of respondents said that cooperation in this area is well established. They were also proposed to evaluate the results of HR branding programs and projects implemented in their companies. The following answers were received:

Professional staff united by a corporate culture is an even more important objective than the commercial one. A well known manager of a world’s leading company was asked: “Are you ready to give up everything and restart your career?” The answer was “yes”, but providing that “you leave me all of my employees and we will be soon commercially successful again”. At the economic forum in Davos, 1,500 delegates, mainly business leaders, determined the key components of corporate success: less than 20% pointed out to profitability, 30% pointed out to the brand’s reputation and integrity, whereby one out of 20 mentioned CSR22. Therefore, partnership between the Human Resources Management and CSR Departments will enable the company to become more competitive and, accordingly, stable, and not to depend on internal and external risks; it will also help the corporate social responsibility policy become more systematic substantiating the popular formula: “CSR-HR=PR”.

Despite marginal difference between Ukrainian companies and international tendencies (for example, a situation need for HR policy, unlike the HR strategic objectives in companies listed by Fortune 100), the in-house social responsibility in respect to the staff is important for companies on the national and global levels and will continue to be enhanced in the future as surveys show.

E-retailer Zappos has introduced a unique practice23: a new employee must go through a 4 week probation. After a week, the employee is offered compensation for the week plus a bonus of USD 2,000 in the event where they wish to leave the company at this stage. Up to 3% of employees accept the offer and the remaining 97% definitively reject it. By implementing this practice, the company helps an employee to determine whether they share the company’s values and culture and whether an employee suits the company.

20 HR-branding means development of the reputation of a company as an employer in order to promote the values of the possibility of work in this company among both the current and potential employees. 21 http://biz.liga.net/news/E1005631.html 53 companies in Ukraine participated in the survey: 50% of them were national companies and 25% of them were partially or fully invested by foreign capital. The headcount: over 1,000 employees – 10% of respondents, from 300 to 1,000 – 15%, from 100 to 300 – 20%, from 50 to 100 – 35%, from 20 to 50 – 10%, less than 20 employees – 10%. 22 Economist, 2004, http://www.humanresourcesmagazine.com.au/articles 23Keith McFarland Why Zappos Offers New Hires $2,000 to Quit http://www.businessweek.com/smallbiz/content/sep2008/sb20080916_288698.htm

About the Survey

10

Various surveys in different years have shown a close relationship between the company’s human resources policies and corporate social responsibility24:

Greening & Turban (2000) proved that the way a current and potential employee perceives the company’s CSR has an impact on their attitude to the organization;

Cropanzano and others (2001): employees’ attitude is impacted by the company’s honesty and transparency in respect to them;

Cherenson group (2002): the company’s reputation as “a good place of work” depends on the attitude to its employees and quality of its services/products;

Zappala & Cronin (2002): good relationships with the staff result in additional advantages for the company such as improvement of the public image, corporate culture, and support of communities;

Nancy (2004): the HR leadership role is becoming more and more important in the organization’s awareness of the CSR values and the strategic CSR policies on the national and international levels; therefore, efficient CSR means respect for cultural differences as well as flexibility in the implementation of global values and ideas on the national level;

Redington (2005): employees are always the most “forgotten”, but at the same time, the most important stakeholders for CSR activities;

Rupp and others (2006): employees take into account the entity’s CSR and evaluate the extent to which the company helps communities and the extent to which they can feel their involvement in making good deeds;

Sirota Survey Intelligence (2007): employees who are satisfied with the company’s social and environmental indicators will be more positive, involved, and efficient (86% of attractiveness) than those working for a less responsible company (the attractiveness percentage is 37);

Murray (2008): more than 1/3 of respondents pointed out that work for a careful and responsible employer is more important than salaries and wages.

Despite all of the aforementioned facts, Fenwick & Bierema (2008) pointed out that the HR Department along with its huge potential and role in the company’s CSR policies is in fact involved and interested in CSR to a small extent. CSR implementation depends more on the management than employees; at the same time, understanding of CSR, including labour relationships, workplace conditions in the headquarters or the plant’s office in the region differ a lot.

The aforesaid surveys attest to one thing: the use of various HR practices in the company’s CSR policies (monitoring of the staff’s loyalty, organization of training in workplaces, the staff’s career growth, creation of motivation and obligations among employees) may bring important advantages for a business. Furthermore, the HR management plays an important role in CSR practice incorporation in an organization: due to a lack of involvement of the staff and failure to understand corporate values, many good CSR initiatives remain “one day advertising campaigns”.

Understanding the HR Department’s role in the improvement of CSR policy and program efficiency, it is important to understand how the HR and CSR Departments may become partners25, how the HR Department may help develop and implement CSR programs based on their functions. The answer to this question may be the “HR Role in the Company’s Sustainable Development” survey conducted by the Centre of CSR Development under the auspices of JTI from April to June 2010.

Purpose of the survey

is to show the basic elements of partnership between the Human

Resources Management and Corporate Social Responsibility

Departments which the company needs to implement in order to

improve CSR efficiency. The Centre of CSR Development does not set a goal to teach to HR professionals the way

of organizing human resources policies. Today Ukrainian and

international companies and their HR directors deal pretty well with

this role and even become the best ones in Eastern Europe26.

This publication

will be helpful in establishing partnership between the departments and preparing the second practical part of the publication (a guide) which will improve to a large extent:

1. quality of implemented CSR policies and programs;

2. awareness of employees and their involvement in the company’s CSR projects;

3. the staff’s loyalty to the company and its corporate culture;

4. the system of liabilities and motivation;

5. the brand of a responsible employer with the purpose of engaging and retention of talents27;

6. financial indicators.

24Suparn Sharma, Jyoty Sharma, Arti Devi CORPORATE SOCIAL RESPONSIBILITY: THE KEY ROLE OF HUMAN RESOURCE MANAGEMENT// Business Intelligence Journal. January 2009. pages 205 – 213, p. 209 25 In this context, the CSR Department is a department developing and implementing the company’s CSR strategies and CSR programs. Depending on the company, this may be the PR Department, Marketing Department, Corporate Management Department, etc. 26Survey by Hewitt Associates 27Practically ¾ of managers believe that these two objectives are key ones in building a corporate reputation and three key objectives of CSR policies (Corporate social responsibility - a challenge for HR? http://www.humanresourcesmagazine.com.au/articles)

Name of the company International/ National

Headcount Interview with a representative

Atlant-M national 2700 HR, PR

BDO international 130 HR

METRO Cash and Carry international 7000 PR

Finance and Credit national 4600 PR, HR

Erste Bank international 1860 HR

Mary Kay international 221 PR

Ernst&Young international 544 CSR, HR

KPMG international 300 PR

Foxtrot national 200 HR

Astelit international 1100 HR

Nemiroff international 1000 HR

Danone international 800 PR

MTS international 3800 PR, HR

Microsoft international 55 HR

OTP international 3800 HR

JTI international 1500 HR

DTEK national 52000 CSR

Obolon national 7000 CSR

11 Survey Technique

In order to conduct this survey, we applied the technique of context analysis of international tendencies (online publications) and expert interviews with the representatives of Ukraine’s leading companies. We selected 50 companies according to their CSR policy (the results of the rating of transparency and openness by the Guardia magazine) and HR efficiency (the results of surveys conducted by Hewitt Associates and HR-Centre). This selection demonstrated the key tendency: successful CSR and HR practices are mainly characteristic of international companies. The companies chosen during the initial selection were sent questionnaires which were prepared by the Centre of CSR Development and tested by Ukraine’s leading companies. The questionnaire was divided into 8 sections including 37 questions in order to survey the HR Department’s role in the company’s CSR strategy implementation. We received filled out interviews from 18 companies (by e-mail or according to the results of expert interviews). Accordingly, a 46% response level is considered acceptable (higher than average for business surveys). Answers were provided by companies anonymously; however, taking into account that questionnaires were sent in advance, all the answers were prepared answers of companies’ representatives. The results of this survey demonstrate tendencies concerning partnership between two departments as compared to international trends. Companies which were surveyed are shown in Table 1.

Table 1. Surveyed Companies.

Slogan

It is a brief or long phrase, a kind of a company’s motto. A slogan is the most noticeable element attracting attention more frequently than the text below it. For this reason, it should read and be remembered easily, be original and show to the fullest extent possible the essence of the company’s CSR in a brief and simple manner.

What does CSR mean for a company? The Centre of CSR Development compared the way international and national companies interpret CSR28. Due to a lack of unique interpretation of CSR prior to adoption of the ISO 26000 international standard, companies developed their own vision and understanding. Apart from the important fact that such understanding was developed, it is important how much the company’s staff can tell about CSR in their company. Tremendous help in identifying answers may be provided by the HR Department, whose goal is to convey corporate values, including CSR, to each employee in the entity. As Table 2 shows, for Ukraine’s companies CSR is not a voluntary activity but “an obligation to Ukrainian society” and the term “Ukrainian society” is the most frequent expression in terminology. Difference between the ways Ukrainian companies interpret CSR is hardly perceived. Furthermore, the representatives of companies that were interviewed failed to use in their answers terms provided on the website. It is caused by too complicated interpretation which renders perception difficult and does not show the unique nature of CSR of a specific company. Developers of advertising texts could give a brief answer: CSR needs a bright slogan which would be remembered not only by developers, but also by the entire staff of an entity. Microsoft has come up with an excellent and concise approach where the purpose of the corporate citizenship policy is to classify the company’s answers into the most urgent economic, social, and environmental problems. We should also mention the approach of Novo Nordisk which distinguishes this company among others: “we build our business on the basis of the triple bottom line principle”. Some companies explain CSR of their organization in 5 to 6 paragraphs; as a result, even top management finds it difficult to explain “what is the difference between CSR of my company and CSR of other companies”. And while this is realized with difficulty on a high level, it is more difficult to realize it on the level of a manager or an ordinary reader/viewer.

13

28Survey by Hewett Accociate

Name of the company

What does the term “corporate social responsibility” mean for an international

company?

Name of the

company

What does the term “corporate social responsibility” mean for a company in Ukraine?

Acc

en

ture

Accenture strives to be a responsible corporate citizen focused on minimizing the impact on the environment and helping individuals around the world gain skills which will enable them to participate in and contribute to the country’s economic development.

Ast

elit

life:), a Ukrainian communication operator, as one of the leaders on the country’s mobile communication market, has a responsible attitude to its users, the state, and society, the needs of citizens, issues of environmental protection and preservation of natural resources. A socially responsible business is, first and foremost, a business responsible for the quality of its products to the end user.

CIS

CO

Formation of long-term values. Our CSR programs are designed to provide long-term benefits for our staff, clients, shareholders, partners, and people around the world. We are focused on three main areas: personnel, environment, and social investments.

Syst

em C

apit

al

Man

age

me

nt

Building a successful and profitable business and being a responsible corporate citizen are the objectives which do not exclude, but complement each other. These objectives are at the heart of the strategy of the SCM Group. As one of the largest business groups, we are aware of the scale of our influence on the social and economic development of Ukraine and recognize our obligations to Ukrainian society. At the same time, we do not substitute the government’s obligations to the citizens with our activities.

Ern

st a

nd

Yo

un

g Creation of prospects in the era of changes. We have developed a business strategy which is based on close cooperation with our employees, clients, and society in order to help them realize their potential.

Gal

naf

toga

z

From the very foundation of the Concern Galnaftogaz, both the Company’s shareholders and management have had a common vision of the Company: Concern Galnaftogaz is an advanced, modern, open, and transparent company whose activities are oriented to the best European and global standards.

Mic

roso

ft

The purpose of the corporate citizenship policy is to classify our answers into the most urgent economic, social, and environmental problems29.

DTE

K

The scale and dynamics of DTEK make it possible not only to set and solve ambitious production goals, but also to refer solution of their methods to our responsibility to society. This understanding is based on the Company’s business realities.

Ne

stle

Formation of the key values by Nestle is a fundamental basis for doing business which is oriented to the company’s key lines of business: water consumption, food, and development of agricultural areas where values for both society and shareholders may be formed in the best manner.

Kyi

vsta

r

Social responsibility of a business is a principle of work followed by Kyivstar where our company finds it important and necessary to participate in the development of Ukrainian society and the state in general.

No

vo N

ord

isk

We believe that a healthy economy, the environment, and society have fundamental importance for long-term business success. For this reason, we build our business on the basis of the triple bottom line principle and also contribute significantly to the solution of global problems such as diabetes mellitus, climate change, natural resources, overcoming of the social development misbalance, and economic prosperity.

MTS

We regard CSR as an efficient business tool which is an important component of our strategy and is planned for the future as any other strategically important business line of the company.

14 Table 2. Understanding of CSR by Various Companies

29http://www.microsoft.com/about/corporatecitizenship/en-us/our-commitments/goals/

15 Does the HR Department know about the company’s CSR? HR and CSR functions.

The HR Department has its own structure, divisions, and duty regulations. Additional CSR aspects that are the responsibility of managers of human resources departments in Ukrainian companies are shown in the figure below.

CSR aspects implemented by the HR Department

The second question which we ask in part 2: how to engage the HR Department in the CSR strategy development and implementation?

If a visitor of the Novo Nordisk’s website wishes to write a letter to the company’s team which is in charge of the “sustainable development” issues, among the 15 website’s contacts they can find the contact information of the Senior Vice-President of the company responsible for Corporate People & Organisation.

Danone has a Be Happy Team, a curious association of active employees who give their opinions on various issues of the company’s operation and, therefore, can influence its decisions, for example, a decision not to change the company’s location.

The 2010 Vancouver Olympics and Paralympics had a Human Resources and Sustainability Governing Committee which met regularly to monitor and evaluate the efficiency of the Olympics in terms of the HR and CSR indicators.

As we can see, improvement of awareness of the company’s ethics and values is placed in the first place. We would like to point out to a relatively small percentage of involved HR in the determination and involvement of stakeholders; employees are probably not key stakeholders for 39% of surveyed companies. CSR reporting and environmental protection shared the 6th and 7th positions attesting to a small number of non-financial reports and failure to involve the Human Resources Department’s staff in the process of preparation of such reports, and also to marginal availability of energy efficiency programs on a workplace. Furthermore, HR professionals in some companies in Ukraine are in charge of the social audit training of the staff (which, basically, can be referred to the development of innovations and new products), cooperation with universities (internal and external communications), development of ideas related to CSR projects, and employment of the disabled.

When asked whether the HR Director should know about the company’s CSR, all the respondents answered positively. This seems to be logical in light of statements made by many companies that employees are their main value (Nestle, Obolon, Metro Cash & Carry, etc). And here is what respondents said:

“The company’s CSR means responsibility to our company’s staff to a larger extent: for organization of their work, preservation of jobs, and assistance in their life activities so that they can feel the employer’s responsibility”.

“CSR possibilities enable us, firstly, to engage ambitious, talented, and professional people … Secondly, this makes us possible to improve the workers’ social security, care for the retention of our employees thanks to material and immaterial factors; and this is the key basic area of responsibility and competence of the HR Department of any company”.

“Because one of the stakeholders includes employees: potential, current, and former ones”.

However, despite awareness of the fundamental role of the staff inspired by the “human resources are essential” motto, HR directors in most companies (72%) in Ukraine are not on the CSR Board/Committee of the company and, accordingly, are not directly involved in the formation of the company’s CSR policies. This substantiates again the results of the survey conducted by Fenwick & Bierema (2008) showing that CSR and HR are separate areas. Only three companies pointed out that their HR Director participates in the company’s CSR structure where CSR-related issues are decided. It is important to keep in mind that the implementation of companies’ CSR policies and programs without taking into account the staff’s opinion may affect quality of both the staff and the organization’s work.

CSR Mainstreaming

16

Achievement of strategic KPIs is used to evaluate efficiency of both the company’s performance and the company itself. Everyone contributes to the common cause, works to achieve their goals, and gains bonuses as a result of achieving them. Work according to KPIs helps specialists better understand what they must do in order to improve efficiency. Efficiency here means not only the scope of work performed during a unit of time, but also benefits that the company gains as a result of an employee’s performance. Total KPIs in every department are divided into smaller, personal, and measurable ones, numbering from 3 to 5.

Accordingly, if some companies emphasize a strategic approach to CSR, for example, MTS determines that “as an efficient business tool, CSR … is an important component of our strategy and is planned for the future just like any other strategically important line of business of the company”, then including of KPIs into CSR is a logical process of the company’s development. This will make it possible to:

strategically determine what it wishes to achieve in terms of CSR, which offsets spontaneous actions and contributes to formation of systematic social responsibility;

inscribe to the maximum extent the CSR strategy in the company’s business activities which can be measured;

make the CSR strategy and priorities understandable for the staff; determine the level of the staff’s involvement in the company’s CSR which will

improve the level of loyalty to the company.

On the European level30, CSR KPIs are included in the evaluation of performance of the staff of several levels:

1. top managers (Sony, Danone, Enel, Veolia); 2. companies’ CEOs (ALPRO included in the evaluation of the CEO’s performance ¾

of CSR indicators which served as a basis for reward calculation); 3. managers of country subdivisions responsible for KPIs distribution (Danone); 4. managers of departments (ALPRO established 2/3 of CSR indicators in their

annual evaluation); 5. the staff (ALPRO31 established 1 or more KPIs).

Taking into account a clear connection to the financial component, CSR indicators are more quantitative than qualitative. Nonetheless, Sony had quality indicators of environmental protection acknowledging, at the same time, that these indicators are hard to measure and achieve. It is interesting to know that, according to respondents, the said examples had a positive impact on the development of companies. For example, Danone’s investors showed interest for CSR indicator achievement.

Internal communication is important for achievement of CSR indicators. The aforementioned companies used:

CSR centers created inside a company; seminars and trainings for the staff; Intranet; speech delivered by the company’s Chief Executive Officer; special leaflets about efficiency and KPIs (ALPRO); weekly communication with the staff; departments responsible for awarding bonuses to the staff; managers of departments who informed junior employees.

According to the results of the survey of Ukrainian companies, in Ukraine this process is not yet applied to all the employees or top managers; and as regards HR Departments, this practice is typical of only 44% of surveyed companies. Other 44% of companies still debate over such ideas, but do not measure them separately. CSR indicators are quite frequently included in the evaluation of an employee responsible for the development and implementation of CSR programs and projects: a CSR manager or the staff of HR Departments (the most frequently encountered group). However, these sporadic cases do not ensure the key indicator: the staff involvement in their company’s CSR. As a good saying of Starbucks goes, we can change something only by concerting our efforts. “One person can plant one tree; together we can plant a wood”.

As we can see, CSR indicators are mainly included in the evaluation of

top managers and medium level managers and are connected to bonus

payment: thanks to achievement of CSR indicators the staff of ALPRO can

expect 10% bonuses; at Sony – 20% bonuses; at Danone – 33% bonuses;

and at Enel – 40%.

KPIs (key performance indicators) means a

system of indicators used by employers to evaluate their employees and where the indicators of performance of every individual employee is connected to the total KPI of the whole company, such as profits, profitability, or capitalization.

In the second part of this publication we will cover the following issues: 1. for which level of employees are CSR

indicators necessary in annual evaluation?

2. what should these indicators be? 3. what is the percentage ratio for planning

bonuses on the basis of employees’ CSR indicators?

4. how to improve awareness of CSR indicators?

30http://www.csreurope.org/data/files/200921_csr_in_remuneration_systems__csr_europe_helpdesk.pdf 31 http://www.alpro.be/

The key approach to the development of key documents is to involve the staff in the process of discussing and filling documents with a specific meaning, and also communicate knowledge about this document to others.

Company’s Vision, Mission, and Values

Both international and national companies which were surveyed have their values, mission, and vision which are the key components of any organization. For the purpose of the survey, the key question we asked was as follows: how were they developed?

Given the fact that many organizations have had their own developed vision, mission, and values for many years, the answer to this question posed one of the survey’s difficulties. Nonetheless, during the economic downturn of 2008-2009, some companies initiated the process of revision of their values and filled them with a new meaning. However, only 22% of companies said that their HR Department was directly involved in this process and other 22% pointed out to the PR Department as a participant in this process. In general, the answers were as follows:

All the directors, specialists, and the staff on every level were involved; Corporate Governance Department; Board of Directors and Managers; Organizational Governance Department; Corporate Centre; Headquarters.

We believe that the most comprehensive process could be observed in multinational corporations because there is certain difficulty in both the determination of the relationship between the global, regional, and national levels and the reflection of what companies call “diversity” in the values the company is driven by. For this reason, multinational companies created various level committees (global and regional ones) which solved this task.

At the same time, the staff of Ukrainian METRO participated in the process of determination of the company’s new global values.

Another popular practice is the development of corporate values by outside consultants who “cleaned” the values and built up the brand. However, 66% of respondents confirmed that the staff was involved in the process through:

survey; strategic sessions; association of the staff.

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Issues we cover in the second part of this publication are as follows: 1. how to involve the staff in the

process of development of the fundamental principles of the organization’s operation?

2. how to communicate such principles to the staff?

In the process of development/rethinking of the values, it is necessary to the keep in mind that: 1. the CEO must support and head the

process; 2. a working group must be created and

consist of the representatives of various departments;

3. the best versions of proposed ideas must be debated over inside departments, leading to results which would reflect the essence of the company;

4. permanent communication channels must be developed as a process of creation or rethinking of the values and the obtained product.

Company’s Strategic Documents

CSR Strategy

Name of the company

Web site Strategy as a document

CSR policies, o the web site

Developed CSR policies, documents/

on what issues

Web site verification

Nestle, CSR Report

http://www.nestle.com YES YES YES Food; people; environment, water; development of rural areas

YES

Microsoft, CSR Report

http://www.microsoft.com YES YES YES Corporate governance; employees and suppliers; energy sector and environment

NO

CISCO, CSR Report

www.cisco.com YES NO YES Employees; environment; society;

NO

Novo Nordisk,

CSR Report

www.novonordisk.com YES YES YES Access to health care; responsible business practice; people; environment and climate change; society

YES

Ernst&Young (Ukr. Web

site) CSR Report

http://www.ey.com YES NO YES Corporate social responsibility code

NO

Accenture, CSR Report

www.accenture.com YES NO YES Environment; our people YES

DEK, CSR Report

http://dtek.com YES YES YES Environmental protection; DTEK’s Social Partnership Declaration

NO

Galnaftogaz, CSR Report

/www.galnaftogas.com YES NO YES Corporate Governance Code NO

SCM, CSR Report

www.scm.com.ua YES NO YES NO

Kyivstar, CSR Report

http://kyivstar.ua YES NO YES NO

MTS www.mts.com.ua YES NO YES NO

Siemens Ukraine, CSR

Report

http://web2.siemens.ua/ ua/home/

YES NO YES NO

LIFE:) CSR Report

www.life.com.ua YES NO YES NO

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Involvement of the HR Department is important for all of the subsequent steps of development and improvement of the company’s organizational activities because this department may bring “the prospect of people” to all of the company’s decisions as it is people who perform the key functions. We tried to compare corporate social responsibility strategies of international and national companies.32 The results shown in Table 3 demonstrate an important tendency: international companies have a comprehensive CSR strategy under which they developed specific policies of the company’s CSR priority issues. The highest level of CSR development is verification of web sites presenting information about this or that policy (Nestle, Novo Nordisk, Accenture). In Ukraine, one of such leaders may be DTEK, a surveyed company: the company’s web page presents not only CSR policies as a program document, but also the company’s policies related to environmental protection under the CSR policies, Partnership Declaration, etc. Ukrainian companies mostly place on their web sites information about CSR awareness and CSR policies (without enclosing program documents) they work on (Galnaftogaz, Kyivstar, Obolon, MTS, life:), Siemens Ukraine).

Table 3. CSR Strategies of International and Ukrainian Companies.

In Canada’s Vancity Credit Union, which is believed one of the CSR leaders, the HR Department was

initially responsible for CSR; then this function was assigned to the Strategic Planning Department, and after that a

new department was created and called Leadership in the Community.

And during the Olympics and the Winter Paralympics in Vancouver CSR

(sustainable development) was included in the HR functions. These

examples show again that a HR professional must be included in the

company’s cross-functional structure responsible for the development and implementation of the CSR strategy.

32Sources: corporate websites.

19 The tendency of lacking a complex strategy may be explained by an early stage of CSR formation in companies, a lack of human resources and failure to attract other interested departments to the process of CSR strategy and policy formation. The CSR strategy formation is a long-term and complex process where the following factors must be taken into account33:

1. key targets, principles, internal and external stakeholders have been determined;

2. a committee has been created to develop the strategy with the participation of the company’s top managers;

3. mechanisms of “selling” CSR advantages to various stakeholders have been developed;

4. the strategy has been related to the company’s key business activities;

5. results have been approved inside and outside the organization;

6. strategy communication has been developed;

7. trainings for the staff have been developed: CSR may be successful only in the event of a change in the attitude and behaviour which starts with the staff;

8. a system of the strategy measurement and evaluation has been prepared; otherwise resources, including temporary and financial resources, will be invested on the basis of conjectures, and not results, which offsets the entire CSR concept.

The staff is present at each stage in the aforesaid factors; corporate CSR culture is formed thanks to the staff; and the staff triggers the change management processes as the CSR strategy drives changes. It is important to understand that every employee depending on its professional and personal characteristics may be ready or not ready to face changes, may/may not become a front man of such changes. Nancy Lee proposes to classify the staff into three categories based on the level of their readiness34:

Group A: those who have values and behavior;

Group B: those who have values, but have no behavior;

Group C: those who have no values or behaviour.

In order to succeed in the development and implementation of the CSR strategy, it is necessary to develop a model of behaviour for each group:

Group A: acknowledge that their behaviour is positive and encourage them to develop; Group B: promote, reward, and encourage changes in behaviour; encouragement must be important for this group so that it changes its behaviour;

Group C: not to waste efforts on the staff of this group for the moment; the majority of Group C will change its behaviour as soon as Group B does it, and then Group C will be in minority; but there will be those who will never change their behaviour and, perhaps, this group will be in minority and outside the company.

If there is a common CSR strategy which is not adapted to any of the groups, we can lose influence on Group A, fail to come up with the necessary encouragement for Group B, and waste too many resources on Group C.

33http://www.cipd.co.uk/subjects/corpstrtgy/corpsocres/csrfact.htm 34http://www.ic.gc.ca/eic/site/csr-rse.nsf/eng/h_rs00552.html

20 Another important issue of cooperation between the CSR and HR Departments consists in that HR departments may undertake to prepare and implement policies directly related to the area of influence of HR departments such as health care (stress resistance) of the staff, diversity, a balance between the family and wok, development of the staff, corporate volunteering, and eco-purchases35. These policies need support from managers, good practices, constant communication, and they increase CSR program awareness and efficiency.

In our survey, only four company respondents had no CSR strategy which offsets the possibility of systematic CSR activities. Other 28% of companies involved the HR Department in the process of development whereby 57% of companies involved the PR Department or the Corporate Relationship Department as direct participants in the process. 57% of entities also involved employees in the development process through:

distribution to the company’s staff of policies developed by a working group consisting of the representatives of various departments;

proposal of their own variants at the meeting dedicated to this issue; association of employees; survey.

When developing policies, it is extremely important to trace efficiency, so help offered by the HR Department is important here. This may include:

questions in annual surveys about loyalty to the company, CSR indicators, and involvement of employees;

an internal web site and mail distribution where employees may give their opinion on various issues;

qualitative indicators in the form of the staff turnover, healthcare and safety indicators, development of the staff, and diversity.

All of the aforesaid data may be used in the company’s non-financial reports. It is worth noting that annual surveys of the level of satisfaction of companies often include a question about the extent to which employees are satisfied with the company’s CSR. However, we believe that this question fails to fully disclose the level of awareness, understanding, and participation in the company’s CSR implementation. For this reason, we propose to ask the following questions:

How well are you aware of the company’s CSR policies? How well do you understand the company’s CSR policies? What does the company’s corporate social responsibility mean for you? How well does the company follow its values and principles? Do you know about the company’s CSR strategy? How well does the company implement its CSR strategy? What is the extent to which the company’s CSR makes you proud of

your work for our company? What is the extent to which the company encourages and helps you

implement CSR in the office, in the plant, at meetings?

Sometimes companies claim that people and government authorities do not understand their CSR policies, so consumers do not make a socially responsible choice in favour of the company implementing CSR. In this case, it is important for the company to be aware that education of consumers starts inside the entity, with its own employees.

In the future, when preparing a report, it is important to consult the staff from categories A and B to find out what to report on and which results to include. Approval of top managers to publish the report is important as well. Only under such conditions may the CSR strategy be an efficient tool in the company’s business strategy implementation.

Issues we cover in the second part of this publication are as follows: 1. CSR management in an organization

and the HR Director’s participation in it;

2. HR Department’s role in the CSR strategy development;

3. how to involve employees from Groups A and B in the strategy development and implementation;

4. HR Department’s role in monitoring the strategy evaluation and preparation of a non-financial report.

35 For more details about stable purchases see the new publication of the Centre of CSR Development which is prepared under the auspices of the Embassy of Norway to Ukraine.

21 Codes of Conduct The HR Department’s36 function is to develop and implement codes of conduct, and also monitor the extent to which employees follow the Code’s principles in their every day activities. Values and the Code of Conduct of the staff make up the foundation on which a company is built up. This survey also proved that care for the ethical basis of the organization’s activities is a 100% domain of the Human Resources Department, but only 94% of the surveyed companies had codes of conduct. What issues do they cover? Conducted in 2006, a survey of 150 leading companies of Great Britain, Germany, and Canada emphasized: codes of conduct are primarily dedicated to corporate governance (96% of respondents) and are focused on management, employees, the Board of Directors, and partners. The area of application of codes of conduct grows for the purpose of corporate social responsibility with priority on the following issues:

company's impact on the economic, environmental, and social areas, sustainable development;

working environment; surrounding environment; labour relationships; relationships with suppliers; ethical behaviour.

Directors and investors became particularly interested in codes of conduct during the economic downturn when ethical principles and compliance with codes of conduct gained paramount importance. It is important to avoid vague wording in the code and describe the conduct expected from the staff.

Some companies have an “ombudsman’s” office where complaints of employees are considered regarding the company’s value implementation: this is the key aspect of activities, for example, of audit firms where ethical issues are key ones for their business.

The code must show the organization’s specific activities and conduct taking into account the current risks (for example, specific segments were integrated in codes created by Oshchadbank and Alpha-Bank OJSC: system of control of the bank’s financial and economic activities, relationship with the bank’s clients).

The code must answer the questions and include specific provisions determining37:

the basics of conduct of the company in relationship with society, business partners, and clients;

relationship among employees (manager - subordinate), delegation of possibilities and responsibility;

conduct in a workplace, prohibition to use one’s official position for personal purposes, compliance with the laws;

regulations on work with information, basics of business ethics in the company.

It is interesting to know that companies listed on the New York Stock Exchange, pursuant to the Sarbanes-Oxley Act, are required to have two codes of conduct: one code for the staff and another code for the company’s higher financial staff. This practice is typical, for example, of MTS.

3М has the following components in its Business Conduct Policy: environment, healthcare, and safety. The staff must follow the company’s policy in these three areas, including prevention of pollution in a workplace, development of products with the minimum effect on the environment, energy efficiency, taking into account healthcare and safety issues in daily work and business decisions. Furthermore, the Code warns the staff against “missed occasions to prevent pollution and reduce waste, improve energy efficiency, unhealthy labour conditions and engagement of supplier services/products who do not share the values of 3M related to the environment, healthcare, and safety”.

36 In global companies, this function is often delegated to the competence of the Department of Ethics; however, 77% of employees in 214 global companies would like to see closer cooperation between the HR and CSR Departments. Survey by Conference Board. http://www.conference-board.org/utilities/pressDetail.cfm?press_ID=3775 37Corporate Codes of Conduct - http://www.humancapital.ru/index/?node_id=454

22 The staff’s participation is important for the development and implementation of a code of conduct. At the same time, 35% of the companies we surveyed did not participated in the code’s development although under regulations of the Institute of Business Ethics, this is one of the most important initial elements of the Code’s development38 requiring:

1. involvement of the manager and support from the Board not only at the stage of development, but at the stage of obtaining reports on compliance with the code as well;

2. the staff’s opinion on what is important for them and on what issues they need guidance;

3. inclusion of issues related to shareholders, staff, clients, suppliers, and local community; some happen to include competitors: success of this model is proved by time;

4. show the way the code works;

5. testing of the code: it is possible to determine the group of employees representing various levels and regions/areas; outside organizations may be involved;

6. informing the staff: develop a leaflet, distribute information via the corporate Intranet; send it to all the employees, suppliers, partners, and other stakeholders;

7. the code must work, so it must be included in introduction, internal, and external training programs;

8. monitoring and evaluation: managers must report on conformity to the code of conduct, a responsible person controlling compliance with the code must be selected.

The most popular channels of communicating the code to the staff in company respondents include the internal corporate or global web site and distribution of a leaflet about the code of conduct to every new employee as shown in the figure.

Ways of presenting the company’s code of conduct to the staff.

Furthermore, companies discuss codes at meetings with top managers, have a page on the external web site and official presentation for the staff; documents are discussed through tutors and are signed when employees are hired. Therefore, employees play an important role in the process of development, implementation, and updating of the code which emphasizes the role of the HR Department in the company’s CSR formation and development.

Issues we cover in the second part of this publication are as follows:

1. How to develop or update the code of conduct in a company? 2. Forms and methods of presenting the code of conduct to the staff. 3. How to make the code of conduct work? 4. Forms of the code’s monitoring and implementation.

38 Institute of Business Ethics, http://www.s145828053.websitehome.co.uk/developing.html

HR planning consists in factors such as analysis of the workforce competence, revealing of knowledge necessary in the future, comparison of the skills of the current employees with the future needs, and determination of aspects to which attention should be paid.

For CSR oriented companies, this process also includes evaluation of professional skills necessary for working in an economy of “sustainability”, namely: taking into account the work’s specifics with “shortages” of economic and natural resources (water, energy), growing attention to environmental and social risks, government changes and, accordingly, obtaining licenses for work. Companies should determine their key CSR competences and defaults in terms of such structural changes. An economy of “a new environment” witnesses system transformations which need new knowledge and skills.

Due to such transformations, search for and development of talents must be combined with the company’s policies and corporate social responsibility targets in order to make sure that talents develop in the right direction. 64% of global financial and HR managers say that about half of all the applicants ask questions about the company’s values before accepting work; and 59% of respondents tell about the companies’ plans to invest additional funds in CSR within the nearest five years.

The personnel recruitment and development issues are often considered by companies from the perspective of creation of the employer’s brand, and this process must also include the CSR prospect. More and more companies are including issues of ethics and CSR in their recruitment programs promoting the advantages of work in a corporate culture based on values, including corporate volunteering and involvement of communities. Cooperation with students and online recruitment are ideal conditions for promoting the company’s CSR culture. Normally, a job interview includes issues of ethics and CSR and a letter offering employment reminds about the company’s corporate culture.

Issues we cover in the second part of this publication are as follows:

1. Building of the employer’s brand on the basis of the company’s CSR values;

2. Inclusion of CSR values in the company’s recruitment programs;

3. HR programs in terms of the company’s CSR.

Personnel Planning and Recruitment

23

24 Our respondents have not thought about this yet: only 33% of companies evaluate the need for CSR trainings for their new employees. For some companies, CSR goals have an impact on various training preparation.

“Depending on the set objectives, if we implement a project … we decide that we need two day training dedicated to partnership building. Depending on … the company’s goals …, we propose, accordingly, additional elements, including coaching: we can’t do without it”.

Some respondents tried to focus on top managers: “… We need to hold training for top managers because the bank’s top managers must initiate CSR programs and support them. In order to change the attitude to CSR in the bank, it is necessary to change the way top managers think”.

As regards trainings for new employees, only a small number of companies (just 3) cover CSR issues in introduction trainings “without classifying them into a separate CSR case”. Respondents also included a company which confessed that “it considers more actively CSR and HR partnership issues in 2010”. 27% of companies include CSR issues in the personnel recruitment programs seeing this as “ensuring of the human right in the process of employment”, gender equality, non-discrimination.

“In the personnel recruitment and selection policies, we focus our attention on recognizing rights in gender issues. We made it clear for ourselves that we tolerate no discrimination according to nationality, health condition, labour reward evaluation, we use no child labour and support initiatives focused on its prevention, we conduct a responsible policy of job preservation and compliance with the labour laws”.

Recruiters of one company pay attention to correspondence of “the applicant’s internal values to the company’s values”, and respondents of another company emphasized that “it is important for us that people know and share our company’s mission”. In some companies during interviews applicants were proposed to solve a problem of the ethical way of doing business or asked questions “about the extent to which an applicant is ready to share the company’s principles and values, particularly as regards CSR issues”. However, for the moment, according to the survey’s results, no CSR issues are included in letters offering employment or agreements with the personnel. Programs of development of talents also include HR programs or principles which emphasize again the company’s CSR philosophy: programs of balance between the family and work, gender equality, or women’s career growth. If we compare answers of our respondents regarding the company’s programs “of ensuring equality between men and women”, “diversity”, “fight against stress”, in most cases companies have no programs, but principles which they try to follow (for example, they offer flexible working hours in order to ensure a balance between the family and work). The most popular program in 77% of companies is “a program of cooperation with students” under which students are offered internship. At present, only international companies hold trainings to cope with stress. Another key principle/program is a program of hiring managers from the region where the company operates as it often happens that companies try to hire foreign managers. However, if we discuss benefits for companies, the balance of national/international managers is very important; for this reason companies often specify that citizens of a specific country are encouraged to submit documents. In our survey only one respondent answered that they had such a program. From this perspective, priority of an inside applicant over an outside one is important as well and this is successfully implemented by the companies we surveyed.

During the probation period, the HR Department presents the vision, mission, and key values to employees and compares them with the company’s CSR targets and policies. This practice increases the staff’s loyalty and involves the staff in the company’s social projects. During the probation period and trainings, employees receive a leaflet about the corporate values and information about the following issues:

- CSR policies and obligations; - key CSR strategy priorities; - company’s key stakeholders; - how the company measures its CSR results; - non-financial reports; - where the staff can find further information about the company’s CSR and how it can participate in social projects.

The company respondents include in the orientation introductory trainings information about the code of conduct, values, charity, and “green” initiatives. Only two companies we surveyed include CSR questions in order to evaluate the employee’s performance during the probation period.

“The company focuses on how an employee shares and demonstrates the company’s values; in the event of early termination of the probation period, the employee receives a social package and additional bonuses”. “In our company we have a probation period sheet including, among others, CSR issues related to business ethics, human rights, and labour protection”.

One company also underlined that despite the fact that issues are not included, but “if an employee during a probation period shows activity in CSR issues, they are given additional points in the evaluation process”. Upon the probation period’s termination, similar trainings must be held on a regular basis, once a year. This also makes it possible to classify employees into categories after the probation period’s termination in order to form training programs, see Table 4.

Issues we cover in the second part of this publication are as follows: 1. inclusion of CSR issues in the

evaluation of employees after the probation period;

2. training of employees dedicated to CSR issues;

3. participation of the staff in the company’s social projects and impact of the staff’s activity on career growth.

Competence Training and Development

25

25

Category of employees Issues to be included in the training

program

Employees having CSR issues in the list of their duties, for example, employees responsible for healthcare and safety in companies

Training included in their competence, for example, under the OHSAS system

Employees with direct CSR duties: CSR ambassador, “water marshals”

Specialized trainings

Top management, members of the Board

Strategic sustainability trainings

Employees with indirect CSR duties, for example, employees participating in social projects

General CSR issues

All the employees Company’s values, CSR policies, forms and methods of the staff’s participation in the company’s CSR implementation

26

In most companies (55%) operating in Ukraine, CSR issues are not included in general trainings for the staff. One company holds trainings for departments where employees and their families are involved. When it came to special CSR trainings, respondents were unanimous in their answers: “not held”. Only one company held a specialized training dedicated to partnership building in order to successfully implement a planned social program. The key component of similar trainings is demonstration of a clear relation between participation of the staff in the company’s CSR projects and promotion in the entity. Accordingly, one of the criteria of evaluation of an employee may be its activity/passivity/initiative in the company’s CSR projects. 50% of respondents specified that CSR indicators were important for their career growth in the company, more in informal evaluation.

“This is partially related to informal evaluation”.

“No policies and regulations enforce it, but on an informal level - yes”.

“For example, conformity to the rules of ethical business relations is one of the key criteria of evaluation of the employee’s professionalism”.

“Initiative and ability to inspire the staff by an idea is one of competences of a manager. The same situation when it comes to CSR”.

“It depends on the position: if for managers, they are included in KPIs”.

Table 4. CSR issues to be included in the program of trainings for various level employees.

Rewards and efficiency management are another important function of the HR Department which is involved in the determination of efficiency criteria, expectations, and monitoring results in order to achieve the company’s objectives. HR managers integrate CSR in job descriptions, the company’s annual indicators, individual plans, and team objectives. In 44% of the companies we surveyed, CSR issues are included in job descriptions, annual plans, and team objectives.

“By ensuring communication efficiency and efficient CSR procedures, the company will become a market leader within 5 years”. “The CSR issue is included in the managing company’s mission: we contribute to the development of society by participating in corporate social responsibility programs”.

The most important tool of the human resources policy is reward and motivation programs. Naturally, these factors depend on the company’s financial indicators; however, CSR indicators have an impact on the level of rewards for the leading companies as well. Accordingly, reward and recognition programs (an employee of the month, career growth, etc) based on financial and non-financial indicators must be connected to the company’s CSR values and strategies. If this is not done, the company’s will likely fail to achieve its objectives. Some examples of non-financial indicators include client satisfaction, reputation evaluation, staff involvement, healthcare and safety, greenhouse gas emission, etc. Now and then, there may be cases of unsatisfactory CSR implementation or obstruction by certain employees, including on higher levels. For this reason, a well developed motivation program may have an impact on this process. 66% of the companies we surveyed confirmed that CSR was included in both the formal and informal reward systems.

27

Management Efficiency

Inclusion of CSR in motivation schemes, salary packages and targets, which determine whether managers will get their salary bonuses or be promoted, encourage the staff to implement CSR.

Должностные инструкции

28

Of course, job descriptions are rarely revised; for this reason, the possibility to include CSR issues in them is restricted and takes a lot of time, unless a new department or a new company is created. It is important not to include a general description of CSR, but only specific indicators and duties.

Exit Interviews Exit interviews may serve as final verification of the level of implementation by a company of its CSR programs; they include questions about CSR and business ethics. Thanks to interviews, it is possible to find out the extent to which the company fulfills its CSR obligations and whether it meets the expectations of an employee. Only 16% companies we surveyed confirmed that they included CSR questions in exit interviews.

“We try to find out the issues and details which “made” an employee leave our bank and pay attention to social aspects”.

“Some questions are related to the employee’s comfort in the office and also the code of conduct”.

“We ask questions about the values and the code of corporate ethics”.

Individual Growth of Employees All of the companies claim that they contribute to the individual growth of employees.

“This is one of our advantages. Development that an employee receives even by performing its professional duties is an individual development which needs autonomy, deep knowledge, activity, and initiative. Otherwise, no employee will be efficient”. “Our employees can attend various trainings, internal and external, and improve their qualification. Employees who improve their qualification have an advantage over employees who fail to do it”.

“These are trainings, work with tutors, and involvement in projects which can reveal the employee’s individual characteristics”. “The program of achievement evaluation includes feedback from employees and a subsequent possibility to develop professional competences and individual qualities”.

“Annual evaluation of the staff serves as a basis for the formation of an annual training and development plan, professional training; after that, a state recognized diploma is delivered”.

“We have a cycle of efficiency management which is directly related to development. There two key events for the efficiency evaluation: Annual Review and Mid-Year Career Discussion. We believe that an employee must be the main initiator of development, and the company’s task is to create conditions for development. We have a 10-70-20 approach. We believe that trainings account for 10% of development and on the job accounts for 70%: employee’s performance, implementation of projects, novice adaptation, 20% - experience learnt from other employees”.

“The Top-50 program presupposes that medium-level employees will hold high level positions one day”. “The professional and individual growth plan is developed for every employee on an individual basis. Employees can attend trainings, conferences, business forums, and master classes. We receive feedback from each employee so that we know where we are and where we go. For example, senior managers are paid for CIPD, CIM, CCL, MCE training. Everyone has access to the company’s corporate library with business materials”.

Issues we cover in the second part of this publication are as follows: 1. What CSR issues must be

included in job descriptions and team objectives?

2. forms of influence of the CSR activity on the formal and informal reward system in a company;

3. Individual growth of employees in terms of CSR;

4. what to ask about in exit interviews?

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Involvement and Participation of Employees As it was mentioned above, the staff is one of the key stakeholders. An important step for determination of the mission, vision, values, and development strategy means understanding of the key problems, priorities, and prospects of all of the main interested parties, including employees. The staff can participate in consultations and, in this way, develop new programs and approaches, monitor implementation of programs.

Involvement of employees was recognized as a key factor of the value of the company’s shares; so this indicator is often traced in order to evaluate the corporate governance efficiency.

All the respondents of our interview emphasized that companies involve the staff in CSR events.

“First and foremost, this is notification by the company’s chief executive of a new project to be implemented in the near future. HR Departments in the field are “guides” of various measures and initiatives focused on involvement of employees in various events that are held”. “This is primarily investment in time, knowledge, and resources. We also launched a new direction such as involvement of the staff’s ideas”. “We encourage people initiating social responsibility projects and appoint them managers of those projects”. “We have practically no initiatives where employees are not involved. Our CSR Committee is based on the decisions and participation of our employees”.

“We discuss the dates of events with our employees, distribute information among our staff in order to reveal volunteers. We also raise money for the needs of children”.

“The Green Office program, introduction of the KPI system (employee motivation according to the system of key performance indicators)”. “The company has an informal association of employees, Dream Team, holding various charitable events (visits to orphanages, assistance to specific children, charitable photo exhibitions, etc). The company’s employees are involved in the annual fund raising “Help is so Easy” campaign, and are also invited to events held under the campaign”.

“We have volunteer programs and every employee chooses a program in which they wish to participate”.

In order to raise awareness of the staff, many HR Departments are actively involved in informational and educational events and initiatives, for example, contests. Companies that are leaders in the CSR field actively create “CSR champion teams” and the company’s employees are encouraged to join such groups. The team meets during the working hours and initiates CSR projects. Leading companies also implement programs of support for their employees and their families in education and taking social and environmental measures at home, at work, and in communities: this is supported by 72%.

“Our employees can always involve their families in the company’s events. Each environmental and cultural project is followed by opening of an online resource where all the information is presented. Let us suppose that children of our employees attended children’s jazz festivals which we organized; besides, it turned out that children of our employees can play jazz music, i.e. they also acted as participants”. ”Last year we collected and removed waste from the park areas of Dnipropetrovsk as part of a team building event”.

.

It is expected that as time passes by, employee involvement will become an important tool for the corporate reputation enhancement. For example, Hewitt Associates develops a package of CSR issues and involvement of employees for the annual global survey of employees.

77% of company respondents involve their employees in the process of development of social responsibility programs by:

Presenting ideas; Voting for the best ideas; Discussing ideas; Employees implement CSR

programs on their own.

30 “In our office we had Eco-Friendly Tips with information about paper and electric energy saving. We also talked about it in our corporate magazine, held an eco-project contest, and participated in voluntary Saturday work”. “We have recently held a contest about following the Green Office principles. Six of our employees were awarded according to the contest’s results. As regards family members, this depends on employees; anyway, they were invited to participate in voluntary Saturday work”.

All the companies we surveyed practice corporate volunteering.

“Under the company’s volunteering initiative program focused on human traffic prevention, we held 11 information seminars for 600 people. Later we held 10 more information seminars for 255 people”. “We encourage personal experience of our staff. We assisted organizations which needed legal help. We consider providing assistance to social organizations in accounting and legal matters”.

“Donations. Our employees collect books for orphanages. In the event of floods in our country, we collect clothes to be sent to the affected regions”. “Our consultants organize beauty classes for women suffering from breast cancer. Our employees also visit orphanages in Bila Tserkva and organize football matches and various meetings with children”.

“During environmental events and fund raising for charity: help to a sick employee, collection of things for children deprived of parental care”.

“The company launched an educational mission: under the 6 educational projects organized by the company, speeches were delivered to students by marketing, Human Resources, IT, PR, and sales department experts. Our goal was to improve knowledge and skills of students and young specialists, share the best business practices, and, based on our own experience, show what is necessary for a successful career in an international company”.

As regards a social dialogue in the company, it was not developed in most companies. Trade unions were created in 33% of companies and a collective agreement was signed only in 44% of them (See Table 5).

Table 5. Social Dialogue in companies.

The program of employee involvement and participation in CSR may help develop value proposals for the staff which may keep employees and enhance recruitment programs. It is important not to miss the moment when an entity failed to involve employees in taking key decisions and CSR activities of the company; and for this reason, fewer employees are involved in various initiatives; as a result, employees leave the company or stop participating in such events.

Issues we cover in the second part of this publication are as follows: 1. how to involve employees and their

families; 2. how to promote corporate

volunteering; 3. benefits from developing a social

dialogue in a company.

The CSR strategy needs development and implementation of the internal communication program in order to communicate corporate direction, objectives, innovations, and results of CSR programs. There are many communication channels: Intranet, web sites, blogs, social networks, podcasts, video, forums, meetings, regular briefings, web broadcasting, voice messages, and printed and digital information bulletins.

The final goal of CSR communication is to involve employees in implementation of the company’s corporate social responsibility policy. Without participation of CSR directors and top managers, it will be difficult to involve employees in the company’s social activities whereby motivation and perception of such activities will be weak. If CSR is not understood on the higher level, it may lead to the staff being unsatisfied and disappointed and this may be communicated on various web sites of social networks. A good example of the management and efficient CSR communications are important in order to avoid such consequences.

All the companies present the CSR objectives and plans to their staff. The most popular forms include corporate publications (83%), internal corporate web site (67%), and fund raising among employees (67%) (Table 8). Additional communication forms include an external web site and monthly all hands meeting.

Table 8. Forms of Communication of CSR Objectives and Plans to the Staff

Issues we cover in the second part of this publication are as follows: 1. Presentation of the CSR objectives and

plans to the staff; 2. CSR evaluation and annual survey of

the staff.

Internal Communications

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31

32 In order to raise awareness of CSR on a regular basis and also to trace perception of the staff throughout the year, companies organize “quick votes”; some companies regularly poll their employees in this way. Here are some examples of questions of a “quick vote” prepared by Cooperativs (2008):

Do you and your family have a careful attitude to the environment? How much water do you consume during 2 minutes of tooth brushing? From October 19 – 25 weeks – a week of waste reduction. Give examples of

the best practices in your family in this issue. What technique of washing your car consumes the least amount of water? Today is the Earth’s Day. What can you sacrifice for the sake of the

environment? Do you expect to see arctic ice melting in your lifetime? Do you make conscious decisions when buying products with the label of

Faitrade? The staff’s answers may help the organization determine the extent of misunderstanding and the need to correct communication. Such CSR surveys may become an active tool for the formation and integration of CSR messages. Furthermore, using communication channels, the HR Department can find and distribute successful stories of leadership in CSR among different departments.

We regularly inform of theoretic aspects and implementation of practices, including CSR. This includes orientation when hiring new employees, corporate web site, and internal information resource called “Employee’s Reference Book. The company also publishes a monthly corporate magazine and sends various corporate messages. We also remember about our former employees. BDO has a club of former employees. We constantly keep in touch with them and hold meetings for them. We have also a digest where we cover the company’s work, including in the CSR field, and they may also influence decisions the company takes.

Only 44% of companies include evaluation of companies’ CSR in their annual staff polls which may be one of indicators of the strategy efficiency and CSR communication.

1. understanding of corporate social responsibility by Ukrainian companies is complicated and difficult to remember; as a result, employees find it difficult to explain the essence of CSR in their companies;

2. international companies have a complex CSR strategy under which they develop specific policies for issues which are important for companies; in Ukraine, this process is not common yet;

3. HR Departments try to raise awareness of the corporate ethics and values; however, 61% of HR managers are not involved in the determination of the entity’s key stakeholders;

4. despite the unanimous support of the statement that an HR Director must know about the company’s CSR, HR professionals in 72% of companies in Ukraine are not members of the company’s CSR Board/Committees, and, therefore, they do not participate directly in the company’s CSR policy formation;

5. in most cases, no objective to achieve CSR indicators is set for the staff yet: only 44% of the surveyed companies determine CSR indicators for their staff, and 44% of them discuss such ideas, but fail to implement them;

6. HR Departments and the staff are not involved in the process of development of the company’s key documents:

- only in 22% of companies HR Departments took an active part in the development of the corporate values, mission, and vision; - only in 28% of companies HR Departments took an active part in the development of the CSR strategy; in the remaining 57% of companies this process was coordinated by the PR Department or the Corporate Relationship Department; - in 35% of companies the staff was not involved in the development of the code of conduct.

7. only 27% of companies include CSR questions in the personnel employment programs and only 33% of companies evaluate the need for CSR trainings for new employees; accordingly, 55% of companies do not include CSR questions in their general trainings for the staff yet;

8. a weak level of monitoring of the company’s CSR strategy implementation: only 44% of companies included CSR issues in their annual plans, team objectives, and annual surveys of the staff’s loyalty; only 16% of companies included CSR questions in exit interviews;

9. the most popular issues which are efficiently implemented by HR Departments include the staff’s individual growth and corporate volunteering;

10. the social dialogue is considered a “complicated issue”: a trade union was created in 33% of companies whereby a collective agreement was signed only in 44% of them;

11. the most popular internal communication channels in the companies’ CSR programs are corporate publications (83%), internal corporate web site (67%), and fund raising among the staff (67%).

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Survey Results: Ukrainian Tendencies

Survey Results: Ukrainian trends

Structure of the “Social Responsibility: Human Resources are Essential” Guide. Part 2.

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1. Company’s key documents: values, mission, vision, code of conduct: how to involve the staff, how to develop or update the code of conduct in a company, forms and techniques of document presentation to the staff, how to make a document work, forms of monitoring of the document performance. 2. Company’s corporate social responsibility strategy: how to make the strategy differ from the strategy of another company and keep it in stakeholders’ mind, how to involve the HR Department, the organization’s CSR direction and participation of the HR Director in it; how to involve various groups of employees in the strategy development and implementation; 3. Monitoring of the company’s CSR activity: the HR Department’s role in monitoring the strategy implementation evaluation and non-financial reporting preparation, what levels of employees need CSR indicators in the annual evaluation, what are those indicators, what is the percentage ratio for planning bonuses based on CSR indicators, how to raise awareness of CSR indicators. 4. HR practices in terms of CSR: formation of the employer’s brand on the basis of CSR values; the company’s recruitment programs in terms of CSR objectives and policies, evaluation of the staff according to the probation period’s results; CSR issues to be included in trainings, job descriptions, team objectives and exit interviews; forms of CSR activity’s influence on the formal and informal reward system; the staff’s individual growth; how to involve employees and their families; corporate volunteering; benefits from the social dialogue in a company. 5. Internal communications: presentation of the CSR objectives and plans to the staff; communication channels; CSR evaluation and annual surveys of the staff.

35 The Centre of CSR Development is grateful to the following

companies for their participation in the survey

Astelit

Atlant-M

BDO

DTEK

MTS-Ukraine

Obolon

Finances and Credit

Foxtrot

Danone

Ernst&Young

Erste Bank

JTI

KPMG

Mary Kay

METRO Cash and Carry

Microsoft

Nemiroff

OTP