Sandro Baričević President CPRA Communications & Public Affairs Manager Coca-Cola Adria d.o.o.

Macro-Level Trends Macro-economic:  Out of 100 largest economies, 50 are corporations  Worlds largest 500 Co’s: 0,5 % population but 25% economic output  Foreign investments: 29% growth annually since 1983  World trade: x16 between 1950 and 1994  New economy  58% European general public believe Co’ s are not paying enough attention to CSR  44% European consumers willing to pay more for an environmentally and socially responsible products  CSR Investment - in 2000 more than 2.3 MM Euro based on ethical criteria  89% of European decision makers believe CSR will influence decision they take in the future

Macro-Level Trends - cont’d Macro-ecological: –Climate change –Natural disasters –Air & water pollutionMacro-social: –Population growth in developing countries, decline elsewhere –Welfare/Wellbeing gap between “North & South” Array of Consequences: The Concept of Sustainable Development

Micro-Level Terminology many competing termsMacro-level debate on “Sustainable Development” is translated at micro- level into many competing terms: –Sustainable economic development –Corporate sustainability –Corporate social responsibility –Ethical business –Corporate social performance –Corporate citizenship Triple Bottom LineThe Three P’s All referring to “Triple Bottom Line” or “The Three P’s”: –Economic“Profit” –Ecological“Planet” –Social“People”

Profit, Planet & People

COMMUNITY INVOLVEMENT BASIC BUSINESS PRACTICES VALUE CHAIN IMPACT Company’ s Impact on Society

Intermittent support for a range of good causes in response to the needs/appeals of charitable and community organizations. Often gifts of cash, but increasingly the giving of time, expertise and other resources, in cooperation with employees, customers and suppliers. Long-term strategic involvement in community partnerships to address a limited range of social issues, carefully chosen by the company to protect its long-term corporate interests and enhance its reputation. Commercially-driven activities, to promote sales, brand equity or other business policies, which give the company a direct competitive advantage, but which also have a clear element of public good. The core business activities in providing goods/services the society wants, in a manner which is ethically, socially and environmentally responsible. LONDON BENCHMARKING GROUP MODEL VALUE CHAIN BASIC BUSINESS: POLICY & PRACTICE COMMUNITY INVOLVEMENT AREA of FOCUSREPORTING Separate report on community programs/ initiatives Statements of policy and performance Detailed accounting of performance against policies Economic impact studies Impact of core business activities on the greater economy, through forward or backward linkages with other businesses. ISSUES: Behavior of suppliers or retailers, e.g. on labor or environment BENEFITS: Multiplier effect of business on the economy ENVIRONMENT ETHICAL CONSUMER MARKETING EMPLOYMENT POLICIES CODES OF BUSINESS CONDUCT BUSINESS PARTNER RELATIONSHIPS SHAREHOLDER BRIEFINGS COMMERCIAL INITIATIVES WITH COMMUNITY BENEFITS COMMUNITY INVESTMENT CHARITY Company’ s Impact on Society

21 st Century Stakeholders ConsumersConsumers want to buy from companies who share their values Retail customersRetail customers want suppliers to help support their commitment to consumers EmployeesEmployees want to work for companies whose corporate values align their own CommunitiesCommunities want companies who create income & jobs, while helping to build neighborhoods where people want to live & work GovernmentsGovernments want companies to help sustain growing & competitive economies, and societies for all MediaMedia want evidence & measurement to compare rising expectations and business behaviour InvestorsInvestors want companies to secure an enhanced reputation to ensure greater value reflected in long-term share price

Reputation Corporate Reputation Impacts Corporate Reputation & Stakeholders Stakeholders’ Expectations “Having reached the apex of its power, capitalism is now facing a new situation: shareholders are no longer the only ones to whom one is accountable” - Le Monde, October 2000 Market Leadership Product Quality Management Quality Good Corporate Citizenship Financially Sound Company Reputation Drivers Buy & Recommend Products Invest & Recommend to Invest Work & Recommend Place to Work Treat Negative Info Objectively & Embrace Positive Info Behavioral Intentions Supply Goods & Recommend to Supply

Principal Values of CSR Enhanced brand image/reputation Increased sales/customer loyalty Increased productivity and quality Increased ability to attract and retain employees Reduced regulatory oversight Improved financial performance Reduced operating costs Access to capital

Present Expectations Community Expectations Employment Environmentally responsible Regular reporting Involvment in decisions Understand concerns Contribute to charities Loan executives Support volunteers programs Solve community problems Company Expectations Educate workforce Support company`s freedom to operate Provide social services Trust company supporting community interests Loyalty Support company`s community projects Be proud of company and its employees Understand the company`s business problems

Changes in Expectations Communities force companies to display new forms of responsibility Shift from checkbook philanthropy to a responsible behaviour Companies feel there is no more loyalty: only requirements The freedom of companies to make business decisions is limited Need for trust, the shared vision The psychological contract is violated

Psychological Contract Community Expectations Company Expectations Psychological Contract

Communities for Corporate Involvement The Corporation in the Community Cyber Community Interest Community Employee Community Fenceline Community Impact Community Site Community

Driving Forces Community Expectations Community as the Definer of the License to Operate NEIGHBOUR OF CHOICE Building trust …a legacy of trust Control Cost Drivers Differentiate Products in a Global Marketplace ExternalInternal

Company and Community Assesment Company Factual Contributions Community needs Other companies’ programs Qualitative Willingnes to plan Relationships Community needs, attitudes and expectations Strategic Strengths Weaknesses Community Factual Community data Community needs Other companies’ programs Community resources Qualitative Attitudes/concerns Expectations Reputatuon Strategic Threats Opportunities Program Strategies Relationship building Identifying issues Community programs

Considering Community Needs Permanent and sustainable relations with key individuals, groups and organizations Institutionalised procedures which anticipate the expectations of the community Focus on problems and quality of life of social community