index

UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX

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LBC 65.050.2I-54Ukrainian Companies’ Transparency and Reporting Index. – K.: Farbovany Lyst LLC, 2011 – 31 p.

This publication provides the results of assessment of Ukrainian largest companies’ websites according to the Transparency and Reporting Index criteria, which was conducted by the Centre for CSR Development in August 2011. It analyzes and describes in detail the level of corporate social responsibility information disclosure among companies from various sectors. Moreover, the publication presents a comparison of Ukraine’s leading companies and the results of the world’s companies, as well as the largest companies of Russia and Israel.

LBC 65.050.2© Centre for CSR Development, 2011

This publication has been prepared by the Centre for Corporate Social Responsibility Development under the Ukraine National Initiatives to Enhance Reforms project (UNITER) that is funded by the US Agency for International Development (USAID) and implemented by Pact Inc. This publication preparation was possible thanks to sincere support of the American people offered by the US Agency for International Development (USAID). The contents of this publication are the sole responsibility of the Centre for CSR Development and do not necessarily refl ect the opinions of the USAID, Pact Inc, and the American Government. No part of this publication can be reproduced and used, whether in graphical, electronic, or other format, and no photocopying or other use of the same is allowed without proper reference to the original source.


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TABLE OF CONTENTS

Introduction .................................................................................................................................... 5

1. About the Transparency and Reporting Index ........................................................................... 62. Participants’ assessment and selection methodology ................................................................. 7 3. Results of the Companies’ Transparency and Reporting Index in Ukraine in 2011................. 104. Ukrainian companies in the rankings of the world’s companies in terms of the Transparency and Reporting Index .................................................................................................................... 165. Various sector companies’ openness level in Ukraine ............................................................. 20 6. Specifi cs of the CSR interpretations on the companies’ websites. The most “open” CSR areas ........................................................................................................ 237. About the Centre for Corporate Social Responsibility Development ....................................... 28

Conclusions .................................................................................................................................. 29


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DEAL COLLEAGUES,

The Centre for CSR Development has the honour to present to you the fi rst company Transparency and Reporting Index in Ukraine 2011. This Index was launched by the Centre for CSR Development under the Ukraine National Initiatives to Enhance Reforms project (UNITER) that is implemented by Pact and fi nanced by the US Agency for International Development (USAID). The Index is based on the methodology of Beyond Business. On this occasion, I would like to thank Elaine Cohen, Manager of Beyond Business, for her free offer of the methodology proven by her three-year working experience. As you may be aware, assessing 143 companies of Ukraine, Russia, and the world is not an easy task. In our opinion, the results derived are quite interesting despite the fact that they have substantiated again the theses which the CSR experts have stated since long ago: there are no many non-fi nancial reports in Ukraine, so companies have to improve the non-fi nancial reporting level in Ukraine. But today the Index permits us to both state and argue why non-fi nancial reporting is so important. I am grateful to the Centre for CSR Development team for the Index they have created. I would like to emphasize once again: we have made the Index and all of its data may be checked by simply visiting the site of any company and this is how our Index is different from other rankings existing in Ukraine. Another specifi c feature of the Index is that it includes a wide variety of Ukrainian companies from different sectors, enabling us to assess the overall CSR situation and its coverage in Ukraine. Moreover, our readers will be able to identify the position of Ukrainian companies among other leading international companies in terms of the Transparency and Reporting Index.Hopefully, the results of Ukrainian companies will be even better next year.

Best regards,Maryna Saprykina,

Head of the Centre for CSR Development


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INTRODUCTION

Information disclosure is an important aspect of operations of a socially responsible company sticking to the openness and transparency principles.

Information can be disclosed through several sources (non-fi nancial and fi nancial reports, articles in the media, holding of special events); however, a company’s website is the most important and most informative source of information about its performance.

From the technical perspective, the Internet is the simplest and the most infl uential, taking into account the social media, channel of communication with the target audiences as compared to other means (radio, television, press, etc). In the event where a company needs to present itself on the market, the Internet resource is the most effi cient tool in building a corporate style as it offers unlimited resources for forming relations with partners, investors, and consumers.

A website may be called a company’s visit card as this source of communication permits a company to fully present its own activities to its stakeholders, in particular in the corporate social responsibility area. In Ukraine, websites are the most important methods of disclosing information; according to a study titled “Corporate Social Responsibility 2005-2010: Status and Development Perspectives”, which was conducted by the Centre for CSR Development under the Ukraine National Initiatives to Enhance Reforms project (UNITER) implemented by Pact and fi nanced by the US Agency for International Development (USAID), 15% of companies have chosen it as their principal method.

The same “Corporate Social Responsibility 2005-2010: Status and Development Perspectives” study showed a low level of openness among Ukrainian companies in respect to society: in 59.8% of companies detailed information about their activities is available for the in-house use only. Private and joint-stock companies account for the largest share of entities, which disclose no information about their activities. The study concludes that Ukraine’s companies are far from being aware that access to information about their performance in the CSR area is an important aspect.

The results of the aforementioned study encouraged the Centre for Corporate Social Responsibility Development to establish the companies’ Transparency and Reporting Index under the Ukraine National Initiatives to Enhance Reforms project (UNITER) in order to encourage greater transparency among companies, including in the corporate social responsibility area.


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1. ABOUT THE TRANSPARENCY AND REPORTING INDEX

Over the period from July 01, 2011 to August 20, 2011, analysts of the Centre for CSR Development assessed for the fi rst time the websites of companies operating in Ukraine according to the Transparency and Reporting Index. This Index has been developed on the

basis of the methodology of Beyond Business (Israel).

The Index’ difference from other corporate social responsibility ratings consists in the assessment subject, i.e. a company’s website viewed as a main source informing the audiences about its CSR policy and practices. The Index also includes quite clear and understandable assessment criteria and indicators, which excludes any possibility of the website being subjectively assessed. Another advantage of such research is that the subject is easily accessible, because all the necessary information can be obtained from public sources. This saves time for research and has higher credibility as no companies are to be directly engaged in order to provide information necessary for the research purposes.

The Index of companies’ transparency and reporting has been developed by the Centre for CSR Development under the Ukraine National Initiatives to Enhance Reforms project (UNITER) implemented by Pact and fi nanced by the US Agency for International Development (USAID). ESG is the Index communication partner. General television partner – UBR.


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2. PARTICIPANTS’ ASSESSMENT AND SELECTION METHODOLOGY

T he Transparency and Reporting Index assessed companies included in the list of Ukraine’s top 100 largest companies, which is drawn up by calculating the net income and net profi t, according to the Investgazeta weekly’s version for 2009-2010, and companies whose shares

are listed on the international stock exchange. Companies from 12 economic sectors of various ownership forms (both public and private) were assessed.

Each company was notifi ed of being assessed according to the Transparency Index criteria by sending a letter to the company’s manager (Appendix 1).

The companies’ websites were assessed in accordance with four criteria:

• reporting (50% of the total result): existence of a report about the company’s social and environmental activities;• transparency (30% of the total result): level of information disclosure according to the CSR key areas;


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• navigation (10% of the total result): easy access to any information about the company’s social and environmental responsibility;• accessibility (10% of the total result): potential website accessibility from the perspective of various aspects (language, contact information availability, adaptability for the disabled).

Criterion Index criteria and points Policy and

procedures

Indicators Total

points

Subject Points 50% 50% 100%

1. Reporting

GRI A level report

GRI B level report

100

80

100 GRI C level report 60

Non-GRI report 50

Other partial report 40

2. Transparency

Business profile and strategy 2

60

CR management 2

Management 4

Ethics and human rights 4

Dialogue with stakeholders 2

Material issues 2

Impact on jobs 12

Consumers, products,

marketing

6

Suppliers and supply network 6

Community involvement 8

Environment 12

Table 1. Assessment Criteria According to the Transparency and Reporting Index


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3. Navigation

Number of clicks on the first

CR contents

5 (1 click), 3 (about), 0 (3 clicks and more)

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Search 5

Topic accumulation on the

website

2

Menu 2

Site map 4

Links to other information 2

4. Accessibility

Language 4 – Ukrainian, 1 – English., 1 – Russian, 2 –

other (max. 10)

20

Accessibility for the disabled 3

Contact information 4 – name and details, 2 – information

Blogs and other interactive or

video materials

3

TOTAL 200 200

In order to determine the place of companies operating in Ukraine among other companies of the world, in our study we analyzed the websites of the top 20 global companies according to the Global 500 rating in 2011 that was published by Fortune. This rating is based on income the companies earned in 2010. Furthermore, we analyzed the websites of Russia’s top largest 10 companies in terms of capitalization, whose shares are listed on the MICEX and the RTS. In addition, in order to compare the assessment results, we decided to include the results of Israel’s top best companies where companies have been assessed according to the Transparency Index by Beyond Business for three years.


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3. RESULTS OF THE COMPANIES’ TRANSPARENCY AND REPORTING INDEX IN UKRAINE IN 2011

Table 2. Results of Assessment of the Top Twenty Companies According to the Transparency and Reporting Index

Position Company Points (maximum: 200)

Percentage

1 DTEK 160 802 Metinvest* 146 733 Obolon 140 704 ArcelorMittal Kryvy Rih 122 615 System Capital Management 119 59.56 Kyivstar 117 58.57 Interpipe 106 538 Ernst & Young Ukraine 105 52.59 METRO Cash & Carry Ukraine 104 5210 Galnaftogaz 103 51.511 Industrialny Soyuz Donbasu 102 5112 Astarta-Kyiv 92 4613 British American Tobacco Ukraine 91 45.514 Ferrexpo 84 4215 BDO Ukraine 81 40.516 TNK-ВР Commerce 79 39.517 PWC Ukraine 78 3918 Kyivenergo 67 33.519 MTS Ukraine 59 29.520 Myronivsky Hliboproduct 55 27.521 Zaporizhstal 51 25.522 Henkel Ukraine 49 24.523 Slavutych 48 2424 Smart Group 45 23.525 Energoatom 44 2326 Nibulon 43 22.5


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27 Lukoil Ukraine 42 2228 Lemtrans 41 21.528 Procter & Gamble Ukraine 41 21.530 Ukrtransgaz 40 2131 Kraft Foods Ukraine 39 19.531 PUMB 39 19.531 Zoria-Mashproekt 39 19.531 Motor Sich JSC 39 19.531 Ukrtransnafta 39 19.536 Omega IJSC 37 18.536 Zaporizhkoks 37 18.536 Kyivmiskbud 37 18.536 Ukrgazvydobuvannia SC 37 18.536 OTP Bank 37 18.541 Boryspil Airport 36 1841 Deloitte Ukraine 36 1843 Lviv Railway 35 17.543 Naftokhimik Prykarpattia 35 17.543 Oshchadbank 35 17.543 LG Ukraine 35 17.547 Kyiv Paper Mill 33 16.547 Naftogaz Ukrainy NJSC 33 16.547 Ukrtatnafta 33 16.547 Yuzhny Port 33 16.547 KPMG Ukraine 33 16.552 Poltava Gas and Oil Company 32 1653 Alchevsk Steelworks 31 15.553 Illichivsk Seaport 31 15.553 Donetskstal 31 15.553 South-West Railway 31 15.553 Bogdan Corporation 31 15.553 Pryvatbank 31 15.559 Zaporizhtransformator 30 1559 Nikopol Ferro-Alloy Plant 30 1559 Turboatom 30 1559 Ukrtelecom 30 15


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63 Asnova Holding 29 14.563 Ukrainian Insurance Group 29 14.565 Ukrnafta 28 1465 Ukrenergo 28 1467 Zaporizhiaoblenergo 27 13.567 Dniper Railway 27 13.567 SUN InBev Ukraine 27 13.570 ING Bank 26 1370 Zakhidenergo 26 1370 Odesa Seaport 26 1373 Dniproenergo 25 12.573 Roshen 25 12.575 TAS Insurance Group 24 1276 Ukrposhta 23 11.577 ATB-Market 22 1177 Novokramatorsky Mechanical Engineering

Plant 22 11

77 Odesa Railway 22 1177 Zasiadko Mine 22 1181 Company «Technological Agricultural Com-

pany United»21 10.5

82 AvtoKrAZ 20 1082 Alchevskkoks 20 1082 BaDM 20 1082 Donetsk Railway 20 1086 Donetskoblenergo 19 9.586 Kernel Holding S.A. 19 9.586 Continent Nafto Trade (ТМ WOG) 19 9.589 PJSC Rise 18 989 Tsentrenergo 18 991 Creative-Group 17 8.592 Delta Lotsman 16 892 Konti 16 892 Epicenter K 16 892 Milkiland Ukraine 16 892 Mariupol Trade Port 16 8


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92 Farmak 16 898 Agrosvit 15 7.599 Rubizhansk Cardboard Mill 13 6.5100 Yuzhnyprogaz Institute 12 6101 Dniprooblenergo 11 5.5101 Optima Pharm 11 5.5101 South Railway 11 5.5101 Fozzy Group 11 5.5101 JSC Kryukov railway car building works 11 5.5106 OJSC Stakhanov Wagon Works 9 4.5107 Pivdenny GZK 8 4107 Ukrhydroenergo 8 4109 A.T.K. 7 3.5

*Companies such as Azovstal, Khartsyzk Pipe Plant, Avdiyivka Coking Plant, Mariupol Illich Iron and Steel Works, Ingulets Ore-Dressing and Processing Plant were not assessed as these companies are part of Metinvest Group and have no their own websites.

EXPLANATION

The assessment results show that DTEK’s website, which was assigned 160 points (80% of information disclosure), is the most informative and transparent website among those making available corporate social responsibility information, according to the companies’

Transparency and Reporting Index in 2011 in Ukraine. Metinvest holds the second position according to the Index: 146 points (73% of information disclosure). Obolon ranks third according to the Index: 140 points and 63% of information disclosure.

The average results of assessment of Ukrainian companies that ran their own websites and, accordingly, were assigned some points (109 companies) totaled 20.5%. This indicator is critically low and shows that the companies’ websites supply no enough information, including corporate social responsibility information, to their stakeholders. Such low results can be explained by low corporate social responsibility activity of companies. Another reason is a small percentage of companies, which prepare non-fi nancial reporting as this criterion has the largest weight in the Index. However, as our study shows, it had the lowest percentage of coverage by companies: 9%.


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It should be noted that the fi nancial reports of Myronivsky Hliboproduct and Ferrexpo contain CSR-related information (Myronivsky Hliboproduct: 2 pages, Ferrexpo: 9 pages); but they are presented only in English, which is an obvious signal to investors regarding the companies’ corporate social responsibility that can be considered the key stakeholders of these two companies. Hopefully, this Index will help attract the companies’ attention to Ukrainian stakeholders as well, as their CSR efforts are currently unavailable for all the groups of stakeholders.

It is symptomatic that the fi rst 25 companies in the rating are primarily represented by entities operating in the heavy industry and metallurgy sector (4 companies); they include 0ne state-owned company.

All in all, the websites of Ukraine’s companies cover their corporate social responsibility activities, but the information level of these websites is low. Most companies fail to inform about all the CSR areas focusing on just one or two of them.

The companies’ websites make it possible to fi nd information sought for by visitors through the Menu and Sitemap options. Importantly, most companies run their websites in several languages.

It should be emphasized that 23 more companies that were studied had no their own websites at all (Appendix 2): these are mainly representative offi ces of international companies; brief information about their operations is posted on the global website.

TOP TEN COMPANIES ASSESSED BY THE TRANSPARENCY AND REPORTING INDEX

The average Index indicator for the top ten assessed companies is 61.1%. All the companies included in the top ten list issue non-fi nancial reports prepared according to the GRI (Global Reporting Initiative) standards: DTEK, Obolon, SCM, Metinvest, Ernst & Young, and

according to other non-fi nancial reporting standards (UN Global Compact).


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Table 3. Top ten companies assessed by the transparency and reporting index

Position Company Points (maximum: 200)

Percentage

1 DTEK 160 802 Metinvest 146 733 Obolon 140 704 ArcelorMittal Kryvy Rih 122 615 SCM 119 59.56 Kyivstar 117 58.57 Interpipe 106 538 Ernst & Young Ukraine 105 52.59 METRO Cash & Carry Ukraine 104 5210 Galnaftogaz 103 51.5

In general, 11 companies achieved (10.3% of the total) the result of 50% of openness; according to Beyond Business, the Index expert initiators, this is a “suffi cient” level of openness and transparency.

Apart from non-fi nancial reporting, the Index top ten companies have good indicators in terms of other assessment criteria. In particular, their websites present a detailed description of social and environmental projects implementation. Naturally, the websites include a full description of the companies’ products or services. However, even the Index leading companies fail to fully cover all the CSR areas: some companies do not describe their policies of human rights and dialogue with stakeholders. The websites of the said companies are user friendly as they include the Search and Sitemap options permitting visitors to fi nd promptly any necessary information.


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4. UKRAINIAN COMPANIES IN THE RANKINGS OF THE WORLD’S COMPANIES IN TERMS

OF THE TRANSPARENCY AND REPORTING INDEX

Within the framework of our study, we also analyzed the websites of the world’s top 20 companies according to the Global 500 rating in 2011 published by Fortune. This rating is based on income earned by companies in 2010. The best result was shown by General

Electric: 93.5% of openness (187 points according to the Index). Having analyzed the world’s top 10 companies, the average indicator of corporate social responsibility information disclosure on their websites is 78.9%, which is higher (by 17.8%) than the indicator of Ukrainian companies to a considerable extent.

Table 4. Results of Assessment of the Top Ten Companies According to the Global 500 Rating by the Transparency and Reporting Index

No. Company Points (maximum: 200) Percentage 1 General Electric 187 93.5 2 British Petroleum 181 90.53 ING Group 178 894 Volkswagen 177 88.55 Royal Dutch Shell 171 85.56 AXA 142 717 China National Petroleum 140 708 Toyota Motor 136 689 ConocoPhillips 134 6710 Exxon Mobil 132 66

Furthermore, we analyzed ten largest companies of Russia in terms of capitalization, whose shares are listed on the MICEX and the RTS. The highest percentage of website transparency regarding CSR information disclosure was assigned to Rosneft (82%). The study revealed that the average indicator of the Russian companies’ website openness (top ten) is also higher than the indicators of Ukrainian companies and totals 61.3%.


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Table 5. Results of Assessment of Russia’s Ten Largest Companies According to the Transparency and Reporting Index

Figure 1. Comparison of Website Transparency in Terms of CSR Information Disclosure among the Top Ten Companies

Position Company Points (maximum: 200) Percentage 1 Rosneft 164 822 Norilsk Nickel 142 713 Gazprom 140 704 NOVATEK 135 67.5 5 Lukoil 127 63.56 Novolipetsk Steel and Iron Works 123 61.57 VTB 111 55.58 Sberbank Rossii 104 529 Surgutneftegaz 93 46.510 TNK-ВР 87 43.5For the assessment result comparison purposes, we decided to include the results of Israel’s ten

best companies where assessment according to the Transparency Index has been conducted by Beyond Business for three years. Israel’s ten best companies have a high indicator according to the website Transparency Index: 73.1%. This shows that the websites of companies in this country are more informative and provide access to corporate social responsibility information as compared to the companies’ websites in Ukraine and Russia. But this can be explained by the three-year experience in assessing Israeli companies by the Transparency Index.

78,9 73,161,3 61,1

0102030405060708090

World Companies Israel Russia Ukraine

Openness Percentage


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Table 6. Comparison of Companies

No. Company Country Openness per-centage

1 Bank Hapoalim Israel 992 Bank Leumi LeIsrael Israel 953 General Electric USA/Global companies 93.54 British Petroleum UK/Global companies 90.55 ING Group Netherlands/Global companies 896 Volkswagen Germany/Global companies 88.57 Strauss Group Israel 888 Royal Dutch Shell Netherlands/Global companies 85.59 Rosneft Russia 8210 DTEK Ukraine 8011 Machteshim Agan Israel 78.512 Partner Communications Israel 73.513 Metinvest Ukraine 7313 Norilsk Nickel Russia 7113 AXA France/Global companies 7116 Bank Discount Israel 7116 Gazprom Russia 7016 Obolon Ukraine 7019 China National Petroleum China/Global companies 7020 Toyota Motor Japan/Global companies 6821 NOVATEK Russia 67.522 ConocoPhilips USA/Global companies 6723 Exxon Mobil USA/Global companies 6624 Lukoil Russia 63.525 Novolipetsk Steel and Iron Works Russia 61.526 ArcelorMittal Kryvy Rih Ukraine 61


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27 Cellcom Israel Israel 6027 Teva Pharmaceuticals Israel 6029 System Capital Management Ukraine 59.530 Kyivstar Ukraine 58.531 VTB Russia 55.532 Israel Chemicals Israel 5433 Interpipe Ukraine 5334 Ernst & Young Ukraine Ukraine 52.535 METRO Ukraine Ukraine 5235 Sberbank Rossii Russia 5235 Gazit Globe Israel 5238 Galnaftogaz Ukraine 51.539 Surgutneftegaz Russia 46.540 TNK-ВР Russia 43.5


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5. OPENNESS LEVEL OF UKRAINIAN COMPANIES FROM VARIOUS SECTORS

It should be noted that we assessed companies from various economic sectors; all the companies belonged to big business. The largest numbers of companies were from the heavy industry sector: 21 company.

Table 7. Openness Indicators of Ukraine’s Companies by Sectors

Sector Number of companies

Average level (%) Maximum (%) Minimum (%)

Holding companies 3 44.6 59.5 23.5Communications 4 28.6 58.5 11.5Food industry/FMCG sector 9 26.5 70 8Financial sector 7 16 19.5 12Oil and gas 12 21.7 51.5 9.5Electric power 11 19.7 80 4Heavy industry 21 21.3 73 4Retail 4 19 52 5.5Agriculture 10 15.2 46 3.5Transport 14 13.4 21.5 5.5Audit and consulting 5 33.3 52.5 16.5Pharmaceutical sector 3 7.8 10 5.5Other sectors 6 12.6 18.5 6Total 109 20.5 80 3.5

Holding companies represent the most transparent sector in terms of corporate social responsibility information disclosure; their average result is 44.6%, which is higher by 13.2% as compared to communication companies achieving 28.6% and holding the second position.

The least “transparent” companies in terms of CSR information coverage are those operating in the pharmaceutical sector (7.8%). Interestingly, the holding company with the lowest result (Smart Group) was assigned more points than leaders among pharmaceutical companies (BaDM), fi nancial companies (PUMB), and transport companies (Lemtrans).

The largest gap between the results is in the electric power sector (76%) being the Index leader and the company gaining the lowest number of points.


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Figure 2. Information Disclosure Indicators among Electric Power Companies

80

33,523

14 13 12,5 9,5 9 5,5 40102030405060708090

Openness percentage

LEADERS BY SECTORS:Sector Company Percentage (%)

Holding companies System Capital Management 59.5%Communications Kyivstar 58.5%Food industry/FMCG sector Obolon 70%Financial sector PUMB 19.5%Oil and gas Galnaftogaz 51.5%Electric power DTEK 80%Heavy industry Metinvest 63%Retail METRO Cash & Carry Ukraine 52%Agriculture Astarta-Kyiv 46%Transport Lemtrans 21.5%Pharmaceutical sector BaDM 10%


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Figure 3. Average Transparency Indicator of Ukraine’s Companies by Sectors

0,00%

5,00%

10,00%

15,00%

20,00%

25,00%

30,00%

35,00%

40,00%

45,00%44,60%

33,30%

28,60%26,50%

21,70%21,30%19,70%19,00%16,00%15,20%

13,40%

7,80%

Average Transparency Indicator of Ukraine'sCompanies by Sectors

Note: The results are provided only for companies that gained points during assessment.


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6. SPECIFICS OF CSR INTERPRETATION ON THE COMPANIES’ WEBSITES

Analyzing the Index criteria, it should be noted that Ukraine’s companies highlight the concept of corporate social responsibility on their websites in various ways. Few companies had the Corporate social responsibility section on their websites. Among these are the leaders of

the Index. These companies have a separate section on their websites dedicated to corporate social responsibility, which contains all the information about their activities in this area, as well as non-fi nancial reports of the company.

DTEK’s website can be called the most informative website in terms of CSR among Ukrainian companies; it provides detailed information about the company’s activities in all the CSR areas with indicators and the cost of such activities. The CSR section also has the company’s non-fi nancial reports and a schedule of CSR activities (this type of information can rarely be found on the websites of Ukrainian companies). In addition, the contact information of the manager in charge of sustainable development is available, which is rare as well, because, fi rstly, few companies in Ukraine employ such specialists, and, secondly, most companies provide contact information of persons or departments responsible for public relations or relations with the media, and the “leader” among contact e-mails is the general e-mail starting with info@.

Galnaftogaz has quite an original title of the CSR section, namely “We and Society”. It should be noted that none of the assessed companies had a similar title for the section dedicated to social responsibility.

Some companies still understand corporate social responsibility only as charity, and, therefore, place CSR-related information in such a section.

State-owned companies usually called the CSR section as “Social policy”; however, this title does not meet the defi nition of corporate social responsibility, because the latter includes other areas as well. “Social policy” sections usually contained only information about the company’s activities dedicated to protection of its employees: safety measures, social infrastructure for personnel, opportunities for personnel training and qualifi cation improvement, etc.

Unfortunately, most companies (57 out of 109 companies running their own websites) had no separate section dedicated to CSR, and the company’s policy in this area was described in the


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sections below:• activities;• about the company;• press centre.

COVERAGE OF VARIOUS CSR ASPECTS BY COMPANIES IN UKRAINE

Based on the results of our study, we could conclude that companies in Ukraine are primarily focused on the navigational aspect (54.5%) of their websites, which attests that companies care about accessibility of materials posted on their websites. Most companies have the Search (73%) and Sitemap (68%) options on their websites, which enables visitors to quickly fi nd any information that interests them. At the same time, Ukraine’s companies practically do not present to their website visitors any international corporate social responsibility standards. Only 8.5% of companies posted on their websites external links to international or national organizations, which promote CSR issues.

Figure 4. Openness Level of Ukraine’s Companies According to Various Criteria of the Transparency and Reporting Index

9

27,1

54,5

23,7

0

10

20

30

40

50

60

Reporting Transparency Navigation Accessibility

Openness Percentage

According to the assessment results, we could conclude that on their websites companies from any sector primarily focus on their own products: 55%. All the companies that were assessed and gained some points described their products or services they provide. However, it should be emphasized that most companies (92%) limited themselves to a description of their products and provided no information about their consumers.


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Development of non-fi nancial reporting and coverage of such information on the companies’ websites are unsatisfactory. As Figure 3 shows, in Ukraine this criterion is covered on the companies’ websites to the least extent primarily due to the fact that most assessed companies have no such reports. Only 23 out of 109 companies use some form of non-fi nancial reporting. In percentage terms, the number of companies publishing non-fi nancial reporting on their websites is 21%. These 23 companies include:

• three companies having non-fi nancial reports according to the GRI G3 standard, level B (DTEK, Obolon, Metinvest);

• two companies have non-fi nancial reports according to the GRI G3 standard, level C (Ernst & Young Ukraine, System Capital Management);

• eleven companies having non-fi nancial reports according to other reporting standards (METRO, Price Waterhouse Coopers Ukraine, Kyivstar, TNK-BP Commerce, British American Tobacco Ukraine, ArcelorMittal Kryvy Rih, Astarta, Galnaftogaz, Interpipe, Industrialny Soyuz Donbasu, BDO Ukraine);

• seven companies partially including non-fi nancial reports in their annual fi nancial reports (Myronivsky Hliboproduct, Motor Sich, Ferrexpo, Boryspil Airport, Kyivenergo, Bohdan Corporation, OTP Bank Ukraine).

PUBLISHING THE COMPANY’S HR POLICY

When it comes to issues directly related to social responsibility, companies pay great attention to their personnel. Indeed, this is a pleasant fact as personnel should be the key asset of companies. The level of companies’ openness in this CSR area was 31%. The range of companies’ activities focused on development and support of their personnel is quite diverse. Such activities include:

• training and qualifi cation improvement;• providing safe working conditions; • possibility to use social infrastructure items freely.In general, companies introduce and cover most measures to support and develop their personnel.

The only personnel development aspect that is insuffi ciently supported by companies as compared to their foreign counterparts is personnel diversity. It should be pointed out that the world’s largest companies pay great attention to these issues. This situation may be explained by the fact that global companies operate in many countries while Ukrainian companies operate primarily in the domestic market and consider the personnel diversity issue irrelevant.


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COVERAGE OF CHARITABLE ACTIVITIES

Many companies describe their charitable activities, sometimes realizing that these are a direct synonym of social responsibility. Some companies describe their charitable activities only in general terms, while others post on the websites all the necessary information, including fi nancial costs they incur due to their charitable activities. Apart from charity, companies describe their social projects aimed at community development. The level of disclosure of such information is 25%.

ENVIRONMENTAL PROTECTION

As regards coverage of information on the environmental protection activities, most companies that have such information on their websites are representatives of the heavy industry, power, oil and gas sectors, that is, the sectors that have a huge impact on the environment. Sites of these companies often include detailed information about the company’s environmental policy, use of equipment and its effect on the environment. Information about the company’s environmental policy effi ciency indicators are provided as well:

– water consumption level; – electric power consumption level;– reduction in greenhouse gas emissions, etc.

In total, the indicator of disclosure of information about environmental protection efforts is 19.5%.

It should be noted that companies whose activities particularly affect the environment, in most cases do not address the issue on their websites. In particular, most companies representing the fi nancial sector that do not directly affect the environment, unlike heavy industry, maintain no sections dedicated to environmental issues on their websites. These categories primarily include fi nancial sector companies, neither of which provide information about their environmental policies on their websites.

SUPPLIERS

The supplier information provided on the websites of Ukraine’s companies represents, in most cases, general information about the required documents, distribution, and logistics. The procurement issue, which directly concerns corporate social responsibility (ethical/sustainable


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procurement, supplier selection procedure, taking into account ethical criteria and CSR criteria) is not very actively discussed on the sites of companies.

LEAST OPEN ISSUES

The least open CSR areas among Ukrainian companies are as follows:• ethics and human rights (disclosure percentage: 6%);• dialogue with stakeholders (disclosure percentage: 5%);• material issues (disclosure percentage: 1.9%).

Normally, companies fail to publish on their websites any practices of code of ethics implementation and have no policies, which would ensure human rights protection.

Websites of most companies lack information about any advantages of corporate social responsibility introduction that the key lines of a company’s business may gain and determination of material issues.

54,5

3125 23,5

19,5

6 5 1,90

10

20

30

40

50

60

Issues Posted on the Companies' Websites

Figure 5. CSR Issues Posted on the Companies’ Websites


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7. ABOUT THE CENTRE FOR CORPORATE SOCIAL RESPONSIBILITY DEVELOPMENT

The Centre for CSR Development is a leading CSR expert organization in Ukraine, a member of the UN Global Compact (2010-2011), GRI Organizing stakeholder, national partner of CSR Europe (Brussels) and the World Business Council for Sustainable Development (WBCSD,

Geneva). The organization brings together 21 companies of Ukraine. The Centre consults on the development of CSR strategies, programs and communications, monitoring and assessment of project effi ciency, preparation and verifi cation of non-fi nancial reporting.

Ten member companies of the Centre for CSR Development participated in assessment according to the criteria of the Index of transparency and reporting of companies and showed very good results.

In average, the percentage of CSR information disclosure among the Centre members is 46,4%. Five companies being members of the Centre for CSR Development were included in the Index top ten companies, including DTEK, the Index leader.

The openness indicator of the Centre members is twice as higher as the average indicator of openness among Ukraine’s companies.


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CONCLUSIONS

Based on the results of the fi rst assessment of companies according to the criteria of the Transparency and Reporting Index in Ukraine in 2011, we can make the following conclusions:

1. The level of CSR information disclosure on the websites of companies in Ukraine is very low. This can be explained by a low level of non-fi nancial reporting, which is a key assessment criterion for the Index.

2. Companies in Ukraine still do not have a common vision of social responsibility and do not realize that this is a complex concept. Some companies cover only one of the CSR areas (charity, relations with personnel) and pay no attention to others. Lack of understanding of the CSR complexity is confi rmed by the fact that not all companies post information about their activities in this area in one section; such information is often to be found in several sections of the site. Half of the assessed companies have no separate section dedicated to social responsibility. This points out to the fact that most companies use websites to familiarize external audiences with the company and its products, and social responsibility is not a general priority for companies in Ukraine.

3. The websites of Ukrainian companies tend to lack any external links to international organizations engaged in CSR promotion as compared to international companies. Companies give their own interpretation of social responsibility and fail to present global CSR trends to their website audiences. Furthermore, an overwhelming majority of companies do not show how the introduction of CSR affects the effi ciency of their core businesses.

It should be noted that companies in Ukraine have a wide fi eld of activities to improve the informational aspect of their own websites about corporate social responsibility. However, improvement of the informational aspect of the companies’ websites is impossible without proper activation of the CSR-related activities. Next year, we will see how companies take into account our recommendations, based on the results of the Index of transparency and reporting of companies in 2012.


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INDEX OF COMPANIES MENTIONED IN THIS PUBLICATION

1. ArcelorMittal Kryvy Rih, p. 25;2. Astarta, p. 25;3. BaDM, p. 20;4. Beyond Business p. 4, 6, 9, 15, 17;5. Bohdan Corporation, p. 25;6. Boryspil Airport, p. 25;7. British American Tobacco Ukraine, p. 25; 8. Centre for CSR Development, p. 4, 5, 6, 28;9. DTEK, p. 13, 14, 25, 28;10. Ernst & Young Ukraine, p. 25;11. ESG, p. 6; 12. Ferrexpo, p. 14, 25;13. Fortune, p. 9, 16;14. Galnaftogaz, p. 23, 25;15. General Electric, p. 16;16. Industrialny Soyuz Donbasu, p. 25;17. Interpipe, p. 25; 18. Investgazeta, p. 7; 19. Kyivenergo, p. 25;20. Kyivstar, p. 25;21. Lemtrans, p. 20;22. Metinvest, p. 13, 14, 25;23. METRO, p. 25;24. Motor Sich, p. 25;25. Myronivsky Hliboproduct, p. 14, 25;26. Obolon, p. 13, 14, 25;27. OTP Bank Ukraine, p. 25;28. PriceWaterhouse Coopers, p. 25;29. PUMB, p. 20;30. Rosneft, p. 16;31. Smart Group, p. 20;32. System Capital Management, p. 14, 25;33. TNK-ВР Commerce, p. 25;33. UBR, p. 6;34. Ukraine National Initiatives to Enhance Reforms project (UNITER), p. 4, 5, 6;35. US Agency for International Development (USAID), p. 4, 5, 6.


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APPENDIX 1. LETTER SENT TO COMPANIES BY THE CENTRE FOR CSR DEVELOPMENT

Topic: Assessment of companies’ transparency and reporting

Dear …!The Corporate Social Responsibility Development Center is hereby honoured to announce that

your company has been selected for assessment according to the criteria of the Transparency and Reporting Index. According to the international social responsibility standards and ISO 26000, transparency and reporitng are key principles of social responsibility. That is why the Corporate Social Responsibility Development Center, under the “National CSR Agenda Development” project supported by UNITER, developed the Index of transparency and reporting of companies in Ukraine based on the methods of Beyond Business (Israel).

Companies selected and included in the Transparency Index are public companies whose shares are traded on the international (eg., London, Warsaw, Frankfurt) stock exchanges, and the Index included 100 largest companies in Ukraine in terms of net profi t. The Index covers companies from various sectors, including the technological sector, communication sector, holding companies, construction, food, pharmaceutical, banking and other sectors.

The subject of assessment for creating the Index is the company’s website that will be assessed by the Centre for CSR Development in terms of disclosure of information about the company’s corporate social responsibility activities. The fi nal results for each company and the company’s position in the Index is the total points earned by each company according to the following four criteria:

• reporting: availability of a report describing the company’s social and economic activities on the company’s website;

• transparency: level of disclosure of information by four key CSR area; • navigation: level of accessibility of any information about the company’s corporate social

responsibility and environmental responsibility;• accessibility: potential accessibility of the website in terms of various aspects (languages,

available contact information, accessibility for the disabled). You can fi nd out more about the assessment methodology on the website of the Centre for CSR

Development: www.csr-ukraine.org. No points will be assigned to companies running no websites at the moment of the Index being created or whose websites are under construction providing no detailed information. Assessment of the companies’ websites will be conducted from August 01, 2011 to August 15, 2011, and the assessment results as well as the Transparency and Reporting Index will be presented in late September 2011.


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APPENDIX 2LIST OF UKRAINIAN COMPANIES RUNNING NO WEBSITES

AMONG UKRAINE’S 100 LARGEST COMPANIES (THE 2009 – 2010 LIST WAS MADE ON THE BASIS OF THE NET INCOME

AND NET PROFIT CALCULATION, ACCORDING TO INVESTGAZETA)

Adidas Ukraine Lysychansk Petroleum Investment CompanyDniprovskiy Steel WorksShidenergoService InvestPoltavskiy GZKImperial Tobacco UkraineFood Company “Podilla”CitiBank UkraineAgricultural enterprise “Lvivske”JSC “Suha Balka”Dovzhenko Agrofi rmNPF “Urozhay”Insurance Company “Avante”Nokia Siemens Networks UkraineDonetskavtotransL’Oreal UkraineDruzhkivsky Engineering WorksCargill UkraineNaftogazvydobyvannaVTB Leasing UkrainePhilip Morris Ukraine

index

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