3Basic reporting extended with CR issues Triple Bottom LineEnvironmental ObligationsDevelop processes and technologies to protect natural resourcesDevelop innovations to reduce environmental harmDevelop, improve, or sustain infrastructures in local communitiesEngage in waste management/ recyclingSocial & Ethical ObligationsServe the best interests of the human assetsDevelop innovations to improve standards of livingProvide resources and support to local communitiesEngage in global eventsProvide resources and support to global stakeholdersFinancial ObligationsMaximize shareholder wealthEnsure long-term profitabilityCommunicate strategy, vision, and financial performance to shareholdersProvide tax revenue for state and federal governmentSupport the economies of local communitiesRegulatory ObligationsAbide by the law and industry regulationsProvide full disclosure of financial informationComply with stock exchange regulations
4Business approach to Social Responsibility Stronger influence of intellectual capital on company’s real valueIncreasing requirements of financial markets, stakeholder groups and global trendsIncreasing number and international reporting standardization of extra financial business performanceIntegration of Social Responsibility with business strategyEvolution of Social Responsibility in the direction of Corporate Responsibility and SustainabilityNumber of reports by typeNumber of sustainability reportsSource:Source:
5Corporate Responsibility standards International standards and guidelines Global Reporting InitiativeRules for determining report contentMaterialityShareholders interestSustainabilityCompletenessRules for ensuring high report qualityBalanceComparabilityAccuracyTimelinessTransparencyReliabilityStandards used in CR auditsISO 14064AA 1000ISO 14001OHSAS 18001ISO 9001ISO (in preparation)
6Global trends concerning stock exchange investments More and more companies are being measured by more than just financial performance – leading to the creation of a number of indices focused on environmental, social and economical performance.Dow Jones Sustainability Index (DJSI, Nowy York – World index)FTSE4Good (Londyn – World index)Johannesburg Stock Exchange Socially Responsible Investment IndexSao Paulo Stock Exchange Corporate Responsibility IndexEthibel Sustainability Index (ESI – European index)Business in the Community (Great Britain)2005 Environmental Sustainability Index (Yale Univeristy and Columbia University)Jantzi Social Index (JSI - Canada)
7Investments in environment friendly companies International organization Carbon Disclosure Project (CDP)In 2003, Institutional investors issued GHG emissions disclosure requests to FT500 largest companiesCDP provides a coordinating secretariat for institutional investors with a combined $57 trillion of assets under management. On their behalf it seeks information on the business risks and opportunities presented by climate change and greenhouse gas emissions data from the world's largest companies: 3,000 in 2008.Estimation
9The trust building Framework Trust is achieved through behavior and transparency and is a key success factor for the business to operate, innovate and grow.StandardsAnd GuidelinesStakeholders needs and expectationsBenchmark to othersOwn needs – what’s good for BusinessLicence to operate, innovate and growClear value & principles, objectives, governance structure and “walk the talk”Transparent reporting on values, management practices and performanceGet Independent Assurance through a phased approach with external reporting and assurance
10General companies’ approach to CR – level of engagement Strategic approachOrganizations at this level focus not only on value protection, but also on innovation that will benefit both society and the company’s own competitiveness. At this level of engagement, corporate responsibility is a business imperative that informs the overall corporate strategy and is seen as a value creation mechanism.Responsive approachBusinesses act as corporate citizens and work to actively mitigate risks and reduce negative impacts arising from their activities. The goal for these companies is value protection.Philanthropic approachCompanies approach corporate responsibility as an exercise in establishing goodwill by making charitable contributions. The underlying assumption is that goodwill or reputational enhancement is the only return in investment to be derived from such actions.Non-engagementCompanies at this stage view corporate responsibility at a distraction or impediment to their primary goals value creation. Beyond legal requirements they do not engage in environmental, health, safety, community or governance issues.
11Company’s CR partners - stakeholders grouping CustomersInvestorsBuild reputation and brand of the organization. If loyal to the company, create stable grounds for increasing income.The group most interested in sustainable development and dynamic growth. It includes Corporate Governance issues.CompanyBusiness StrategyRisk ManagementBrand & ReputationCorporate cultureEmployeesSuppliersTheir engagement, satisfaction and loyalty impacts company’s perception and determines its economic success.The quality, reliability and solidity of their products and services influence credibility and high standards of the companyCommunitiesEnvironmentSocial groups e.g. disabled people, local communities, institutions like schools and hospitals influence public opinion and media approach.Ignorance of natural environment protection issues may result in serious threat for the business from public opinion and legal regulationsothers:Government / RegulatorCustomer organizationsCompetitorsStakeholders engagement is becoming crucial in:defining and developing sustainability reporting systemaligning the performance reports with new business strategy- 11 -
12Preliminary recognition of CR activities – issues to be dealt with CustomersQuality management systemsHealth & SafetySuppliersOn term deliveryTo keep official secretEnvironmentEnvironment investmentsGreen supply chainGreen footprintEnergy consumptionGHG emissionsCorporate Responsibility fieldsOrganizational cultureMission, Vision, Key Values,Code of Conduct,Ethical programShareholdersCorporate GovernanceImprove communication with financial market participantsInternet transmission from stockholders meeting (ASM)EmployeesRecruitment and developmentEmployee voluntary serviceSocial actionsRestructuringTrade UnionsReportingEnvironmental reportEnvironmental protect reportUsage of international standardsLocal communitiesRelations with organizationsCharity cooperation (Ngo)Social programsNational culture patronage
13Consistent Deployment of CSR Strategy Balancing Stakeholder Interests Most important challenges in strategic approach to Corporate ResponsibilityConsistent Deployment of CSR StrategyDecentralized StrategyGenerally, corporations do not have well defined strategies to holistically address CSR as a strategic objective. Many responses have been limited to cosmetic solutions such as PR and media campaignsDisconnected EffortsSome corporations perform a number of unrelated CSR activities that address the needs of disparate stakeholder groups and do not focus on a corporate wide approach to strategic stakeholder groupsaResource Constraints:Many organizations have identified financial and staff resource constraints as a major obstacle to the strategic planning and development of CSR activitiesbBalancing Stakeholder InterestsBalanceCorporations have difficulty balancing the primary interests of shareholders and remaining stakeholders to relieve the tension between achieving financial goals versus social and environmental goalsShort-term focusThe primary focus of corporations has been to maximize shareholder profit by addressing easily measurable short-term financial performance goalsShareholder InterestsIn the UK, 57% of financial analysts and 41% of investors claim that they do not pay attention to social, ethical and environmental issues when making investment decisionscStakeholder InterestsCommunities, employees, and customers express more interest in the long-term strategies such as corporate governance, social responsibility, and sustainability that do not produce immediate financial resultsMeasuring ResultsQuantifying ReturnsMeasuring results of CSR programs has been identified as the greatest challenge to corporationsAlthough about 50% of companies see more potential business opportunity than risk to their organization they are struggling to find ways to capitalize on programs in the marketplace71% of companies report publicly on citizenship and sustainability performance, but have difficulty communicating value to stakeholdersa70% to 80% of market value comes from hard-to-assess intangible assets such as brand equity, intellectual capital, and goodwill, organizations are especially vulnerable to anything that damages their reputationdSource: a. Michael E. Porter and Mark Kramer, “Strategy and Society: The Link Between Competitive Advantage and Corporate Social Responsibility”, (Harvard Business Review 2006); b. David J. Vidal, “Reward Trumps Risk: How Business Perspectives on Corporate Citizenship and Sustainability Are Changing Corporate Board Survey” (Corporate Board Action Series 2006); c. Leslie Stones, “Forget the Bottom Line, Watch the Managers” (Business Day 2006); d. Robert Eccles and Scptt C. Newquist “Reputation and its Risks” (Harvard Business Review 2007).
14Deloitte’s approach to CR strategy building process
15CR must be incorporated into existing strategic planning processes. Corporate GovernanceCommunication of CR issues to the board is critical in the development and evolution of the CR strategyThe board’s demonstration of desired behavior is critical to the implementation of the CR strategyRaise CSR issues to the boardBusiness StrategyImplementation of the CS agendaCorporate Responsibility (CR) StrategyCR AgendaEnvironmental AwarenessLocal OutreachInternational OutreachInternal DevelopmentCR Management PracticesCommunication of ExpectationsRewards and RecognitionRole Model BehaviorConsistent Global/Regional DeploymentMonitor and ControlEmployeesThe deployment of CR management practices will drive employee engagement and build a sense of individual and collective ownership of the CR AgendaManagement practices need to address differences across regions, lines of business, business units, and geographies. For example, interpretation of CR differs for a business unit located in the US versus Europe and prioritization of CR issues differ for lines of businesses such as financial services or healthcare in the same corporation.
16Methodology of implementing strategic approach to CR Phase IPreparatoryPhase IIImplementationPhase IIIOperational1st StagePre-audit of Corporate Responsibility procedures and activities3rd StageDetermination of communication rules with stakeholders5th StageSupport CR system management6th StageSustainability Report audit2nd StageDevelopment / adjustment of Corporate Responsibility policy4th StageEstablishment of formal CR function
17Deloitte’s CR toolsTools used by us were developed on the basis of Deloitte’s experts experience gained over the years as well as international best practices:The Deloitte Sustainability Scorecard – gives the indications on the way of preparing the report, content of the report and form of the final report. It allows for a overall view and captures all CR areas and issues based on the 6 categories that include 30 indicators.Deloitte’s Good Practice Model – allows for the analysis and assessment of current CR area’s situation at the same time identifying these activities that require improvement.ERA (Deloitte Enterprise AssessmentTM) – this is a methodology that allows to identify and assess risk in organizations. It facilitates prioritizing of CR areas in regard to organization's business strategy.Deloitte Sustainability Assessment Model – enables the organization's quality assessment in regard to social responsibility and sustainability. Allows for identification of the competitive advantage areas as well as those of the poor quality.
18Deloitte’s global network of CR&S services More than 200 practitioners in more than 20 countries world-wide (70 practitioners in Europe), led by Eric Hespenheide, partner US.Focus on Assurance lead by Preben J. Soerensen (Partner, DK)Focus on GHG services lead by Pat Concessi (Partner, CAN)Engineers and auditors, environment and sustainability expertsYearly international conference of CR&S networkFirenze 2003, Paris 2004, Toronto 2005, Madrid 2006, Copenhagen 2007Intense representation internally and externallyMember of World Economic ForumMember of World Business Council for Sustainable DevelopmentSignatory to the Global CompactMember of the Global Reporting Initiative (GRI) Board of DirectorsStrong collaboration with audit, risk and management consulting, and corporate financial services to offer innovative, multi-disciplinary service
20Potential companies’ features that influence CSR Companies with negative brand imagePKN Orlen, TP, Provident, PZU, Kompania Węglowa, Tesco, Jeronimo Martins (Biedronka), J&S, Prokom, MicrosoftOrganizations conducting „sensitive business” exposed to social disapproval(tobacco) BAT, Philip Morris, (military) Bumar, International Technologies, (alcohol) Grupa Żywiec, Kompania Piwowarska, Sobieski, PolmosCompanies with the dominant market share e.g. former state owned entitiesPZU, TP, KGHM, PKP, Telewizja PolskaEnterprises conducting mergers, transformation or rebrandingBosh-Siemens, Alcatel-Lucent, Nokia-Siemens, PEKAO (BPH part), Polpharma,Companies with comparable products and services difficult to promote or with advertising limitations(energy) RWE Stoen, PSE, Vattenfall, PGE, Tauron, (pharmaceuticals) Bayer, Polpharma, GlaxoSmithKline, Polfa, Novartis, ServierCompanies acting on highy competitive and price sensitive market(mobile) Polkomtel, PTK Centertel, PTC, (financial advisory) Expander, Open Finance, (banks) Polbank, PKO BP, PEKAO, Millenium, BRE, Eurobank, ProvidentCompanies with environment sensitive products or activity(fuel) Shell, PKN Orlen, Lotos, BP, Statoil, (energy) Vattenfall, Elektrownia Kozienice, (chemicals) Zakłady Azotowe Puławy, CiechInternational corporations entering foreign market with imported CR strategy – not adjusted to local business environment- 20 -
21Implementing strategic approach - advantages for companies Business Risk ReductionAnticipation and counteraction of legal, personal, environmental, corporate image and operational risksWell managed CR activity influences customers trust and employees loyalityCR is no longer a single PR activity but perceived as long-term investment became the dynamic developing philosophy of conducting business in modern worldLong-term stable growthInvestors are more likely to invest in companies with long-term strategy based on system of values that secures sustainable development and reduces business risksFollowing FTSE4Good and Dow Jones Sustainability, different stocks create new indexes designed to measure the performance of companies that meet globally recognized corporate responsibility standards and to facilitate investment in those companiesIncrease in company’s valueObtaining competitive advantageObedience to CR values will definitely transform from company’s competitive advantage today into obligatory standard tomorrow- 21 -
22Implementing strategic approach - advantages for companies Professional CR strategy increases employee satisfaction, loyalty and motivation in more effective way with non-salary factorsBetter reputation positively affects recruitment process (EU open labor market makes it more challenging for employers in CEE countries)„Desired” employerCorporate image advertising campaigns based on and CR policy are being implemented by many companies in order to strengthen brand perceptionGrowth in the affluence of the Polish society makes the customer choice less price sensitive in favour of brand awarenessBetter and cost effective marketingFair judgmentExternal and professional assurance guarantees balanced and reliable assessment as opposed to the „flattery” internal reportsExpansion benefitCompanies with professional CR strategy and reporting are better perceived by external environment (authorities, media, partners) while acquiring new markets as well as conducting mergers and acquisitionsMeeting industry requirementsCompanies with no professional CR regulations are excluded from cooperation with companies that obey CR values at all levels (partnerships, supply chain)- 22 -
23O Deloitte„Deloitte” to marka, pod którą pracują wspólnie dziesiątki tysięcy profesjonalistów w niezależnych od siebie firmach na całym świecie, świadcząc klientom usługi m.in. audytorskie, konsultingowe, doradztwa finansowego, zarządzania ryzykiem i doradztwa podatkowego. Firmy te są członkami Deloitte Touche Tohmatsu, podmiotu prawa szwajcarskiego („DTT”). Każda firma członkowska świadczy usługi na określonym obszarze geograficznym i podlega przepisom prawa oraz regulacjom branżowym kraju lub krajów, na terenie których działa. DTT wspomaga koordynację działań firm członkowskich, ale sama nie świadczy usług na rzecz klientów. DTT i jej firmy członkowskie są odrębnymi i niezależnymi podmiotami prawnymi, które nie mogą podejmować zobowiązań za siebie nawzajem. DTT i jej firmy członkowskie ponoszą odpowiedzialność wyłącznie za własne działania i zaniechania, a nie za działania i zaniechania innych firm członkowskich. Każda z firm członkowskich DTT ma indywidualną strukturę organizacyjną, odpowiadającą przepisom prawnym, regulacjom, praktyce zwyczajowej i innym czynnikom kraju prowadzenia działalności, i może świadczyć usługi profesjonalne na jego terytorium za pośrednictwem spółek zależnych, stowarzyszonych i/lub innych podmiotów gospodarczych.O Deloitte w Europie ŚrodkowejDeloitte Central Europe to regionalna jednostka działająca w ramach Deloitte Central Europe Holdings Limited, członka Deloitte Touche Tohmatsu w Europie Środkowej. Usługi świadczą spółki zależne i stowarzyszone z Deloitte Central Europe Holdings Limited, które stanowią odrębne i niezależne podmioty prawne. Spółki zależne i stowarzyszone z Deloitte Central Europe Holdings Limited to jedne z wiodących firm świadczących usługi profesjonalne; zatrudniają łącznie ponad 4000 pracowników w ponad 30 miastach w 17 krajach Europy Środkowej.O Deloitte w PolsceW Polsce usługi na rzecz klientów świadczą: Deloitte Advisory Sp. z o.o., Deloitte Audyt Sp. z o.o., Deloitte Doradztwo Podatkowe Sp. z o.o. oraz Deloitte Business Consulting SA (wspólnie określane mianem „Deloitte Polska”), będące jednostkami stowarzyszonymi Deloitte Central Europe Holdings Limited. Deloitte Polska jest jedną z wiodących firm doradczych w kraju, świadczącą usługi profesjonalne w pięciu głównych obszarach: audytu, doradztwa podatkowego, konsultingu, zarządzania ryzykiem i doradztwa finansowego za pośrednictwem ponad 1000 profesjonalistów z Polski i zagranicy.Więcej informacji można znaleźć na polskich stronach internetowych:W przypadku projektów w skali regionalnej oraz przedsięwzięć wymagających wsparcia na poziomie regionu usługi świadczy Deloitte Central Europe Limited, firma stowarzyszona Deloitte Central Europe Holdings Limited. Deloitte Central Europe Limited jest jedną z wiodących firm świadczących usługi profesjonalne w dziedzinie doradztwa podatkowego, doradztwa gospodarczego, zarządzania ryzykiem i doradztwa finansowego.