0. Strategic Approach to Corporate Responsibility.
Michal Dzoga
Sofia, 30th October 2008

1. Agenda Global trends in Corporate Responsibility 2
CR development evaluation
Deloitte’s approach to CR strategy building process
Benefits for a company

2. Global trends in Corporate Responsibility

3. Basic reporting extended with CR issues
Triple Bottom Line
Environmental Obligations
Develop processes and technologies to protect natural resources
Develop innovations to reduce environmental harm
Develop, improve, or sustain infrastructures in local communities
Engage in waste management/ recycling
Social & Ethical Obligations
Serve the best interests of the human assets
Develop innovations to improve standards of living
Provide resources and support to local communities
Engage in global events
Provide resources and support to global stakeholders
Financial Obligations
Maximize shareholder wealth
Ensure long-term profitability
Communicate strategy, vision, and financial performance to shareholders
Provide tax revenue for state and federal government
Support the economies of local communities
Regulatory Obligations
Abide by the law and industry regulations
Provide full disclosure of financial information
Comply with stock exchange regulations

4. Business approach to Social Responsibility
Stronger influence of intellectual capital on company’s real value
Increasing requirements of financial markets, stakeholder groups and global trends
Increasing number and international reporting standardization of extra financial business performance
Integration of Social Responsibility with business strategy
Evolution of Social Responsibility in the direction of Corporate Responsibility and Sustainability
Number of reports by type
Number of sustainability reports
Source:
Source:

5. Corporate Responsibility standards
International standards and guidelines Global Reporting Initiative
Rules for determining report content
Materiality
Shareholders interest
Sustainability
Completeness
Rules for ensuring high report quality
Balance
Comparability
Accuracy
Timeliness
Transparency
Reliability
Standards used in CR audits
ISO 14064
AA 1000
ISO 14001
OHSAS 18001
ISO 9001
ISO (in preparation)

6. Global 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 Index
Sao Paulo Stock Exchange Corporate Responsibility Index
Ethibel 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)

7. Investments in environment friendly companies International organization Carbon Disclosure Project (CDP)
In 2003, Institutional investors issued GHG emissions disclosure requests to FT500 largest companies
CDP 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

8. CR development evaluation

9. The trust building Framework
Trust is achieved through behavior and transparency and is a key success factor for the business to operate, innovate and grow.
Standards
And Guidelines
Stakeholders needs and expectations
Benchmark to others
Own needs – what’s good for Business
Licence to operate, innovate and grow
Clear value & principles, objectives, governance structure and “walk the talk”
Transparent reporting on values, management practices and performance
Get Independent Assurance through a phased approach with external reporting and assurance

10. General companies’ approach to CR – level of engagement
Strategic approach
Organizations 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 approach
Businesses 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 approach
Companies 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-engagement
Companies 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.

11. Company’s CR partners - stakeholders grouping
Customers
Investors
Build 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.
Company
Business Strategy
Risk Management
Brand & Reputation
Corporate culture
Employees
Suppliers
Their 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 company
Communities
Environment
Social 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 regulations
others:
Government / Regulator
Customer organizations
Competitors
Stakeholders engagement is becoming crucial in:
defining and developing sustainability reporting system
aligning the performance reports with new business strategy
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12. Preliminary recognition of CR activities – issues to be dealt with
Customers
Quality management systems
Health & Safety
Suppliers
On term delivery
To keep official secret
Environment
Environment investments
Green supply chain
Green footprint
Energy consumption
GHG emissions
Corporate Responsibility fields
Organizational culture
Mission, Vision, Key Values,
Code of Conduct,
Ethical program
Shareholders
Corporate Governance
Improve communication with financial market participants
Internet transmission from stockholders meeting (ASM)
Employees
Recruitment and development
Employee voluntary service
Social actions
Restructuring
Trade Unions
Reporting
Environmental report
Environmental protect report
Usage of international standards
Local communities
Relations with organizations
Charity cooperation (Ngo)
Social programs
National culture patronage

13. Consistent Deployment of CSR Strategy Balancing Stakeholder Interests
Most important challenges in strategic approach to Corporate Responsibility
Consistent Deployment of CSR Strategy
Decentralized Strategy
Generally, 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 campaigns
Disconnected Efforts
Some 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 groupsa
Resource Constraints:
Many organizations have identified financial and staff resource constraints as a major obstacle to the strategic planning and development of CSR activitiesb
Balancing Stakeholder Interests
Balance
Corporations have difficulty balancing the primary interests of shareholders and remaining stakeholders to relieve the tension between achieving financial goals versus social and environmental goals
Short-term focus
The primary focus of corporations has been to maximize shareholder profit by addressing easily measurable short-term financial performance goals
Shareholder Interests
In 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 decisionsc
Stakeholder Interests
Communities, 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 results
Measuring Results
Quantifying Returns
Measuring results of CSR programs has been identified as the greatest challenge to corporations
Although 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 marketplace
71% of companies report publicly on citizenship and sustainability performance, but have difficulty communicating value to stakeholdersa
70% 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 reputationd
Source: 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).

14. Deloitte’s approach to CR strategy building process

15. CR must be incorporated into existing strategic planning processes.
Corporate Governance
Communication of CR issues to the board is critical in the development and evolution of the CR strategy
The board’s demonstration of desired behavior is critical to the implementation of the CR strategy
Raise CSR issues to the board
Business Strategy
Implementation of the CS agenda
Corporate Responsibility (CR) Strategy
CR Agenda
Environmental Awareness
Local Outreach
International Outreach
Internal Development
CR Management Practices
Communication of Expectations
Rewards and Recognition
Role Model Behavior
Consistent Global/Regional Deployment
Monitor and Control
Employees
The deployment of CR management practices will drive employee engagement and build a sense of individual and collective ownership of the CR Agenda
Management 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.

16. Methodology of implementing strategic approach to CR
Phase I
Preparatory
Phase II
Implementation
Phase III
Operational
1st Stage
Pre-audit of Corporate Responsibility procedures and activities
3rd Stage
Determination of communication rules with stakeholders
5th Stage
Support CR system management
6th Stage
Sustainability Report audit
2nd Stage
Development / adjustment of Corporate Responsibility policy
4th Stage
Establishment of formal CR function

17. Deloitte’s CR tools
Tools 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.

18. Deloitte’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 experts
Yearly international conference of CR&S network
Firenze 2003, Paris 2004, Toronto 2005, Madrid 2006, Copenhagen 2007
Intense representation internally and externally
Member of World Economic Forum
Member of World Business Council for Sustainable Development
Signatory to the Global Compact
Member of the Global Reporting Initiative (GRI) Board of Directors
Strong collaboration with audit, risk and management consulting, and corporate financial services to offer innovative, multi-disciplinary service

19. Benefits for a company

20. Potential companies’ features that influence CSR
Companies with negative brand image
PKN Orlen, TP, Provident, PZU, Kompania Węglowa, Tesco, Jeronimo Martins (Biedronka), J&S, Prokom, Microsoft
Organizations conducting „sensitive business” exposed to social disapproval
(tobacco) BAT, Philip Morris, (military) Bumar, International Technologies, (alcohol) Grupa Żywiec, Kompania Piwowarska, Sobieski, Polmos
Companies with the dominant market share e.g. former state owned entities
PZU, TP, KGHM, PKP, Telewizja Polska
Enterprises conducting mergers, transformation or rebranding
Bosh-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, Servier
Companies 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, Provident
Companies with environment sensitive products or activity
(fuel) Shell, PKN Orlen, Lotos, BP, Statoil, (energy) Vattenfall, Elektrownia Kozienice, (chemicals) Zakłady Azotowe Puławy, Ciech
International corporations entering foreign market with imported CR strategy – not adjusted to local business environment
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21. Implementing strategic approach - advantages for companies
Business Risk Reduction
Anticipation and counteraction of legal, personal, environmental, corporate image and operational risks
Well managed CR activity influences customers trust and employees loyality
CR is no longer a single PR activity but perceived as long-term investment became the dynamic developing philosophy of conducting business in modern world
Long-term stable growth
Investors are more likely to invest in companies with long-term strategy based on system of values that secures sustainable development and reduces business risks
Following 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 companies
Increase in company’s value
Obtaining competitive advantage
Obedience to CR values will definitely transform from company’s competitive advantage today into obligatory standard tomorrow
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22. Implementing strategic approach - advantages for companies
Professional CR strategy increases employee satisfaction, loyalty and motivation in more effective way with non-salary factors
Better reputation positively affects recruitment process (EU open labor market makes it more challenging for employers in CEE countries)
„Desired” employer
Corporate image advertising campaigns based on and CR policy are being implemented by many companies in order to strengthen brand perception
Growth in the affluence of the Polish society makes the customer choice less price sensitive in favour of brand awareness
Better and cost effective marketing
Fair judgment
External and professional assurance guarantees balanced and reliable assessment as opposed to the „flattery” internal reports
Expansion benefit
Companies 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 acquisitions
Meeting industry requirements
Companies with no professional CR regulations are excluded from cooperation with companies that obey CR values at all levels (partnerships, supply chain)
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23. O 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 Środkowej
Deloitte 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 Polsce
W 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.