Accelerating csr practices by United Nations Development Programme in Croatia

ACC E L E R AT I N G C S R P R AC T I C E S

ACCELERATING CSR PRACTICES in the new EU member states and candidate countries as a vehicle for harmonization, competitiveness, and social cohesion in the EU

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Baseline study on Corporate Social Responsibility in Croatia Study Implemented by: Marina Škrabalo, Nives Miošić-Lisjak, Aida Bagić UNDP project partners: Association for CSR in the Croatian Chamber of Commerce Publication has been prepared and published with funding by European Union. The views expressed in this study reflect the authors’ opinion and do not necessarily represent the position of the European Union or the United Nations Development Programme. Publication has been prepared within the Project “Accelerating CSR practices in the new EU member states and candidate countries as a vehicle of harmonization, competitiveness and social cohesion”. More information: www.acceleratingcsr.eu Copyright © United Nations Development Programme, Croatia 2007 United Nations Development Programme Radnička cesta 41/8 10000 Zagreb Croatia UNDP is reserved logo of organization of the United Nations Development Programme. All rights are reserved. Fragments of this publication may be copied, reproduced and distributed with the source provided. Design and Layout: Pseudoprodukt Editor: Tara Bray ISBN: 978-953–7429-10-2 2

Dear Reader, It is a great pleasure and to present to you the very first comprehensive baseline analysis of Corporate Social Responsibility (CSR) in Croatia. The study, results of which we are sharing with you in this publication, was carried out under the regional CSR project “Accelerating CSR practices in the new EU member states and candidate countries as a vehicle for harmonization, competitiveness, and social cohesion in the EU” funded by the European Commission and the United Nations Development Programme. This analysis builds on the work of many actors who believe that true CSR can make business more sustainable, profitable and engaged in development. UNDP Croatia has been actively involved in promoting CSR through various projects and the United Nations Global Compact initiative since 2004. Whether you are a business person, Government official or representative from a civil society organization our hope is that you will find this publication useful for your professional work. It provides a map of relevant organizations and initiatives you can decide to become a part of; it also provides an analytical snapshot of current CSR situation among businesses operating in Croatia. It gives useful recommendations for businesses, Government and civil society organizations that you may find inspirational and trigger action. Only our collective cross-sector initiatives can make Croatia a better home for everyone and I invite you to join the growing circle of sustainability practitioners in the country. Why is CSR such an important topic? CSR unleashes a huge potential for innovation at all corporate levels. It provides a systematic framework to manage your organization taking into account financial, environmental, social, governance and ethical issues. It helps to reduce energy, waste and cut costs, differentiate your business, sidestep future regulations, create innovative new products and processes, open new markets, attract and retain the best employees, improve your image with the shareholders and the public, reduce legal risk and insurance costs and provide a higher quality of life . Long term it establishes brand name loyalty and hence – profitability. Embedding sustainability strategically into day to day business operations is not a burden; it is an exciting opportunity to engage in innovative processes that are guiding the world right now and will continue even more in the future. Sustainability could become the ethos of any smart organization that views people, planet and profits as one. I sincerely hope that you will find this publication useful and invite you to embark on this journey for sustainability.

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▪▪ FOREWORD

Yuri Afanasiev

Resident Representative UNDP Croatia

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▪▪ ABBREVIATIONS: AA1000 – AccountAbility 10000 Standard AED – Academy for Educational Development AIESEC - Association Internationale des Étudiants en Sciences Économiques et Commerciales CATI – Computer-assisted telephone interviews CEDAW – Convention on the Elimination of Discrimination against Women CEE – Central and Eastern Europe CSR – Corporate Social Responsibility EFQM - European Foundation for Quality management’s model of business excellence GDP – Gross Domestic Product GEF – Global Environmental Facility GRI – Global Reporting Initiative HGK – Croatian Chamber of Commerce IBRD - International Bank for Reconstruction and Development IET - Definition of Ratings According to Metodology by IET ILO – International Labour Organization NESsT – Nonprofit Enterprise and Self-sustainability Team NGO – Non-Governmental Organization SA 8000 – Social Accountability 8000 Standard SD – Sustainable Development SME – Small and Medium Enterprises TA – Technical Assistance UNDP – United Nations Development Programme UNIDO – United Nations Industrial Development Organization WB – World Bank

Executive Summary

Context and History of CSR in Croatia Economic and Legal Context Current Legal Framework

13 15 16

CSR Promotion in Croatia: Actors and Key Initiatives Business Associations Expert Organizations and Consultancies Governmental Institutions and Public Agencies International Development Organizations Academic Community: Research and Education Civil Society Organizations Trade Unions Media Review of CSR Progress since 2004

19 19 21 21 23 24 24 25 26 26

Analysis of CSR Implementation Capacities of the Business Sector in Croatia – Research Findings Note on Methodology General Overview of Key Findings Regarding Engagement in Croatia 1. CSR Strategy Development 2. Stakeholder Engagement 3. Governance and CSR Specific CSR Initiatives relevant to Croatia 4. CSR Performance Management 5. Public Disclosure on CSR in Croatia 6. Reporting Verification

Good practices of CSR implementation in the country Case Study: Holcim Croatia – How green and friendly can cement, concrete, and aggregates be? Case Study: Sustainability principles deployed – Hartmann and SA 8000 Case study: Hauska & Partner International Communications (H&P): “We cannot succeed if we failed to understand each other perfectly”

59 59

Conclusion and Recommendations Recommendations for Accelerated Development of CSR in Croatia

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APPENDIX 1 - Key CSR Related Events (December 2004 – May 2007)

APPENDIX 2 – List of researched companies and stakeholder organizations

APPENDIX 3 - Definition of Ratings According to Metodology by IET

APPENDIX 4 - Bibliography

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▪▪ CONTENT

35 36 38 39 41 46 47 48 56

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Executive Summary

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▪▪ EXECUTIVE SUMMARY

This report represents a component of the regional research - Accelerating CSR practices in the new EU member states and candidate countries as a vehicle for harmonization, competitiveness, and social cohesion in the EU. The study in Croatia was carried out from March – May 2007, and included desk research, in-person interviews with 25 companies, 3 group interviews with representatives of stakeholders (the media, trade unions and NGOs), and 21 web-site surveys, followed by either phone or e-mail contact to corroborate the findings of the web-site surveys. Some interviews included several representatives of a company or an organization, so that the total number of people interviewed or directly consulted for the purpose of this study exceeded 70. Corporate social responsibility in Croatia needs to be assessed within the general transition context, taking into account on the one hand the EU integration process and market liberalization, and on the other, the specific context of post-Yugoslav societies. Socialism – ‘worker’s self-management’ - introduced the practice of wide participation in managerial processes. At the same time, the business sector’s interest in quality management dates back to the 1960’s, while various types of community investments can be traced back to before WWII. More recently introduced business practices, such as the promotion of teamwork and stakeholder consultations, often seem to be a combination of contemporary Western approaches to quality management and these older legacies. In early 2007, almost three years after the first ‘National Conference on CSR,- Agenda 2005’, it became apparent that corporate social responsibility had become a prominent enough concept to foster collaboration among Croatian companies, academia, some NGOs and other expert organizations. This resulted in the emergence of a ‘community of practice’ which facilitates the horizontal exchange of best managerial practices and encourages more consistent public disclosure of non-financial information relevant for assessing corporate contributions to sustainable development. CSR in Croatia is driven by leading business associations, supported by international development agencies and, to some degree, business media. Unlike three years ago, interested companies can now access several resource websites, enrol in education modules on CSR and corporate governance, download CSR development related manuals or just call up one of the business associations or support organizations for advice. Sectoral CSR initiatives are also underway. In Croatia, there are around 200 companies that have embraced CSR as part of their declared values or strategic orientation. These are mostly large companies with a significant percentage of international ownership. They are publicly listed and export oriented and tend to have much greater motivation and availability of resources to organize, monitor and publicize their CSR practices. They are concentrated in the manufacturing and processing industries, financial services and telecommunications, and are often among the top leaders in their sector. While role models exist, there is a deep information, competence and profitability gap dividing these leaders from the vast majority of SMEs that make up almost 90% of all Croatian business entities, as well as the

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thousands of larger companies that are primarily grappling with shortterm survival issues. CSR practices in Croatia are relatively well developed and prevalent in the areas of workplace quality and safety, consumer satisfaction, environmental protection and community investments and partnerships. Much less frequent practices relate to corporate governance procedures, integration of CSR in risk analysis and overall business strategy development, supply-chain management and socially responsible investing. The current drivers for CSR in Croatia are primarily internal, stemming from companiesâ&#x20AC;&#x2122; assessments of long-term opportunities and risks, related to productivity, efficiency, market integration and establishing positive relationships with stakeholders. Horizontal interactions among different, primarily non-state actors enhance mutual cooperation. However, the complementary role of watchdog non-governmental organizations (consumer associations, environmental and human rights groups, trade unions), challenging companies to account for their potential misbehaviour, is much less systematic. The vertical dimension of the CSR policy arena is less developed, both in terms of a lack of specific government policies, incentives and sanctions, as well as in terms of a lack of efficient transfers of know-how and support mechanisms available to small and medium enterprises. Strengthening the role of the government in promoting CSR, in partnership with the business sector, presents a key area for improvement in the upcoming period. A conducive environment for CSR in Croatia is clearly emerging, mainly due to the efforts of the business community itself. However, state efforts and external drivers, primarily media coverage and independent monitoring, need to be strengthened. Continued support must also be provided for the initiatives of the business sector, civil society and academia that are operational or have been conceptualized. The exchange of best practices with counterpart organizations in other European countries that have had a different tradition and scope of CSR engagement, can be beneficial in accelerating the expansion and elaboration of the Croatian efforts at the sector and individual company level. The major challenge of ensuring a critical mass of CSR-aware companies, including SMEs, may thus be overcome in a reasonable timeframe. The key areas for improving CSR practices at the company level relate to the integration of CSR into overall business strategies, which need to be deployed in a systematic manner, responding to different stakeholdersâ&#x20AC;&#x2122; interests and needs. T he capacities of business associations that are engaged in the promotion and advocacy of CSR and sustainable development can be further strengthened by the more proactive role of Croatian business associations in collaboration with international support organizations. Enhancing CSR awareness in the media may result in a higher quality and greater scope of public information on corporate social responsibility. The further expansion of local academic engagement in the research and promotion of CSR, enabled by adequate funding from the public and private sector and the EU, will ensure the timely creation and sharing of needed, locally relevant knowledge on CSR drivers, obstacles and inno-

vative actions. Strengthening the complementary role of the Government in CSR promotion is of the utmost importance, yet, it can only work if it is based on the principle of partnership with the business sector. Finally, strengthening the capacity of civil society organizations to enable them to engage in partnerships with the business sector and to act as credible and constructive watchdog organizations, will require a variety of cost-effective investments on the part of donor organizations and the Government. .

Context and History of CSR in Croatia

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1 The report was discussed at the 12th session of the Croatian parliament in February 2005 and stirred up a fervent ongoing public debate.

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▪▪ CONTEXT AND HISTORY OF CSR IN CROATIA

Corporate social responsibility in Croatia needs to be assessed within the general transition context, common to all post-communist countries. It ,must also take into account the specific context of post-Yugoslav societies with their legacy of ‘self-management’ socialism, the destruction of the 1990’s war and the establishment of independent states. As noted in previous research on the origins of CSR in Croatia (Bagić et al., 2004), “worker’s self-management” socialism had already introduced the practice of wide participation in managerial processes. The interest in quality management dates back to the 1960’s, while various types of community investments can be traced back to before WWII, corroborated by a socialist regime in which enterprises were expected to invest in local and regional social development. More recently introduced business practices, such promoting teamwork and stakeholder consultations, often seem to be a combination of contemporary Western approaches to quality management and these older legacies (Bagić et al., 2004:28). The transition from socialism to capitalism began in Croatia in 1990, during a period of political instability, soon to be followed by war and the break-up of Yugoslavia. Croatia did not achieve full territorial integrity until 1998. After the election of the coalition government, led by social-democrats in January 2000, Croatia began to consolidate its democratic institutions, which had positive effects on Croatia’s international reputation, economic growth, the return of Serbian refugees and respect for citizens’ and human rights. The war is one of the main reasons for Croatia’s transition being often considered as ‘delayed’ or ‘extended’, with the first wave of privatization being labeled, by some leading Croatian economists, as “legalized robbery through different forms of fictitious or politically dictated transactions” (Baletić, 203; 287; quoted in Stubbs et al., 2007:5). Similar to some other parts of South Eastern Europe, the kind of capitalism that developed in Croatia in the last decade and a half, is “characterized by the dominance of insider interests, extreme clientelism, non-market based financial sector allocation, and a close link of the state and government with entrepreneurs and the financial sector” (Bićanić, n-d; 1, quoted in Stubbs et al., 2007:5). The process of dismantling this kind of ‘crony capitalism’ is ongoing and still requires the combined efforts of various sectors of Croatian society. This is corroborated by the lack of corrective measures taken, following the Report on Privatization Audit conducted by the State Audit Office in the period 2001-04. This showed that out of 1,556 enterprises, 64% did not meet their development objectives, 75% reduced the workforce by more than 50% and only 5% were privatized in complete compliance with relevant laws (Državni ured za reviziju, 2004:48-49)1. Considering the troublesome political and economic context of the 1990’s, it is not surprising that the visibility of corporate social responsibility in the Croatian business community corresponds to the period of Croatia’s EU accession process. This began in 2001 with the signing of the Stabilization and Association Agreement and was accelerated after Croatia gained ‘candidate country’ status in June 2004, increasingly focusing the attention of the Croatian political and economic elite on Croatia’s long-term potential

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for socio-economic development in Europe’s political space and integrated market economy. Croatia’s landmark event - the first National Conference on CSR - Agenda 2005 - took place in December 2004, bringing together over 120 practitioners and researchers, and enabling the formulation of a common cross-sectoral CSR agenda. Its preparation was an unprecedented collaborative effort by the Economics Institute, with the support of Konrad Adenauer Stiftung and in partnership with several business associations, international organizations, consulting firms and NGOs. The following overview of key events and initiatives since 2004 indicates the current concentration of interactions across sectors and organizations, geared towards the creation of a conducive business and broader social environment for CSR, where systematic Government incentives are still missing. Introducing the CSR concept into the language of the Croatian business community, and into the public discourse, entailed identifying traditional business practices for inclusion under CSR, while simultaneously identifying opportunities to strengthen systematic CSR approaches - both by transferring good practices from other countries and by raising the visibility of existing CSR practices in Croatian companies. As noted by prominent CSR researchers and practitioners, in the last four years there was “a paradigm shift, from low level attention to the issue of CSR to the now almost ubiquitous reference to ‘social responsibility’ in business conference, in sections of the media, and in training activities” (Stubbs et al, 2007:6). The most commonly used terms for CSR are currently ‘društveno/ socijalno odgovorno poslovanje’ (socially responsible business practice) and ‘korporacijska/korporativna društvena odgovornost’ (corporate social responsibility), with the most common corresponding abbreviation for CSR being ‘DOP’. It is also quite common to use the abbreviated version ‘odgovorno poslovanje’ (responsible business practice) in order to avoid misunderstanding CSR as being primarily about ‘social issues’, and even more narrowly, about social benefits and support. Previous research on CSR in Croatia indicated a prevalence of responsible business practices in the areas of environmental protection (primarily in industry), human resources management, customer satisfaction, and community relations. They also pointed out the importance of leadership support and vision for sustained visibility and viability of socially responsible policies and practices within the company. CSR as a management framework seems to be limited to large and successful private companies, both domestically and foreign-owned. Although small and medium-sized companies often invest into their communities spontaneously, their capacity for investment into quality management systems, environmental management systems, and stakeholder relation systems remain very limited. The vibrant tradition of corporate giving is linked to company interests, but also to media support which provides maximum visibility and promotes companies’ reputations in this area, in a society characterized by decreased social standards, and by Government’s failure to provide for a long list of communal and social needs (Bagić et al. 2006)

Reputation and differentiation of companies and brands seems to be the principal perceived benefit of CSR, particularly in the light of prevailing negative social attitudes on lack of transparency and compassion on the part of Croatian business sector, caused by traumatic privatization during an economically stagnant previous decade, and by the legacy of a political and value-system egalitarianism. In this context, corporate responsibility is often perceived by the public as a meticulous adherence to legal standards, i.e. the traditionally high labour standards, and increasingly sophisticated environmental standards, in the context of the EU accession process. This perception of corporate responsibility is reinforced by poor supervisory and enforcement mechanisms, such as the inspectorate and the judiciary, which enables unsanctioned breaches of law, and by the absence of substantive public condemnation of unethical practices. Reputation is linked closely with the competitiveness of products and services, especially as customers become more informed and demand more quality. Export seems to be another strong motivator, as it fosters the introduction of quality management systems, and various industry-specific certificates recognized in target markets. The prevalence of investment into workforce education, primarily of management and specialist personnel, is linked directly to the shortage of such personnel in the labour market, and the poor match between the formal education system and the needs of the economy. Foreign investment, the introduction of quality management systems, the drive for increased productivity and export orientation, often push companies to introduce compulsory ICT education, foreign language and teamwork training for their entire workforce which, in addition to specialist skills training, tends to improve the long-term employability of people with lower skill levels. CSR practices in the areas of corporate governance, integration of CSR into risk management and overall business strategy, supply chain management, and socially responsible investment, are much less developed and relatively infrequent. The gap in these practices seems to be caused by the absence of outside drivers, although there is a marked potential for their future prominence. For instance, the Consumer Protection Act was not adopted until 2003, and the prescribed structures of local consumer protection councils are not yet operational. There are only two national consumer protection organizations, primarily engaged with cases of fundamental violations of consumer rights, such as monopolistic price-fixing, which have so far failed to promote responsible consumption. The consolidation of the growing capital market seems to be imminent, both in terms of additional capitalization, and the regulation of quality and transparency of corporate governance systems. The systematic approach to the development of business strategies and management systems is becoming increasingly frequent among leading companies, as evidenced by a marked growth in implemented norms and standards over the past five years.

According to the latest EU Progress Report, privatization is still continuing at a much slower pace than envisaged. In the late 1990s, the private sector accounted for only 60% of Croatia’s GDP and it seems to have risen only slightly in recent years. The private sector share in total employment increased from 66.2% in 2004 to 68% in 2005. State intervention and ownership remained significant, especially in the shipbuilding and steel industries. The main factors delaying the process of privatization seem to be the low level of commitment from the Government, legal problems, poor

investor interest and unrealistic sales conditions in some instances (European Commission, 2006). There is considerable industrial concentration, since the top 400 companies account for 51.5% of pre-tax profits, 49.7% of gross revenue, and employ 33.4% of all people employed in 2005 (Privredni vjesnik, 2006; quoted in Stubbs et al., 2007). At the same time, out of 73,000 active companies in 2005, 86% were micro-enterprises with less than 10 employees, while the remaining 9,659 enterprises included 1,019 large companies (with 250 or more employees), 2,520 medium-sized companies (between 50 and 249 employees) and 6,120 small enterprises (11 to 49 employees). There are currently only 359 public or communal enterprises2.

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▪▪ ECONOMIC AND LEGAL CONTEXT

2 Data obtained from Ruđer Friganović, Director of the Industry Sector of the Croatian Chamber of Economy in April 2007.

Table 2: Selected Economic Indicators of the Croatian Economy (Adapted from the Croatian Chamber of Economy, http://hgk.biznet.hr/hgk/fileovi/9517.xls, accessed on April 4th, 2007) Croatian Indicators Total area, km2 Total population, mid-year estimate, ‘000 Active population GDP, current prices (mil. USD) GDP per capita, (USD) GDP, real growth rate in % INDUSTRIAL PRODUCTION growth rate in % EXCHANGE RATE HRK/EUR, period average2 EXCHANGE RATE HRK/USD, period average2 TRADE EXCHANGE - EXPORTS, (mil. USD) TRADE EXCHANGE - IMPORTS, (mil. USD) TRADE BALANCE, (mil. USD) CURRENT ACCOUNT BALANCE, (mil. USD) GROSS EXTERNAL DEBT, (mil. EUR) CENTRAL GOVERNMENT DEBT, (mil. HRK) FOREIGN DIRECT INVESTMENTS IN CROATIA, (mil. USD) PRICES, growth rates in % CONSUMER PRICES – Inflation% RETAIL TURNOVER real growth rates in % NET WAGE AND SALARY, (in HRK) TOTAL PERSONS IN EMPLOYMENT UNEMPLOYMENT RATE % TOURISM REVENUE, (mil. USD) CENTRAL GOVERNMENT BUDGET Total revenue, (mil. HRK) Total surplus/deficit, (mil. HRK)

2004

2005

2006

87 661 4 439 1.719.509 35.645,1 8.030,0 4,3 3,7 7,495680 6,031216 8.022,5 16.583,2 -8.560,7 -1.841,3 22.780,6 96.901,5 1.261,5

87 661 4 442 1729 312 38.882,5 8.753,4 4,3 5,1 7,400047 5,949959 8.772,6 18.560,4 -9.787,8 -2.576,4 25.540,8 106.789,4 1.625,5

87 661 4 441 1759 492 42.915,3 9.664,1 4,8 4,5 7,322849 5,839170 10.376,3 21.488,3 -11.112,0 -3.174,7 28.997,6 108.446,9 35,2

2,1 2,6 4 173 1.409.634 18,0 6.726,7

3,3 2,8 4 376 1420 574 17,9 7.370,1

3,2 2,1 4 603 1467 876 16,6 7.990,1

80.466,9 -4.097,4

85.654,9 -3.756,2

95.235,9 -2.268,3

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In 2005, real GDP growth was 4.3%, compared to 3.8% in 2004. The GDP per capita increased from 8,030 USD in 2004 to 9,664 USD in 2006 (HGK Selected Economic Indicators). In 2005, average per-capita income increased to an estimated 47% of the EU-25 average (in purchasing power standards). Even though the employment rate has been constantly rising since 2001, relatively high unemployment rates, limited job turnover and job creation, are still some of the most serious economic problems. Although the official unemployment rate declined from 16.9% in July 2005 to 15.7% in July 2006, the long-term unemployment rate is 7.3% with unemployed youth accounting for 30% of the unemployed (European Commission, 2006). While official data on Croatia’s unemployment are the highest among CEE countries, the labour force survey shows a lower, more realistic unemployment rate of 12.7%. Croatia’s employment structure is increasingly reflective of the trends in developed societies, with 63% of the workforce in the expanding service sector, 31% in non-agricultural activities and 6% in agricultural activities (UNDP, 2006:24).

▪▪ CURRENT LEGAL FRAMEWORK There are no laws referring explicitly to CSR. Analysts and practitioners tend to agree that the overall legislative and policy environment relevant for socially responsible business practices in Croatia is marked by over-regulation in some spheres of activity and under-regulation in others (Stubbs et al., 2007). Taking into consideration one of the key components of the definition of CSR as ‘going beyond the legal requirements’, it should be noted that for a large number of Croatian companies, regardless of their size, it is still a problem to meet all the existing legal requirements. There are, however, legal acts relevant for various aspects of CSR, including privatization and corporate governance issues, public procurement, labour relations and work safety, environmental protection and even corporate donations. While Croatia is rapidly adjusting its legal framework to EU requirements, establishing efficient monitoring and consistent implementation of a number of existing laws is an ongoing problem, largely due to the shortcomings of judicial reform and insufficient administration capacities (EU Progress Report, 2006). In this context, strengthening the enforcement capacity of the State Inspectorate is of the utmost importance, as highlighted in the last

3 This can be illustrated by difficulties in meeting legally mandated reporting requirements: out of 238 public joint companies, 108 did not submit their financial reports to the Management Board of the Zagreb Stock Exchange (Grčar and Mateljić, 2007: 13)

EU Progress Report. The State Inspectorate was set-up in 1997 and reformed in 2004, when it unified different inspection services formerly under the jurisdiction of four different ministries, and increased the number of inspectors to 50. Its expanded mandate, corroborated by more stringent criminal sanctions, includes the proposal and review of legislative changes and the delivery of specific inspection services of auditing companies on legal compliance in the following areas: commerce, catering, crafts supervision and product quality control of imported and domestic goods; labour relations and occupational safety; electric power supply, mining and pressure vessels supervision. Nevertheless, labour and market surveillance are still key areas of improvement, according to the latest EU Progress Report. (www.inspektorat.hr)

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CSR Promotion in Croatia: Actors and Key Initiatives

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▪▪ CSR PROMOTION IN CROATIA: ACTORS AND KEY INITIATIVES

In early 2007, almost three years after the first National Conference on CSR - Agenda 2005, it became apparent that corporate social responsibility had become a prominent enough concept to foster collaboration among Croatian companies, academia, some NGOs and other expert organizations. This has resulted in the emergence of a ‘community of practice’ which facilitates horizontal exchanges of best managerial practices and encourages more consistent public disclosure of non-financial information relevant for assessing corporate contributions to sustainable development. Horizontal interactions among different, primarily non-state actors enhance mutual cooperation. However, the complementary role of watchdog non-governmental organizations (consumer associations, environmental and human rights groups, trade unions), challenging companies to account for their potential misbehaviour, is much less systematic. The vertical dimension of the CSR policy arena is less developed, both in terms of a lack of specific government policies, incentives and sanctions, as well as in terms of a lack of efficient transfers of know-how and support mechanisms available to small and medium enterprises. The following overview of key organizations engaged in the promotion, facilitation and expert support to companies interested in formulating and expanding the scope of their CSR practices provides basic information on the current efforts of business associations, international agencies, expert organizations, government, media, civil society and trade unions.

▪▪ BUSINESS ASSOCIATIONS The Croatian Business Council for Sustainable Development (HR BCSD) is the leading business association focused on the promotion of sustainable development in business practices, and was founded ten years ago (in 1997) as a non-profit institution by a group of Croatian companies and NGOs. HR BCSD operates as a national chapter of World Business Council for Sustainable Development (WBCSD) with a membership of 34 companies. HR BCSD serves as a catalyst of peer exchanges of best practices in different areas of CSR and SD, including eco-efficiency projects and, increasingly, sustainability reporting. In addition, HR BCSD was established to serve as an important vehicle for representing business interests in consultative processes with national and local governments, on issues related to sustainable development, such as Government ordinances for managing all special types of waste, advocating for a cost-effective, market-based, yet systematic approach, which is, according to HR BCSD’s Executive Director, inadequately understood and endorsed by the Government. Over the past 10 years the focus was primarily on environmental protection (eco-efficiency) but since 2004 HR BCSD has become intensely engaged in CSR promotion (translation of GRI guidelines, joint CSR benchmarking project with Croatian Chamber of Economy - CSR Community of Practice, organization of workshop on corruption in business with UNIDO, etc.). In the period 1997 - 2006 HR BCSD cooperated with the leading

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business journal “Privredni vjesnik” on the production of an annual special edition “Održivi razvoj” (“Sustainable Development”) presenting key business initiatives related to CSR and SD. The 2007 edition is being prepared with a new partner, the business weekly “Leader“. Since April 2005, HR BCSD has published its own quarterly newsletter “Gospodarstvo i održivost” (“Economy and Sustainability”) which is also available on the web. www.hrpsor.hr The CSR Community of the Croatian Chamber of Economy was founded in 2005 as an association of companies interested in promoting CSR practices in Croatia, in response to the request of a diverse group of companies gathered at the first National Conference on CSR held in December 2004. The five objectives of the CSR Community include (1) enhancement of knowledge and relevance of CSR in the context of EU integration and fostering the competitiveness of the Croatian economy; (2) creation of a conducive environment for CSR including the Chamber as a whole, media, other business associations, state and expert institutions and the media; (3) provision of operational support to the individual and joint CSR initiatives of the Chamber’s members; (4) stimulation of exchange of best CSR practices and hence impact the quality of CSR practices, as well as the quantity of CSR practitioners; and (5) promotion of the CSR concept and positive examples to expert circles and the broader public, which would contribute to the greater recognition of the role of the business sector as a positive change agent in the Croatian economy and society. CSR Community of CCE has been operational since 2006 and publicizes its activities in a separate section of the CEE website, www.hgk. hr/wps/portal/ZajednicaZaDOP featured on CEE’s home page. At present it has 87 members (companies of all sizes and from diverse sectors, including two non-profit institutions - Economics Institute and Croatian Center for Cleaner Production). The “CSR and SD Business Index” is the first big project initiated and implemented by the CSR Community of CCE and HR BCSD, with the financial and programmatic support of the Academy of Educational Development and UNDP. This CSR benchmarking project includes the development of Croatia-specific benchmarking methodology, with mentorship by the UK support organization Business in the Community, which should complement as well as influence the criteria of the most prestigious business award in Croatia, “Zlatna kuna”. As part of the Zlatna Kuna annual ceremony, the Center for Quality of the Chamber of Economy awards quality labels “Croatian Quality” and “Croatian Creation” to companies excelling in innovation, originality and quality of products (to date 164 companies have been awarded the Croatian Quality label and 81 companies the Croatian Creation label). While these labels are not directly related to CSR, this initiative contributes to the visibility of small domestic producers, which in many cases produce environmentally-friendly products. The Croatian Employers’ Association (CEA) is the strongest voluntary business association in Croatia and the only business organization represented in the national tripartite body for social dialogue. Even though

it is not its central theme, CSR and sustainable development are gradually becoming more important to CEA, as evidenced by the Coordination on Sustainable Development, established in 2006, together with HR BCSD, to facilitate joint positioning, advocacy and lobbying of the government regarding environmental legislation. Coordination represents one of the three strategic projects of CEA. The CEA 2007 Activity Plan includes a set of CSR-related activities, primarily mainstreaming CSR into specific industry associations within HUP, starting with the development of industry-specific codes of ethics (ICT industry code of ethics is underway) and the creation of sectoral action plans. (www.hup.hr) The Croatian Association of Managers and Entrepreneurs (CROMA), founded in 1990, focuses on building the professional confidence and competencies of Croatian managers. CROMA is among the first business associations that have addressed the issue of business ethics – in 1993 they organized the first seminar on managerial ethics; in 1997 they commissioned the first and, currently, only survey on managers’ attitudes and practices regarding business ethics and promoted its own Code of Ethics for Managers and Entrepreneurs. CROMA focuses on educating managers in the area of business ethics through specific training and publishing activities. The recent training programme on corporate governance for members of company supervisory boards, in collaboration with the Economic Faculties of Zagreb and Split, is of particular note. In 2007, in collaboration with Varaždin County, CROMA launched the Caux Round Table Club. (www.croma.hr) The Zagreb Stock Exchange (established in 1991) promotes the ‘Code of Corporate Governance’, launched in April 2007 and formulated in partnership with the Croatian Financial Services Supervisory Agency (HANFA). It is a voluntary set of guidelines, supplemented by a detailed questionnaire for publicly listed companies, on their governance structure and practices. ZSE and HANFA (Croatian Financial Services Supervisory Agency) intend to prepare an Annual Report on Corporate Governance, synthesizing disclosures of individual companies. It is estimated that the first effects of the Code on the level of transparency of publicly listed companies, will become visible during 2008, after a period of familiarization and internal reorganization of corporate reporting practices. The Code is available at www.zse.hr. The Association of Croatian Cement Producers has adopted a ‘Charter on Sustainable Development’ and is about to launch a benchmarking initiative based on the Cement Sustainability Initiative of WBCSD. The ICT Association and Association of Driving Schools of the Croatian Employers’ Association are currently finalizing their sectoral codes of ethics. The Croatian Banking Association (CBA) has implemented, in collaboration with UNDP, the first industry-level CSR project, based on employee engagement. The employees of nine leading Croatian banks developed and organised workshops for the public on managing personal/family finances. These are now available in eight cities in Croatia. Based on this initiative, the Croatian Banking Association (CBA) is increasingly assuming the role of the manager of CSR activities for the banking sector as a whole.

▪▪ EXPERT ORGANIZATIONS AND CONSULTANCIES The Croatian Center for Cleaner Production is an expert non-profit organization founded in 2000, providing technical assistance, predominantly free of charge or at subsidized prices, to large and mediumsize companies, on cleaner production, energy efficiency, preparations for ISO 14001, environmental accounting and, recently, on CSR (human rights, labour relations, social investment). This has mostly taken place through several bilateral projects between UNIDO and the Croatian Government, as well as in collaboration with other European organizations such as the Regional Activity Center for Cleaner Production and national cleaner production centres in Slovakia, Hungary and the Czech Republic. (www. cro-cpc.hr) The Association of Management Consultants (AMC) is a professional association of management consultants which promotes professional ethics as a core competency of business consultants. The signing of the Professional Code of Consultant Ethics and basic education on business ethics are membership requirements. Following the initial training of consultants in the area of CSR, carried out by AMC in collaboration with UNDP, AMC proceeded to be the principal organizer of the first set of five education modules on CSR, including a general introduction into CSR and business ethics; quality workplace; environmental protection; and community investments. The project was designed in partnership with MAP Savjetovanja, with the financial support of the Charles S. Mott Foundation and UNDP. Following the ‘training of trainers’ workshop, held in October 2006 and the pilot phase in March-May 2007, the modules are expected to be included in regular AMC education over the next two years, in collaboration with other business associations and interested companies. AMC is also the key promoter of the EFQM excellence model in Croatia, having organized the first assessors’ education course in December 2006, which will be repeated in 2007, and has the long-term plan of becoming the Croatian EFQM licensed partner organization. (www.ups-amc.org) The Croatian Quality Society (CQS), founded in 1993, with origins stemming back to 1965, has 85 corporate members and close to 200 individual members and serves as the main catalyst of learning and information exchange on quality management. Its website is the only credible source of information on the number of ISO certificates. It is based on

data provided by certification agencies and is a valuable resource for practitioners’ articles and case studies on quality management, with several references to CSR. Since 2001, the Croatian Quality Society has published its newsletter on a quarterly base. The 7th Conference on Quality in Croatia was held in May 2006, under the slogan “Quality and Sustainable Development“. It included presentations of global CSR initiatives, code of conduct and business ethics, statement on socially responsible business practice, dissemination of best practices within and outside an organization. Their 2007 conference was dedicated to Quality and Society, it included a special workshop on CSR and was in collaboration with UNDP. (www.kvaliteta.net/index.htm)

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Foreign trade associations in Croatia (American Chamber of Commerce, Nordic Chamber of Commerce, and British-Croatian Business Network) are increasingly including CSR-related topics in their regular activities, focusing in particular on innovation, anti-corruption, and the environment. (www.amcham.hr); (www.nordicchamber.hr)

▪▪ GOVERNMENTAL INSTITUTIONS AND PUBLIC AGENCIES There is no specific, fully developed organizational unit within the Croatian Government structure responsible for enhancing CSR. At the same time there are several Government-sponsored funding programmes and projects that are relevant to CSR development. The Government provides some support to the issues of corporate governance and transparency, but these efforts are quite unsystematic. CSR is mentioned in the National Strategic Development Framework 2006-2013, prepared by the Central Government Office for Development Strategy and Coordination of EU Funds. It is the overarching strategic document used as a foundation for the development of specific national strategies and for the programming of the Croatian Government’s EU pre-accession funding priorities. CSR is very generally referred to in Chapter IV of the Social Cohesion and Social Justice report, as one of the avenues of ensuring social cohesion. Hence promotion of CSR is generally listed as one of the six Government goals in this strategic area, including the following proposed actions – (1) formulation of Government guidelines and recommendations to companies for setting up transparent corporate donation programmes (public tenders or matching funds for programmes recommended by expert state bodies and (2) setting up national awards for CSR backed up by adequate media outreach. The promotion of CSR is not explicitly linked to other strategic themes, such as Entrepreneurial Climate; Transport and Energy; or Nature, Environment and Regional Development. (www.strategija.hr) The following is a review of the activities undertaken by Government bodies and institutions, related to an extent to the creation of favourable institutional and social environments for corporate social responsibility: The Ministry of Economy, Labour and Entrepreneurship (www.mingorp.hr) partnered with UNIDO in the period 2004-06 on the

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regional project “Development of CSR in the Republic of Croatia”. The project included a CSR assessment and generation of opportunities for Government incentives for CSR and a more practical component of providing CSR technical assistance to four medium size companies from the Croatian Center for Cleaner Production. The project ended in March 2006 with the Regional Forum on CSR in the SME sector in CEE, which included 100 government and corporate representatives from 12 European countries (Sweden, Serbia, Slovenia, Macedonia and other SEE countries). Recommendations for a national CSR agenda were discussed, but there is no evidence yet to show that the project has helped create a Government programme of supporting CSR development, except for an officially endorsed proposal of setting up a regional resource centre on CSR in Croatia, as part of future collaboration with UNIDO (no specific decisions or plans have taken place so far). The Ministry is also the official counterpart of the UNDP in implementating two projects: “Promoting Corporate Social Responsibility and Quality Workplace in Croatia” and “Removing Barriers to Energy Efficiency” conducted in cooperation with the Croatian Bank for Reconstruction and Development, the Fund for Environmental Protection and Energy Efficiency, the World Bank and the Global Environment Facility. Furthermore, the Ministry of Economy, Labour and Entrepreneurship has a special Department for Consumer Protection within the Directorate for Trade and Internal Market. The Department prepares and monitors legislative changes related to consumer protection, in the context of the EU accession process. It is also responsible for setting up consumer counseling centres, collecting information on consumer rights and violations, cooperation and expert support to consumer associations, expert support to the National Council for Consumer Protection and management of CARDS projects related to consumer protection. (http://potrosac.mingorp.hr) The Croatian Standards Institute is a public institute responsible for the integration of European and international norms in the Croatian system of norms, which has so far integrated ISO 9000 and ISO 14000 norms. The Institute participates in the regional consultative process on the development of ISO 26000. The integration of norms is a challenging task in Croatia’s EU accession process, as evidenced by the current rate of 40% of integration of EU norms. Another challenge is the lack of a comprehensive official database of the number of different certifications. (www.hzn.hr) The Croatian Government structure includes the Office for Social Partnerships, set up in September 2001, with the mandate of coordinating and providing expert support to the national consultative tripartite body on social dialogue, the Economic-Social Council, which brings together representatives of employers (6 representatives of Croatian Employers’ Association), trade-unions (representatives of 6 national-level associations) and the Government (6 ministers). The Economic-Social Council was established following the official agreement of all parties in order to reach a consensus on all legislative and policy proposals regarding the interests of employees and employers. Regional Economic-Social Councils have been

established in 21 counties in Croatia. (www.socijalno-partnerstvo.hr) The Ministry of Environmental Protection and Physical Planning is a member of the Global Eco-labelling Network and awards the ‘Environmentally Friendly’ label, according to the Regulation on Environmental Label (NN 64/96). According to available information, the Eco-label is currently used for only 12 products by 10 companies (2005 list is provided on the Ministry’s website). The Ministry gives annual awards for environmental protection to Croatian companies, local governments and NGOs, including an award for ‘socially responsible companies’. According to the Ministry’s website the awards were last given in 2004. (www.mzopu.hr) The Fund for Environmental Protection and Energy Efficiency was set up by the Croatian Government in 2004 as an autonomous public foundation financed primarily through Government revenues from environmental fees obligatory for certain categories of businesses (transporters, industrial polluters, users of environment and industrial waste producers), as well as through other transfers from the state budget, local budgets, donations and self-financing. The Fund provides financial support in four specific forms (loans, subsidies, financial support and donations) to companies and non-profit organizations engaged in technological innovations, or other projects improving waste management, cleaner production, and protection of biodiversity, energy efficiency and other aspects of sustainable economic development. The Fund’s disbursement process is a combination of public calls for proposals and investment contracts. The Fund’s funding plan for the year 2007 is around 120,000 Euro. (www.fzoeu.hr) The Croatian Bank for Reconstruction and Development has a loan programme for financing environmental protection, energy efficiency and renewable energy resource projects for companies of all sizes, for crafts and local governments, at annual interest rates ranging from 4% to 6%, with a minimum amount of 13,500 Euro. A new loan programme for the preparation of projects in renewable energy sources was launched in 2007, and is funded by a GEF/IBRD grant. The loan covers a maximum of 150,000 USD and 50% of costs of project documentation, at annual interest rate of 4%. Loan implementation is still contingent on the adoption of a package of Government regulations related to renewable energy sources. (www. hbor.hr)

Most of the Croatian organizations and the initiatives listed above conduct their activities in direct partnership with international agencies and foreign, developmentally-oriented, NGOs. The United States Agency for International Development (USAID) and its implementing partners seem to have been among the forerunners in introducing the concept and the terminology of CSR to Croatia. One of the first comprehensive studies on CSR in Croatia was commissioned by the Academy of Educational Development, as part of a USAID funded programme supporting Croatian non-governmental organizations, with an explicit goal of providing baseline data for the greater engagement of NGOs with the business sector, especially in terms of securing their longterm sustainability in the context of diminishing international support for the civil society. The research was conducted in 2003, in partnership with the Prince of Wales International Business Leaders Forum (IBLF), that already supported similar advocacy-oriented research in other Central and East European Countries, and a local consulting company - MAP Savjetovanja d.o.o. (second edition from 2006 is available at www.aed.hr). Through its CroNGO programme, the Academy of Educational Development has organized several education and networking events on corporate philanthropy, community partnerships and foundations over the past two years. It has also financed two CSR projects, including the Center for Civil Initiatives promotion of CSR in seven counties in Northern Croatia (2005-07) and the HR BCSD and Croatian Chamber of Economy CSR benchmarking project (2007). In October 2004, USAID funded a study trip of Croatian CSR practitioners and promoters from different sectors to the U.K, as well as several follow-up projects, including the cross-sectoral Good Governance Colloquium organized by MAP Savjetovanja d.o.o. in March 2006. USAID has also financially supported research on corporate governance in public joint stock companies (Bajuk et al. 2005) which provided the basis for establishing the National Code of Corporate Governance in 2007. USAID’s entrepreneurship support project Poduzetna Hrvatska (Enterprise Croatia) organized a series of regional presentations of the EFQM model in 2006-07. Since 2004, the United Nations Development Programme (UNDP Croatia), through its Business Partnerships programme, has supported initiatives that contribute to the creation of a conducive environment for CSR and which foster new business-led partnerships that encourage entrepreneurship, improve standards of corporate practice and promote sustainable development and investment in Croatia’s underdeveloped regions. In 2005, as part of its first CSR project supported by the Norwegian Government, UNDP published a Croatian version of the CSR handbook “Winning with Integrity”, an adaptation of the handbook

developed by the U.K. organization Business in the Community. The participatory preparation involved different Croatian experts and practitioners in various CSR areas, who provided input related to the Croatian context and Croatian examples of corporate best practice. In mid-2005 UNDP, in cooperation with ILO, organized an expert seminar on CSR for a group of 35 consultants and managers. The training took place in Turin, Italy and was conducted by the United Nations System Staff College (UNSSC), ILO, and IBLF. The CSR web portal, launched by UNDP in 2006, www.drustvena-odgovornost.undp.hr has addressed one of the key needs for easy access to information on CSR, expressed at the National CSR Conference in December 2004. UNDP, through the CSR project, has systematically provided support to all relevant programmes and organizations in the area of corporate responsibility. In 2006, UNDP and the Croatian Banking Association initiated a partnership project aimed at public education on personal finances. The pilot was carried out in Zagreb for over 300 interested citizens, engaging financial consultants seconded from six leading Croatian banks, to provide free workshops for citizens on how to manage personal finances. After the successful results of the pilot phase, nine banks have joined the project and CBA is now offering workshops as a part of its regular activities, organizing workshops in eight cities in Croatia. In 2007, UNDP Croatia partnered with the Coca Cola Company on a sustainable community development project focused on the protection of water resources and promotion of sustainable tourism in the basin of the Gacka river. The Croatian Chamber of Commerce (HGK), Otočac County Chamber is the main local partner. With this project, Croatia has become part of a regional partner initiative between UNDP and the Coca Cola Company, also taking place in Turkey, Kazakhstan and Romania, as pilotcountries. Both partnership projects represented the first structured effort at direct collaboration between the business sector and community organizations, aimed at addressing specific issues of joint concern. In March 2007, with outstanding media coverage and the attendance of top Government officials, UNDP launched the Global Compact – the network of Croatian companies and other organizations committing to the 10 principles of the Global Compact. Out of the initial 61 GC corporate members, around 60% are not members of either HR PSOR or the CSR Community at the Croatian Chamber of Economy, indicating the added value in mobilizing companies around CSR, created by UNDP. In the scope of another focus area - Environmental Governance -UNDP Croatia has implemented several projects geared towards changing corporate practices and creating a supportive financing environment for energy-efficiency (www.energetska-efikasnost.undp.hr), reversing the negative industry effects on climate change and protecting biodiversity. The projects are implemented in close collaboration with several Government institutions, including the Croatian Bank for Reconstruction and Development, Global Environmental Fund, WB and IBRD, resulting in new credit lines for energy-efficiency projectsavailable to Croatian companies. The current project – COAST - targets tourism, agriculture and fisheries companies in the Adriatic region, in order to encourage the mainstreaming of biodiversity conservation into their business practices

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▪ ▪ INTERNATIONAL DEVELOPMENT ORGANIZATIONS

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▪▪ ACADEMIC COMMUNITY: RESEARCH AND EDUCATION While there is still no integral academic programme focused on CSR or sustainable development, there are an increasing number of courses on business ethics and CSR offered at undergraduate and graduate levels, both at public and private universities and business schools, as mandatory or elective courses. Hence, CSR is being ‘mainstreamed’ into the formal education of future managers and economists. This research has identified five different higher education institutions which offer courses on business ethics and/or CSR, including three public colleges for economics in Zagreb, Split and Osijek and two private colleges in Zagreb. Courses are offered at the undergraduate level in Zagreb and Split and at the graduate level in Zagreb and Osijek. In addition, the economics and management students’ organization AIESEC Croatia runs an internship project on CSR, due to increasing interest among its members. An important, practical education course Corporate Governance for Governance Board Members, organized as a collaborative effort by the Economics Faculty in Zagreb, the Economics Faculty in Split and the Croatian Managers’ and Entrepreneurs’ Association, was announced in March 2007. The announcement received extensive media coverage and the strong endorsement of the Prime Minister, who pointed out the need for the systematic education of governance board members in light of several recent media scandals, implying a serious lack of oversight of financial operations of several leading Croatian companies. The course targets renowned business people, politicians and public officials who are serving as Board members. The first course will take place in the period May-September 2007, consisting of five modules with a total of 60 hours of education, including a module on Business Strategy and CSR as well as a module on Corporate Reporting and Auditing. The key academic research institutions which have contributed to the moderate, yet expanding scope of CSR-related studies by domestic authors4 include the Institute of Economics in Zagreb (corporate governance, sustainability reporting), the Economics Faculty in Zagreb (primarily focu4 Key researchers who have published articles on CSR include Dr. sc. Branka Mraović, Faculty of Geodetics, University of Zagreb (organizational networks and CSR); dr. sc. Gojko Bežovan, School of Social Work of the Law School, University of Zagreb (history of corporate social responsibility in Croatia, corporate philanthropy); dr. sc. Paul Stubbs, Institute of Economics Zagreb, http://paulstubbs.pbwiki.com (sustainability reporting practices); dr. sc. Nikša Alfirević, Faculty of Economics, University of Split; dr. sc. Mislav Ante Omazić, Faculty of Economics, University of Zagreb (correlation of competitiveness and CSR); dr. sc. Borna Bebek, Faculty of Economics, University of Zagreb (business ethics and leadership); dr. sc. Maja Vehovec, Economics Institute Zagreb (business ethics); mr. sc. Domagoj Račić, Island of Knowledge (corporate governance); Vladimir Cvijanović, Economics Institute Zagreb (corporate governance), Domagoj Hruška, Economics faculty Zagreb (corporate governance), dr. sc. Darko Tipurić, Faculty of Economics, University of Zagreb (corporate governace). Scientific bibliography of all authors available at https://bib.irb.hr

sing on corporate governance) and Rijeka, as well as the Zagreb School of Economics and Management in Zagreb (ZSEM). The Economics Institute, Zagreb was predominantly the key organizer of the first National Conference on CSR - Agenda 2005, held in December 2004 and is also a member of the CSR Community of the Croatian Chamber of Economy. The Economics Faculty in Split organizes the biannual international research conference Economies in Transition -, which focused on presentating recent research studies on CSR from transition countries, such as Croatia, Lithuania, at its 2007 event (May 24-26, 2007). (http://www.efst.hr/eitconf/programm.php) Since 2004, in collaboration with the East-West Management Institute Inc. and support from USAID, ZSEM has conducted an annual survey on Corporate Governance and Corporate Social Responsibility in Leading Croatian Companies, as part of a larger research project on investor relations. Each year, the survey includes 40 or more publicly traded companies (those with listed shares, commercial papers or bonds) and companies with a ‘public nature’ (public utilities and major financial institutions), accounting for more than 80% of market capitalization and 66% of turnover on the Croatian stock exchange. The project has gained considerable media attention, resulting in several in-house presentations as part of companies’ efforts to improve their website structure and contents, as well as quoting survey results in several of their annual reports. (www.zsem.hr)

▪▪ CIVIL SOCIETY ORGANIZATIONS There are two main groups of NGOs in the area of CSR in Croatia. The first group performs watchdog functions by monitoring and publicly criticizing the actions of individual companies, or lobbying for legislative changes aimed at regulating the behaviour of businesses. The second group promotes and models inter-sectoral partnerships, corporate philanthropy and community investments, and is more prone to direct engagement in CSR initiatives. Overall, civil society’s focus on CSR is still rather weak due to the lack of continuous, coordinated monitoring projects, which would serve as an external incentive for enhanced corporate accountability. Zelena Akcija, the most visible environmental NGO (Green Action), founded in 1990, has been running the Green Telephone project for the past 15 years, where citizens report environmental problems in their communities, which are followed-up by advocacy actions aimed at local authorities and companies. In 2003-04, Green Action published “green”, “white” and “black” lists of companies, based on the companies’ self-reporting on their use of GMOs but, due to the lack of organizational capacities for continuous monitoring, the project stalled. Green Action is a member of the Green Forum, the national environmentalist network and an active member of CEE Bankwatch, an international NGO monitoring the

working groups»). The project is supported by AED/USAID. (www.cci.hr) SLAP, Association for Creative Development, Osijek, is a professional NGO promoting social entrepreneurship and intersectoral partnerships enhancing community development. In Belišće, SLAP started an Agro-school focusing on the capacity-building of farmers-entrepreneurs, where the Croatian leading food company “Podravka” acts as the vendor for their products and NGOs Biopa and Eko Centar Mavrović provide TA on organic farming. SLAP coordinates these relationships and provides input on management and CSR. and publishes the on-line newsletter Pomak with a thematic section on CSR, presenting the good practices of individual companies and community partnerships. (www.pomakonline.com) SMART, Association for Civil Society Development, Rijeka, is a leading TA and training organization promoting civil society development, NGO management, intersectoral partnership, volunteering and corporate giving. (www.smart.hr) Lijepa Naša, an environmental NGO and the national coordinator of the international “Blue Flag” award in Croatia, has promoted the environmental protection of coastal tourist resorts with considerable media coverage over the past ten years. In 2006, 121 beaches and marinas received this award, which is a significant increase in comparison to 2000 when there were only 22 certified sites in Croatia. (www.lijepa-nasa.hr)

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environmental impacts of international finance institutions, primarily EBRD and WB. (www.zelena-akcija.hr) Eko-Kvarner, a small NGO from the island of Krk, was the most publicly visible advocate for the successful interruption of the regional oil pipeline investment project Družba Adria, which eventually, due to intense adversarial public attention, did not receive approval from environmental experts regarding potential environmental risks. The campaign mobilized a wide array of environmentalist NGOs, experts and ordinary citizens, as well as obtaining the vocal support of the Catholic Church. In 2006, Eko-Kvarner protested against INA’s (the national oil company) lowest prices for low quality gasoline and lack of transparency in negotiating national energy projects. The organization is actively networking with Slovenian and Italian environmentalist groups on a common platform regarding regional energy projects and has initiated the formation of Blue Forum, a coalition of Croatian environmental groups on the Adriatic coast. (www.ekokvarner.hr) The Union of Consumer Protection Associations is a national network of seven regionally based consumer associations organizing consumer education, preparing news for a specialized weekly public TV programme on consumer rights, publishing information leaflets and consumer guides and engaging in advocacy and litigation projects (the most visible action targeted T-Com). It is represented on the Consumer Protection Council, founded in 2003 upon the adoption of the Consumer Protection Act. There are no initiatives encouraging socially and environmentally conscious consumption undertaken by consumer associations, as consumer association’s focus on the protection of basic consumer rights related to fair pricing for expected product quality or services. (www.potrosac.hr) ODRAZ (acronym for ‘Održivi razvoj zajednice’, sustainable development community) is a professional NGO conducting research and providing TA and education on community foundations, organizing multi-sectoral seminars on sustainable development and CSR for NGOs, community groups and SMEs. In autumn 2004, together with a think-tank CERANEO, ODRAZ organized one of the first round-tables on CSR at the Croatian Chamber of Commerce. (www.odraz.hr) CERANEO, a nonprofit think-tank organization, conducted a CIVICUS Civil Society Index Research in 2005. It included a case-study, reporting on the various CSR aspects on the websites of the 10 leading Croatian companies. The most represented are environmental issues and the quality of products, whereby it is common to refer to various ISO norms. Community relations are explicitly referred to on the websites of four companies only, each of them focusing on specific topics such as public health, in the case of Pliva, or children’s well-being, in the case of Coca Cola (Bežovan et al., 2005). (www.ceraneo.hr) Centar za civilne inicijative (CCI-Centre for Civic Initiatives), a community development support NGO, is implementing a project in partnership with the Croatian Chamber of Economy in seven counties in central Croatia combining (1) providing TA to companies interested in upgrading their CSR practices, (2) fostering intersectoral partnerships between companies and NGOs and (3) creating county-based CSR coordination bodies, ideally within county chambers of commerce (i.e. local «CSR communities/

▪▪ TRADE UNIONS There is sporadic, mostly unsystematic trade-union activity related to CSR, which is mostly dependent on individuals’ interests and expertise. The trade union for retail, a member of the Union of Autonomous Trade Unions of Croatia, monitors violations of workers’ rights in retail (based on workers’ surveys and direct experience in collective bargaining and the findings of labour inspections at different companies). The trade-union advocates for a restriction of work on Sunday (also strongly supported by the Catholic Church, as the most visible advocacy initiative of the Franciscan Institute of Peace) and publicly denounces retailers with poor workers’ rights record. However, this work is mostly media-focused and lacks hard evidence in the form of thematic reports. An example of successful, evidence-based public advocacy was the awareness raising campaign about the negative international reputation of retailer Lidl. This was corroborated by the translation of the “Black Book on Lidl”, prepared by a German trade-union Verdi during 2005, at a time when Lidl was preparing to enter the Croatian market. As a consequence, Lidl Croatia complies with the Croatian Labour Law, as assessed by the trade union. Individual labour rights experts from trade unions participated in several multisectoral initiatives focused on the promotion of CSR – education on CSR organized by UNDP in 2005; preparation of the Croatian version of BITC’s manual “Winning with Integrity”, published by UNDP in 2005; design of CSR and Work Environment education module of the Asso-

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ciation of Management Consultants and MAP Savjetovanja. Trade union representatives interviewed as part of this research, acknowledge CSR as an important vehicle for improving the labour rights standards in practice, which is always, no matter how strict the legislation, greatly dependent on corporate values and a culture of open communication with stakeholders and workers’ representatives, in particular.

▪▪ MEDIA Croatian media rarely focus in a more systematic way on the diverse aspects of CSR, except for a small number of specialised, primarily business, journals and some radio stations. At the same time, the role of the media in mobilizing the public at times of mass humanitarian actions and reporting on corporate giving actions announced by companies themselves, is widespread. The most important function of media remains their ‘watchdog’ role, mostly directing public awareness towards negative aspects of corporate behaviour. The key findings of the six-month long comprehensive analysis of the Croatian media on CSR issues, conducted by MediaNet from September 2004-May 2005, showed that CSR themes represented only 2.7 % of the total coverage of economic issues (which make up only 8% of all media coverage) and as little as 0.2% of all media coverage. Among reported CSR news, 70% related to corporate philanthropy, 8% focused on environmental protection and sustainable development and 2% on human resources. The major challenge seems to be the journalists’prevalent perception of CSR as a form of subtle self-advertising primarily, while only few business journalists understand its importance as a global trend among corporations. Nevertheless, over the past two years a growing number of special reports or supplements on CSR have been published in leading business journals, often in collaboration or with the sponsorship of interested stakeholder organizations. Until 2006, the annual supplement «Sustainable Development» published by Privredni Vjesnik and HC BCSD used to be the only specialized media outlet available in a mainstream business monthly. Since 2005, special reports have appeared - EUkonomist, a business monthly published by Banka and Croatian Association of Employers; business weekly magazines - Business.hr (www.business.hr), Poslovni Dnevnik (www.poslovni.hr), Lider (www.liderpress.hr) which also provide media sponsorships to CSR-related events. In 2005, UNDP produced a series of monthly radio shows on CSR in collaboration with Radio 101, one of the most popular radio stations with regional coverage. At the same time, there is no regular section or programme on CSR in any general printed or electronic media, nor any specialist academic journals or popular magazines dedicated to CSR and sustainable development.

The following are examples of newsletters or magazines covering specific CSR areas: ▪▪ ’Gospodarstvo i održivost’ (Economy and Sustainability) published by the Croatian Business Council for Sustainable Development (HRPSOR) since April 2005. The newsletter presents important information on relevant policies and best practices, including partnership projects and CSR (available at www.hrpsor.hr); ▪▪ ‘Okoliš’ (Environment), a bulletin by the Ministry on Physical Planning and Environment Protection, (http://okolis.mzopu.hr); ▪▪ ’Pomak’, published by SLAP, an NGO focusing on intersectoral partnership, is a web-based magazine on social development. Along with nonprofit entrepreneurship and intersectoral partnership, one of the three main areas of focus is corporate social responsibility (www.pomakonline.com).

▪▪ REVIEW OF CSR PROGRESS SINCE 2004 The National Conference on the Promotion of CSR - Agenda 2005, held in December 2004, represented a key event in terms of gathering all relevant actors in the emerging field of CSR in Croatia and enabling them to develop joint strategies within specific areas of their interests. The Conference, with over 120 participants representing different sectors (including more than 40 major Croatian companies), was organized by the Institute of Economics and Konrad Adenauer Stiftung, in partnership with several companies, business associations, international organizations and NGOs, under the auspices of the Ministry of European Integration.5 Instead of aiming at the establishment of one, centralized project, Agenda 2005 was envisioned as a platform for numerous interrelated actions undertaken in self-initiated partnerships, where long-term objectives and key issues were jointly identified to assist the actors in maintaining a strategic approach. Several mid-term strategies and activities were identified within the following areas of CSR – workplace, market relations/value chain, community, environmental protection and corporate governance. Most of the relevant CSR initiatives during the last two years came out of the Conference discussions or out of partnerships established during the Conference. Some of the on-going initiatives were presented at the Conference and their later development greatly benefited from the subsequent involvement of the other participants. The following is a review of CSR progress in Croatia in relation to the key recommendations and proposed actions collectively formulated at the first National Conference on CSR in December 2004. 5 The full list of speakers, Conference programme and minutes from the working groups are available at (www.poslovniforum.hr/agenda/program_1.asp)

Initiative proposed (December 2004)

Progress made (April 2007)

Establishment of the CSR Community within the Croatian Chamber of Commerce, as a permanent working group with a secretariat.

CSR Community established in 2005, operational since 2006.

A series of CSR public panels at county chambers

2005-07 - Center for Civil Initiatives partnered with Croatian Chamber of Commerce on the promotion and TA in CSR in seven counties in Northern Croatia (USAD/AED funded).

Education of journalists on CSR in collaboration with professional associations, specialized NGOs and academic institutions

No systematic education in place.

2007 CSR Benchmarking Project, in partnership with HR BCSD (methodology development, ranking and awarding expected; funding and programmatic support by USAID/AED and UNDP, sponsorship by Ericsson Nikola Tesla and mentorship by Business in the Community). (www.hgk.hr/wps/portal/ZajednicaZaDOP)

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Agenda 2005 Recommendation: Promoting a Conducive Environment for CSR

May 2005 - As part of its broader CSR programme «Zajedno» (Together) and as a way of contributing to Agenda 2005 and European year of CSR, Zagrebačka banka (ZABA) organized a seminar «Social Responsibility – Trends in Croatia and Abroad», in partnership with the International Center for Education of Journalists. UNDP has organized several press briefings on CSR at crucial points of their project (general CSR, business partnerships, and Global Compact).

Development of the Croatian terminology on CSR

In 2006, as part of GRI 2002 and G3 translation, a working group of practitioners and researchers on different expects of CSR discussed and offered the initial set of CSR-related terms, which are being further defined as part of the CSR benchmarking project of HR BCSD and Croatian Chamber of Economy (Spring 2007).

Further development of CSR reporting standards and verification procedures

In 2007 there were six companies reporting in accordance with GRI, which is progress in comparison to two GRI reporters in 2004. G3 Guidelines (including indicator protocols) are currently being translated and published by HR BCSD in partnership with MAP Savjetovanja and GRI, with corporate donations, partners’ in-kind support and support from Charles S. Mott Foundation. 500 hard-copies as well as an online version are expected in June 2007. In March 2006, HR BCSD in partnership with GRI organized the official promotion of G3 as a follow-up to the official G3 Sneak-peak event that took place in Zagreb. GRI 2002 was translated in March 2006 by MAP Savjetovanja in partnership with HR BCSD, with funding by Charles S. Mott Foundation. The translation was officially approved by GRI and published on the GRI website. G3 Sneak Peak took place in Zagreb in February 2006, followed up by G3 draft guidelines consultative process including Croatian companies, trade-unions and NGO. Organizers included HR BCSD, MAP Savjetovanja and Economics Institute.

Adoption of the Code of Ethics in Business at the Assembly of the Croatian Chamber of Economy, followed by voluntary adoption on the part of individual companies and sub-sectors

In May 2005 the General Assembly of the Croatian Chamber of Economy adopted the Code of Business Ethics as the main set of guidelines designed to promote greater transparency and accountability among Croatian companies. By April 2007, 570 companies had adopted the Code (16% of all active large and medium companies or 6% of all active companies with more than 10 employees). Systematic promotion of the Code is still lacking, but will be incorporated in the CSR modules offered by the Association of Management Consultants.

Development of the Croatian web portal on CSR

In 2006 the most comprehensive web portal on CSR was launched by UNDP www.drustvena-odgovornost.undp.hr. The materials provided include detailed information on the Global Compact, a downloadable version of the handbook ‘Winning with Integrity’, including the best practices of Croatian companies, and links to other relevant resources. HR BCSD web portal has added sections on sustainability reporting and GRI. (www.hrpsor.hr) CSR Community portal is still in the initial phase. (www.hgk.hr/wps/portal/ZajednicaZaDOP) Web journal www.pomakonline.com edited by NGO SLAP has a special section on CSR, featuring the best practices of individual companies and community partnerships.

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Organization of a two-day national conference on CSR, with focus on exchange of best practices and exploration of the framework for a national strategy for the promotion of CSR (October 2006)

Despite several discussions, the conference has not yet been organized. In March 2006, the Regional Forum on CSR in SMEs in CEE was organized by the Croatian Ministry of Economy, Labour and Entrepreneurship (MELE) and UNIDO. Recommendations for a national CSR agenda were discussed but have not resulted in a Government action plan. May 2007 – Faculty of Economics in Split organized 7th International Conference ’Enterprise in Transition’: Towards the Enhancement of Social Responsibility and Business Ethics: Modern Theory And Practice” (www.efst. hr/eitconf/topics.php) May 2007 – May 2007. – 8th Conference of the Croatian Society for Quality “Socially Responsible Business Practice” (www.kvaliteta.inet.hr) April 2007 – Seminar on Venture Philanthropy in Zadar, organized by IMPACT, European Centre for International Cooperation, UNDP, NESsT and National Foundation for Civil Society Development. March 2007 – International Symposium “Moral Capitalism – Why Not?” in Varaždin, organized by Varaždin County, HUM-CROMA and Caux Round Table (www.croma.hr)

Developing CSR education modules for SMEs

In the period 2001-05, Integra Foundation carried out three projects on SME development and CSR (supported by the EU CARDS Democratic Stabilization and Civil Society Programme) which resulted in three publications for SMEs in Croatian – translation of Code of Ethics and Social Audit Manual for SMEs (not available), Programme Report on Corruption Problem in SME Sector and CSR toolkit for SMEs published in 2005 (both available at www.integra.sk). July 2005 – UNDP in cooperation with ILO, IBLF and UN Staff College organized one week education training on CSR and quality workplace in Turin, Italy. Training was organized for 35 consultants and CSR practitioners from Croatia. Education modules on CSR, offered by the Association of Management Consultants (AMC) since March 2007 have included some contents relevant to SMEs. 2007 – CSR and business ethics included in curricula of the majority of public and private business schools and universities (VERN, ZŠEM, Faculty of Economics in Zagreb and Split, Entrepreneurship MBA course in Osijek).

Advocating state incentives for CSR

No specific advocacy initiatives have taken place, except for consultations about the draft recommendations proposed by the Ministry of Economy, presented at the Regional CSR Forum for SMEs in CEE, in March 2006, with no apparent follow-up.

Initiative proposed (December 2004)

Progress made (April 2007)

Development of methodology for the assessment of workplace quality

November 2005- Selectio d.o.o. launched Employer Partner Certificate, a benchmarking initiative of HR practices, offered as a commercial service to interested companies (www.poslodavacpartner.org) Spring 2007 - Assessment of workplace quality is included in the draft methodology developed as part of the CSR Benchmarking Project of the HR BCSD and Croatian Chamber of Economy.

Annual assessment of best and worst employers in Croatia, with respective rewards and public campaign (to be linked with independent monitoring undertaken by trade unions)

None so far, except for the annual survey of the most appealing employers, based on employees’ selfreporting, conducted by the job search online service MojPosao, which does not include trade-union input.

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Agenda 2005 Recommendation: CSR in the workplace

SSSH, the largest union confederation, compiled a list of companies utilizing unregistered workforce, and is carrying out a campaign, in collaboration with local authorities focused on cities with no shadow economy. Autumn 2007, MojPosao and UNDP initiate the “Employer of the Year for Persons with Disabilities” Award.

Development of employee volunteering programmes (also related to CSR and community)

Mi and Most NGOs in Split have organized regular volunteering conferences, fairs, and events, with participation by local companies. October 1996 - AED, UNDP, and IBLF organized the Conference on Community Investment: Practical Approaches for Business, focused on partnerships of business and NGOs in community development. July 2007 – UNDP, IBLF and IMPACT organized a workshop for employee engagement in the community. UNDP incorporates the practice of secondment into their partnership projects.

Agenda 2005 Recommendation: CSR in the supply chain and consumer relations Initiative proposed (December 2004)

Progress made (April 2007)

Promoting collaboration between companies and consumer associations around education of employees and the public on consumer rights

As a result of their engagement on the personal finance partnership project with UNDP, the Croatian Banking Association (CBA) initiated collaboration with Consumer Association (Potrošač), aimed at the development of a complaints resolutions system for banking services.

Education of consumers on socially responsible purchase and consumption

None

Development of guidelines and education of companies regarding CSR practices in respect to suppliers

None in the public domain, although there is evidence of a few companies with practices in this area.

Promotion of positive examples of CSR within the supply chain

Not systematically.

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Agenda 2005 Recommendation: CSR, environmental protection and sustainable development Initiative proposed (December 2004)

Progress made (April 2007)

Promotion of best corporate practices in environmental protection via a joint public campaign

There were no joint public campaigns at the national level directly related to the Conference.

Development of independent monitoring of corporate practices in respect to environmental protection

None after 2004 when Green Action’s monitoring of the corporate use of GMO products was halted.

Intensifying communication of the business sector in respect to the state and local government institutions

No systematic efforts have taken place, with the exception of issue-focused lobbying initiatives, which met with very little success (e.g. alternative proposal of the business sector regarding Ordinance on Managing Packaging Waste presented in Spring 2005).

Sporadic local protest actions do take place with substantial media coverage.

Consultative process between the Government and the non-state actors, including business sector, remains inadequately regulated and practiced.

Agenda 2005 Recommendation: CSR and community relations Initiative proposed (December 2004)

Progress made (April 2007)

Continuation and expansion of education on intersectoral partnerships focused on community development

Community investments and intersectoral partnerships is one of the Education modules on CSR prepared by the Association of Management Consultants in Spring 2007. National Foundation for Civil Society Development has established an international research and training centre for inter-sector partnerships, presently under construction in Zadar. 2007 – Community investment and multi-sector partnerships are a part of CSR education modules by Association of Business Consultants.

Education of companies on transparent and effective community investing

2007 - Corporate Philanthropy Award was introduced by the non-profit web portal on corporate giving Donacije.info, with support from Selectio/Moj Posao and AED/USAID. (www.donacije.info) April 2007 – Venture Philanthropy Seminar organized by IMPACT, European Centre for International Cooperation, and National Foundation for Civil Society Development and NESsT. October 2006 – “Community Investment: Practical Approaches for Business” Conference organized by AED with examples of best practices from the United Kingdom.

Further development and improvement of quality of corporate reporting on community relations and investments

2006-07 - GRI 2002 and G3 Croatian translations contribute to greater access to guidelines on reporting on community investments. 2006 – AED’s conference on Corporate Philanthropy demonstrating best practices from the U.K.

Initiative proposed (December 2004)

Progress made (April 2007)

Research on corporate governance practices in Croatia, with subsequent presentations of results6

2006 - Second edition of Overview of CSR in Croatia (AED, IBLF, and MAP Savjetovanja) contains a short introductory update of sectoral initiatives in 2004-05. UNDP/EC comparative study on CSR in new member states and candidate countries underway in May 2007. 2007 – educational modules “Corporate Governance for Members of the Supervisory Boards” organized by Faculty of Economics in Zagreb and Split and HUM-CROMA.

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Agenda 2005 Recommendation: Corporate governance

March 2006 – Best Good Governance Practice workshop organized by MAP savjetovanja with presentations of several corporate governance researches. (www.map.hr) Participatory, consultative process of developing a National Code of Corporate Governance

2007 - Code of Corporate Governance of the Zagreb Stock exchange and the Croatian Financial Services Supervisory Agency (HANFA) was launched in 2007, following more than two years of consultations.

Development of guidelines for companies in transparent communication with investors and the broader public

2004, 2005, and 2006 – Zagreb School of Economics and Management conducted the annual survey on Corporate Governance and Corporate Social Responsibility in Leading Croatian Companies, assessing the scope of on-line reporting and annual reports, providing a benchmark and guidelines to a group of 40 publicly listed companies included in the sample. (www.zsem.hr)

Organizing a public discussion on ‘whistle blowing’ and internal reporting mechanisms that would enable early disclosure of problems and damage control

No systematic debate is underway, with the exception of legislative proposals for whistle-blowers’ protection proposed by opposition parties. 2006 - UNDP and IBLF organized a day-long closed workshop on corruption for corporate leaders. 2007 - HR BCSD and UNIDO organized a day-long workshop on corruption for SME leaders.

6 Academic Research: Tipurić, Darko, Nadzorni odbor i korporativno upravljanje. Zagreb : Sinergija nakladništvo, 2006; Bajuk, Jože, Cvijanović, Vladimir, Dadić, Tatjana, Račić, Domagoj and Melita Veršić Marušić. Korporacijsko upravljanje u javnim dioničkim društvima u Republici Hrvatskoj. 2005. www.vse.hr/edukacija/korporacijsko-upravljanje.pdf ; Hruška, Domagoj. Vlasnička koncentracija i korporativno upravljanje u Hrvatskoj. Magistarski rad. Zagreb : Ekonomski fakultet - Zagreb, 2005.; Omazić, Mislav Ante. Društvena odgovornost i strategije hrvatskih poduzeća. Doktorska disertacija. Zagreb: Ekonomski fakultet Sveučilišta u Zagrebu. 2007.; Tipurić, Darko; Omazić, Mislav Ante; Hruška, Domagoj.; ”Corporate Social Responsibility and Croatian Managers – Empirical Study” Global Business & Economics Review - Anthology 2005, Kantarelis, Demetri (ur.).Worcester, 2004. 289.-300. Manuals, overviews and presentations: Barbić Jakša, Čolaković, Esad, Parać Branko and Josip Šaban. Nadzorni odbori – vodič kroz sustav korporativnog upravljanja, Zagreb:CROMA, 2006; Čolaković, Esad. Menadžerski ugovori – modeli, savjeti i praksa. 2. izdanje. Zagreb: HUM-CROMA, 2006.; Krkač, Kristijan (ur.). Uvod u poslovnu etiku i korporacijsku društvenu odgovornost, Zagreb: MATE d.o.o. i ZŠEM, 2007

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Analysis of CSR Implementation Capacities of the Business Sector in Croatia â&#x20AC;&#x201C; Research Findings

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▪▪ Note on Methodology The process of data collection incorporated the analysis of the existing Croatian publications on corporate social responsibility, such as scientific articles, professional papers, specialized periodical and issues, business publications; a directed search of companies’ web pages; and direct personal and written interviews with companies’ representatives and with representatives of other stakeholders, in line with the guidelines put forward by the international expert team. These guidelines were also used to score the level of CSR development in the Croatian sample of companies. The data collection was carried out during March and April of 2007, while the English language report, which served as the Croatian contribution to the study, and as a basis for the Croatian language report, was finalized in May, 2007.7 For the purpose of this research, the sample has been divided into ‘main sample’ (35 companies) and ‘supplementary sample’ (12 companies). The main sample consists of 35 companies randomly selected from the list of the Top 500 companies published as a special edition of the Croatian weekly ‘Nacional’ in December 2006. The list is based on the criteria of net profits in 2005, according to data collected from the Financial Agency - FINA. In order to ensure representation of the current trends in CSR in Croatia, in addition to the main sample, NET Croatia secured further responses from 14 companies and 12 stakeholders, encompassing an approximately equal number of CSR leaders, those at the inception phase and companies without any evidence on CSR, according to NETs preliminary insight. Among the 35 companies in the main sample, direct interviews were conducted with 14 while the assessment for the remaining 21, according to the scoring table provided by IET, was conducted through website review and direct contact via e-mail and telephone. Of the 12 companies in the supplementary sample, 11 were directly interviewed, while 1 responded to the questionnaire in writing. To better understand the working environments and the influence of stakeholders on the development of CSR in Croatia, along with the companies that were the focus of this research, this research also included 31 joint-stock representatives from various organizations, among which are 2 business associations, 1 certification agency, 3 public and state institutions, 5 unions, 7 business oriented media, 3 non-governmental organizations and 3 scientific research institutions. Three group interviews were conducted with representatives of trade unions, media and NGOs, comprising 6 individual interviews and repeat consultations with three researchers engaged in CSR. 7 Their combined revenue in 2005 was almost 200 billion HRK (app 27 billion EUR), net profits 18 billion HRK (app 2.5 billion EUR), with a total of 183,069 employees (13% of total employed people in Croatia in 2005)

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▪▪ ANALYSIS OF CSR IMPLEMENTATION CAPACITIES OF THE BUSINESS SECTOR IN CROATIA - RESEARCH FINDINGS

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Hence, NET Croatia conducted 25 individual company interviews in person, 3 group interviews with representatives of stakeholders (the media, trade unions and NGOs), and 21 web-site surveys, followed by either ‘phone or e-mail contact to corroborate the findings of the web-site surveys. Some interviews included several representatives of a company or an organization, so that the total number of people interviewed or directly consulted for the purpose of this study exceeded 70.

The present research primarily investigated the existence of a structured and systematic approach to corporate responsibility, as evidenced in the overall business strategy of companies, and in business processes. Utilizing a set of indicators, we were looking for evidence of a company-leMain sample breakdown according to size and ownership structure: vel system for addressing and managing social, environmental, and wider economic and ethical issues, as well as an indiMedium Large cation of a level of companies’ responsiveness to Total (50-249 employees) (250 or more employees) stakeholder expectations on those issues. ▪▪The social issues included the ones reState-owned 1 3 4 lated to diversity and human rights, to poverty Private-subsidiary 2 4 6 and social exclusion, education and life-long of multinational learning, as well as additional issues, currently Private-national 13 12 25 un-cited. ▪▪ The environmental issues included Total 16 19 35 waste and hazardous materials management, water and energy management, and protection Main sample breakdown according to sectoral distribution of bio-diversity, as well as additional issues, currently un-cited. (IET classification): ▪▪ The broader business issues included anti-bribery and antiSector Number of companies corruption, transparent price-setting and business practices, responsible marketing, innovation and creativity, as well as additional issues, currently Manufacturing 16 un-cited. Service 9 ▪▪ The ethical issues included the strengthening of corporate goverAgribusiness 4 nance, incorporation of values, codes of ethics, as well as additional issues, currently un-cited. Finance 3 ▪▪ The stakeholders included the consumers, employees, stockholChemical, oil, gas 2 ders, suppliers, non-governmental organizations, government, local comOther 1 munities, and other currently un-cited interested parties and individuals who could affect the business, or who are impacted by companies’ business operations. Active stakeholders represent a precondition for an CSR-conSupplementary sample breakdown according to sector, ducive environment, in which the authorities and the business community size and CSR development phase: support these processes, while independent civil society serves as a source Sector SIze CSR Leader CSR Inception of ideas, constructive criticism, and, sometimes, disobedience.

Main Features of the Companies in the Sample

Manufacturing

Service

▪▪ GENERAL OVERVIEW OF KEY FINDINGS REGARDING CSR ENGAGEMENT IN CROATIA

Large

Medium

Small

Large

Medium

Small

Based on the guidelines provided by IET, for the purposes of this research CSR Engagement has been divided into six dimensions: (1) Strategy; (2) Stakeholder Engagement; (3) Governance; (4) Performance; (5) Public Disclosure, and (6) Assurance. Each of the dimensions is marked with “no/ little evidence”, “on the way”, or “good practice and beyond”. Graph 1 represents the levels of CSR engagement of the main sample companies in different categories in Croatia.

CSR Engagement Croatia 100 %

90 % 80 %

n=35

70 %

9% 26 %

23 %

74 %

77 %

Stakeholder Engagement

Governance

29 %

46 %

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Graph 1 - CSR Engagement - Croatia

60 % 50 % 40 % 30 % 20 %

91 %

94 % 66 %

51 %

10 % 0% Strategy

Good practice and beyond

On the way

The results of the rating of the Croatian main sample of 35 companies reveal that the most developed dimension is “Strategy”, followed by “Public Disclosure”, “Stakeholder Engagement” and “Governance” while “Performance” and “Assurance” lag behind. The results of the analysis carried out on the Croatian main sample of 35 companies indicate that a structured and systematic approach to CSR is only just beginning. The companies displaying good practices in CSR management represent an exception, and even those do not show the uniform high quality in all areas. A relatively high proportion of companies marked “on the way” when it comes to the integration of CSR into business strategies seems to indicate that CSR is generally, primarily recognized as an important value-related issue, while the number of companies integrating CSR into strategic business goals and corporate policies remains relatively small. One-third of the main sample companies carry out public reporting on their CSR practices, with significant differences in the systematic nature and comprehensiveness of them. However, there is a notable trend of incorporating CSR into companies’ public profiles on their official web pages, and even in annual reports. While the interest in the application of international standards of sustainability reporting, such as GRI, is on the rise, Croatian companies still do not have independent verification mechanisms at their disposal: hence, the verification dimension in the present report yielded, unsurprisingly, the lowest marks. Stakeholder engagement is predominantly of an ad-hoc nature, and often informal, most frequently driven by temporary needs, or as a crisis response in situations representing a threat to reputation, while well-defined policies of stakeholder engagement in all the phases, from risk

Performance

Public Disclosure

Assurance

No/little evidence

analysis to impact analysis, seem to be missing. The development of CSR management structures and the related performance quality management (management systems, and specific business processes aimed at attainment of defined results), received, under the present methodology, very low marks. This indicated that the shift from a spontaneous to systematic approach to CSR had not yet materialized among the most successful Croatian companies. On the management dimension, there is a noted lack of attention on the part of management, and particularly of supervisory boards, for CSR-related issues, which predominantly remain the province of environment, human resource, and corporate communications managers. Organizational culture, especially the vertical and horizontal permeability for information and ideas, seems to be a key factor for the functioning of CSR management structure: the companies whose culture favours quick and informal collaboration do better in the CSR area. However, there is a foundation for fast-tracking the establishment of CSR management systems, stemming from the increasing practice of quality and environmental management, from increased weight given to corporate governance, and from the fact that the vast majority of companies seem to be aware of the advantages of developing their CSR profile for their reputation, and, consequently, for their overall success. Each of these categories is analyzed in detail in the following sections of the report, enriched with examples of good practice from the supplementary sample as appropriate, to provide the reader with a more balanced view of CSR engagement in Croatia. However, the primacy of strategic CSR orientation over other categories should not be taken for granted, as will be further discussed.

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▪▪ 1. CSR STRATEGY DEVELOPMENT When assessing the CSR strategy, we looked for evidence that a company’s core strategy sought to achieve social and environmental targets as well as financial ones and whether having a non-financial strategy was a characteristic of the company. Based on the evidence provided we assigned the scores “no/little evidence”, “on the way” and “good practice and beyond”, according to IET guidelines.8 A relatively high proportion of the main sample (16/35) was rated as “on the way”, based on their explicit mention of CSR in core documents (mostly mission/vision statements) and companies’ profiles, although further corroboration of incorporation of these statements was lacking. Nonetheless, the NET felt it would be unfair to rate them as “no/little evidence”, given that in the Croatian context of emerging CSR awareness, recognition of CSR as relevant to business strategy development is considered a significant step forward. According to the rating guidelines, there is only one company in Croatia’s main sample (Podravka) which has clear evidence of a specific CSR strategy, where CSR is considered as a means of achieving strategic goals. Almost half of the companies (16/35) included in the main sample were rated ‘on the way’, that is, providing some evidence of a CSR strategy, such as budgetary allocations for CSR activities and/or CSR communication. While the sample is too small to generalize on the importance of the sector or ownership, it should be noted that these are all large companies, with 250 or more employees (8 private-national, 4 subsidiaries of multinational, 4 state-owned). All of these companies, in some way, make public disclosures about either their CSR strategy or their commitment to environmental protection or community involvement, often as a separate section on their website or as an integral part of the company’s mission statement.

Examples of CSR in companies’ missions and core values

Dalekovod d.d. affirms its commitment to customer satisfaction based on the principles of business excellence and top quality, and emphasizes that the company is “founded on the principles of a learning company and ability to adapt quickly to turbulent environmental influences. The business activity of our company is characterized by a stakeholder approach, which is especially evident from the fact that the company is owned primarily by its employees. We shall always behave as a responsible member of the society, taking care that our viable development shall meet the interests of the wider community and environmental protection requirements as well.” 9

KONČAR Group, on its website, states that its “business and manufacturing activities completely comply with the requirements of modern production and social responsibility principles” and a separate link entitled ‘social responsibility’ provides further information on sustainable development and environmental protection, human resources, donations and sponsorships.10 VIRO, the sugar factory, lists its partnership with customers among its core values and its employees as the most valuable capital. Social accountability is described in the following way: “Our objective is to be a responsible social partner developing mutually useful relations with our customers, employees, suppliers and the local community. We will continue our efforts aimed at the achievement and maintenance of the highest environmental protection standards”11. Finally, more than half of the companies (18/35) included in the main sample have no specific CSR strategy, or at least provide no evidence that their business strategy seeks to integrate socially and environmentally relevant targets. While a few of them recently joined some of the CSR initiatives (Global Compact 1/18, HR BCSD 1/18, CEE Code of Business Conduct signatories 48) or obtained relevant certificates (ISO 14001 2/18, ISO 9001 5/18), it is difficult to claim that these have been motivated by strategic intentions. Their reporting does not go beyond legally required financial disclosure, and only a few (4/18) make some kind of declaratory statements expressing concern for the environment and energy efficiency. Again, notwithstanding the size of the sample, all 12 medium-sized companies from the sample have been rated as having no, or only a very rudimentary CSR strategy (1 state-owned, 3 subsidiary of multinational, 14 private-national). The supplementary sample of 12 companies with declared CSR policy includes 7 companies with evidence of CSR goals being integrated in the overall business strategy, and 5 which should be taken as examples of good practices. It may be relevant to mention that all 5 of them are subsidiaries of multinationals (Pliva, Holcim, Hartmann, Hauska & Partner International Communications and Coca Cola Beverages Croatia). Two of the 12 companies in the supplementary sample, both SMEs, demonstrated their strategic CSR orientation by recent SA8000 certification. There is a clear correlation between developed CSR strategy and reporting capacity since all of the best 6 companies (1 in the main sample and 5 in the supplementary one) are among the leaders regarding CSR reporting in Croatia. In the case of Coca Cola Beverages Croatia, which may be applicable to other reporting companies as well, a strategic approach to CSR seems to have developed a great deal due to the opportunities and needs identified through the reporting process. Since 2003, 8 However, IET description of each of the 3 possible scores could not be applied without leaving the possibility for border cases, especially between assigning the score ‘no/little evidence’ and ‘on the way’. 9 www.dalekovod.com/misija-vizija-i-ciljevi.html 10 www.koncar.hr 11 www.secerana.hr/default.aspx?id=13

12 Corporate policy Podravke, http://www.podravka.hr/o_podravki/korporativna_politika_2.php 13 The Council functions as an advisory body to the Minister of the economy, labour and entrepreneurship and includes representatives of government administration, the Croatian Chamber of Economy, the Croatian Chamber of Trades and Crafts, the Croatian Employers’ Association, independent experts in the consumer protection field, and representatives of consumer protection NGOs. (http://potrosac.mingorp.hr/hr/potrosac/index.php) 14 The Economic-Social Council brings together representatives of employers, trade unions and government. Its mandate is to analyze and reach consensus on all legislative proposals regarding the interests of employees and employers in the context of collective bargaining and government strategies and policies. (www.socijalno-partnerstvo.hr)

▪▪ 2. STAKEHOLDER ENGAGEMENT Stakeholder engagement includes evidence of dialogue with people who have the ability to influence, or may be affected by, the company’s business, as well as the company’s understanding and clear disclosure of issues important to these groups. None of the companies included in the main sample can be considered as having developed systematic processes for managing relations with all relevant stakeholders in a systematic manner, nor is the stakeholders’ point of view completely understood. Hence, the companies’ business strategies do not always take the stakeholders issues into account. Less than one third (9/35) of the main sample companies have had some interaction with stakeholders, though mostly reactive and often under direct stakeholders pressure. Some of the interviewed companies’ representatives reported that the incentive for more structured stakeholder engagement came out of specific crisis situations, such as community pressure in case of perceived environmental damage or direct action by the unionized workforce. Others reported that increased awareness of the importance of structure in their stakeholder engagement, resulted from the transfer of good practices within the multinational groups of which they are subsidiaries (for instance in case of the Croatian subsidiary of Nestlé where representatives of a Croatian subsidiary participate in annual consultation meetings of the group with a variety of stakeholders at the European level). The existing institutional frameworks, such as the Consumers’ Protection Act setting the foundation for the Consumers’ Protection Council13 or the Economic-Social Council14, and the national tripartite body, also provide a platform for stakeholder engagement within the Croatian context. This may partially explain why the most developed practices can be seen in the area of consumer and employee relations. All nine companies have some form of direct communication with consumers, ranging from free telephone lines for consumer feedback on their products and services to more or less regular consumer satisfaction surveys conducted by external agencies (e.g. CATI surveys, mystery shopping etc.). Responsibility towards consumers is often framed in the company’s overall policy on quality of products and services. Similarly, all nine companies have signed collective agreements relevant to their specific sectors, which is an important indicator of increased stakeholder engagement in the area of labour relations. Representation of employees’ interest is often secured by the presence of the workers’ representative on the company’s supervisory board. The companies employ a variety of internal communication tools. In addition to intranets within some of the larger ones, it is quite common to publish newsletters, which function as a two-way communication channel

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the following policies have been formulated at the Croatia company level – quality, environmental protection, work safety, human rights protection, advertising and children, HIV/AIDS. Podravka is the only main-sample company that was judged to have achieved a good-practice level in the area of integration of CSR and sustainable development in its business strategy, where their value orientation, as well as the development of relevant management systems stems as far back as the 1970s, if not earlier. Podravka’s Corporate Policies review their key business principles, namely concern and interest for stakeholder needs, environmental protection, contribution to social development, reputation, innovation, quality and efficiency of business processes, investing into people, and creation of organizational culture based on learning: “The heart is the symbol of our company. From the vey beginning, it has reflected our concern, courage, and love – concern for our consumers and all interested parties, determination to respond to the challenges that time brings, as well as our feelings and our love towards Podravka.”12 Podravka has defined quality, consumer, and buyer satisfaction policies, environmental policy, and guidelines for waste and water management, as well as cleaner production guidelines. The company has adopted The Corporate Governance Code, and Croatian Chamber of Economy’s Business Ethics Code. In the of Ericsson Nikola Tesla, corporate responsibility is integrated into the overall business strategy as one of the key factors of business excellence, repeatedly validated by a series of national and international business awards received by the company, including EFQM’s Recognized for Excellence certificate, awarded in 2003. In the company’s current threeyear strategy, CSR is identified as one of the priority areas related to the further development of their outstanding reputation, particularly as (1) best provider of ICT business solutions in Croatia; (2) best employer, and (3) responsible enterprise, which is aligned with the vision of the company “…contributing to overall well-being by taking an active part in the development of a progressive and economically prosperous Croatia”. For 2007, the company aims to engage in specific CSR initiatives, and produce the first integrated sustainable development report report in Croatia.

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between management and employees, and in some instances external stakeholders (business partners, community organizations etc.). Employees’ sports and cultural associations, with decades of tradition in some of the larger companies, for example INA, Pliva, Podravka, Ericsson Nikola Tesla or Končar, also represent a form of stakeholder engagement in that the companies provide for the specific needs of their employees. An example of good practice includes regular surveys of employee satisfaction, often conducted by external independent agencies. The results of the employee surveys are sometimes used for enhancing two-way communication within the company, as illustrated by the case of Zagrebačka banka where, after the survey results indicated that the employees were not completely familiar with the overall business strategy, the management made additional efforts into communicating the strategy through more interactive presentations for smaller groups of employees in various regions. This format was found to be more effective than the traditional channels of informing the employees through newsletters or other internal forms of written communication. In the course of 2007, the Bank prepared the introduction of a new salaries and awards system, encompassing the variable portion of the annual bonus, part of which is based on employees’ contributions to CSR and the environmental performance of the Bank. As a result of the annual evaluation of the organisation’s ‘climate’, Zagrebačka Banka determined that the development of an internal communication system, along with a corporate responsibility programme would favourably affect employee satisfaction, which, in 2006, reached levels counted among the highest within the entire Unicredit Group in Europe. Good practices in relations with suppliers include free technical assistance regarding product quality (especially relevant for the food industry where the assistance is targeted to small producers of milk or other agricultural goods). Some companies give special awards to the best suppliers with the intention of increasing the quality of products. One of the many examples of the provision of additional services to consumers, in line with CSR principles, are the drives for retrieving outof-date drugs, organized regularly by the Pliva pharmaceutical company. The drives engage both citizens and health care institutions: during the most recent, at the end of 2006, more than 7,000 litres of expired pharmaceuticals were collected. This action by Pliva represents an example of a company assuming responsibility for the entire life cycle of its product, for consumer safety, and for the environment. Community investments, as a specific form of stakeholder dialogue, include donations and sponsorships following direct requests from the local community, more developed corporate donation programmes, and various types of partnerships between NGOs, businesses and the public sector. Some manufacturing companies organize ‘Open Door Days’ where they present their production processes and use the opportunity to educate the wider community (school children, NGOs, other interested citizens) on environmental concerns. More structured corporate donation programmes, mainly in the form of public calls for donations and sponsorships, have appeared only

recently. Company representatives see them as a useful mechanism to deal with a large number of requests for financial support (some of the leading/ most successful companies reported that the total amount of requests received was higher than their total annual income) and to engage more proactively with various stakeholders in the community. An innovative way of simultaneous, mutually enhancing, engagement of employees and the wider community may be illustrated by the T-HT group’s donation programme «Together we are stronger», where employees are invited to engage in community work and propose donation recipients who are then selected by an independent board involving both company and community representatives. There seems to be limited communication capacity both on the part of the business sector and the NGOs when it comes to more controversial issues. One of the interviewed heads of corporate communications reported that her attempt to arrange a meeting with a prominent leader of an NGO, that displayed information on the company’s malpractice on their website considered inaccurate/false from the company’s point of view, ended in the NGO leader’s response that ‘they are on opposite sides and no dialogue is possible’. The analysis of the 12 companies in the supplementary sample also indicates that stakeholder engagement is among the less developed CSR areas in Croatia. 2 companies show very little evidence of any significant stakeholder engagement, 9 show some indication of taking the stakeholders’ interests into consideratiaon for the overall business strategy, and only one has a systematic process for managing stakeholder dialogue. This is Holcim Croatia, a subsidiary of a multinational group well known for its leading role in sustainable development and CSR initiatives at the global level. In Croatia, Holcim is known for its direct involvement with the local community, as the initiator and organizer of an annual NGO and community initiatives gathering, on its premises in the small town of Koromačno, Istria. Also, it was among the first in setting up public and transparent mechanisms for its community investments. Carlsberg Croatia is an example of a brewery assuming responsibility for the potential harmful effects of the excessive consumption of their product, especially among the under-aged and young population. At the sectoral level, Carlsberg Croatia has been a signatory of the Code of Responsible Marketing Communication Code of the Beer, Malt and Hops Producers Group at Croatian Chamber of Economy since 2005, obligating the brewers to direct their advertising to adults exclusively, and to promote responsible beer consumption. In addition to that, Carlsberg Croatia applies their own Code of Marketing Practices, prohibiting suggestive propaganda directed at minors. The increasing diversity of banking products offered by Zagrebačka Bank, developed in line with the recognized needs of the bank’s customers, illustrates the business case for a socially responsible approach to market expansion, which, at the same time, advances the availability and social sensitivity of financial services. Zagrebačka Bank, for instance, was the first to introduce the moratorium, i.e. the grace period for loan payments during maternity leave and civilian military service. The bank’s offices are being

▪▪ 3. GOVERNANCE AND CSR Specific governance structures for CSR policies and programmes are in the initial stages of development in Croatia, as evidenced by the analysis of our survey. The three main parameters of rating CSR governance have included (1) existence and development of policies promoting transparency and accountability; (2) allocation of responsibility for CSR to senior management or the Board and inter-departmental collaboration; and (3) regularity of CSR on the Board agenda. Based on the analysis of these three parameters, among the 35 companies in the main sample, there are eight (23%) whose CSR governance structure can be assessed as ‘on the way’, and none that could be described as examples of good practice. Hence, in 77% of companies randomly selected from the list of the 500 most profitable companies in 2005, no specific executive is responsible for CSR issues, even if CSR practices are developed in managerial areas, such as environmental protection, employee education or community donations. There is no evidence that CSR issues are being discussed at Board level, nor is horizontal coordination regarding CSR between different departments expected. However, in our supplementary sample of 12 companies with declared CSR orientation, there are 3 companies whose CSR governance can be described as ‘good practice’ and 7 that have been rated ‘on the way’. More specifically, only Podravka among the main sample companies, and Hauska, Croatia Airlines, and Holcim from the supplementary sample, employ individuals whose jobs are directly tied to sustainable development and corporate social responsibility. The most common approach to CSR governance is adherence to transparency and accountability policies and reliance on informal sets of relationships between senior managers in charge of different operations relevant to CSR. Collaboration across business divisions is most common in regard to CSR reporting and annual business reviews, while consultations with the Board are more often informal and focused on individual Board members. Thus, the existence of a formal CSR committee is not the primary indicator of the development of CSR governance and in-depth cultural research would be required to unravel the reality of decision-making related to CSR, which greatly depends on the overall openness of horizontal and vertical communication channels within a company.

Development of policies promoting transparency and accountability The most developed aspect of CSR governance among the surveyed companies is their readiness to comply with the externally formulated voluntary standards and guidelines of business ethics, corporate governance and social responsibility. This is demonstrated by the 14 out of 35 companies in the main sample (40%) that have signed the Code of Business Ethics of the Croatian Chamber of Economy and the 9 out of 35 (26%) that joined the Global Compact in March 2007, hence making a commitment to developing and reporting on their CSR practices over the upcoming years.15 While this rate may seem low to readers who are not familiar with the Croatian context, it is actually an encouraging indicator that the leading Croatian companies are responding positively to these very recent initiatives. Although membership in the Chamber of Economy is compulsory for all incorporated businesses, the signing and adoption of the Code by companies themselves is voluntary. This is in accordance both with relevant legal provisions, as well as with the intention of the authors and promoters of the Code to facilitate dialogue on CSR issues within companies and in the business community in general. In addition to general principles, the code tackles the relationships among companies and with external stakeholders, internal relationships within companies and procedures in cases of breaches of the Code. Moreover, the Croatian Employers’ Association, as the strongest voluntary business association in Croatia, also has a Code of Ethics, adherence to which is a precondition of membership in the Association. These and other initiatives have had a beneficial role in the promotion of good practice and the identification of unethical behaviour, but their disciplinary role in the cases of malpractice has remained relatively weak. Five companies in the main sample (14%) have internal policies of transparency and accountability, which include 4 codes of business ethics, one internal code of corporate governance and one specific policy on shareholders’ rights. The main sample findings include one separate report on corporate governance issued in 2005 by PBZ Grupa, a prominent bank with multinational ownership. It is the only bank in Croatia with a publicly disclosed Procedure on Prevention of Financing of Ruled-out Business Activities, which the bank refuses to finance directly or indirectly due to their detrimental effects on environmental protection or general morality, such as products that can harm the ozone layer, destruction of wild animals, weapons, gambling, liquor and tobacco production and distribution etc. Among the 12 companies with declared CSR orientation in the supplementary sample, all have internal policies on business ethics and transparency of corporate governance. In several cases, these policies go beyond the minimum regulation of professionalism, equal treatment of sharehol15 For comparative purposes over the past two years of existence of the Code of Ethics in Business of CCE, 570 companies have adopted it.

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refurbished in line with the standards of accessibility for handicapped people, and are being fitted with wheelchair ramps, tactile floor tracks for the visually impaired and the blind, which lead from the entrance to the nearest counter, equipped with communication devices for the hearing impaired.

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ders and clarity of governance structure. For instance, Holcim Hrvatska has a set of policies on business ethics, fair market relations, prevention of conflict of interest and security of information, which are communicated to all employees. Coca Cola Beverages Croatia has a special policy on the treatment of children in advertising and anti-discrimination policy. OTP Bank has a set of regulations, deployed by its international group, on the prevention of money laundering, legal compliance, professional ethics and environmental risk assessment in its investment activities. Croatia Airlines’ Code of Business Ethics is monitored by the Ethics Committee with the mandate of reviewing complaints and proposing measures to the CEO. Ericsson NT is one of the very few companies in Croatia that has adopted its own, specific Principles (or Code) of Corporate Governance with separate sections on the responsibilities and relations of the Management Board and the Governance Board, shareholders’ rights, and transparency and reporting obligations. It also has a separate Code of Business Ethics which is uniform for the entire Ericsson group and provides specific guidelines in the following areas of business conduct: respect for employees and human rights in the workplace, prevention of conflict of interest, legal compliance, reporting violations, protection of company’s assets and information, employees’ responsibilities towards the society and the environment. The specifics of governance of state-owned companies should also be noted. Among these, current or former public utilities or infrastructure monopolies (at national or local levels) should be distinguished from enterprises that operate in the marketplace, whose privatization has failed or has not been undertaken. Many companies in the first subgroup are governed and managed in a more traditional way, with a reduced level of market pressure that enables gradual restructuring, high job security and often above-average pay levels and some investments into the community. Consequently, CSR-related practices in these companies often stem from established practices, rather than from newly implemented ones. However, some companies in this subgroup have already received foreign direct investment and are operating in markets undergoing liberalization; although still partly state-owned, these companies are often among the most active promoters of CSR and community involvement, although some of their pricing, social or environmental practices may be criticized. The second subgroup usually comprises inefficient enterprises with limited strategies and capabilities, which are usually unable to undertake wider CSR initiatives. It can be concluded that policies of accountability and transparency are on the rise in Croatia, as more companies are adopting the standards promoted by the business associations and global organizations, such as the Global Compact, as well as preparing their own policies, specific to their business strategies and identified risks of reputation and cohesion. It is expected that the adoption of the Code of Corporate Governance in 2007 and intensified promotion of CSR and business ethics by leading business associations, will have a positive impact on corporate governance policies in the years to come.

CSR Responsibilities at the Level of Senior Management Based on the analysis of the main sample of 35 companies, there are very few cases where CSR has been formally integrated into the responsibilities of the Board members and senior management, although informal consultations do take place across departments with focus on specific tasks, primarily CSR reporting and programme development. Two companies (INA and the Atlantic Group) have inter-departmental CSR committees in charge of coordinating CSR activities and one company has made the deputy CEO responsible for developing CSR reporting and the overall corporate strategy (Janaf). In Podravka, one of the national CSR leaders, a coordinator has been appointed responsible for sustainability reporting, within the domain of corporate communications who is also engaged in corporate giving programmes and interactions between the Board members and different departments in relation to specific CSR initiatives. A prominent bank (PBZ), has a CSR programme within its corporate communications department, currently focused on sponsorships and donations, soon to be restructured into an integrated corporatewide programme with an adequate managerial structure. In several cases, CSR reporting and the subsequent programming is being initiated by individual managers, who are not Board members, but have a ‘CSR vision’ and are capable of ensuring Board endorsement for the introduction of new programmes and activities, such as an environmental management system (Dukat), a sustainability-related risk assessment (Elektrokontakt), CSR disclosures in annual reports and official websites (Končar) and preparation of separate environmental reports (T-HT Group). In these cases, more intense communication between the heads of the most relevant departments (corporate communications, quality, environmental management and human resources) takes place in an informal manner, and, while its institutionalization would be welcome, it is key that information and plans are communicated and aligned. Among the 12 companies in our supplementary sample with declared CSR orientation, as expected, a great majority of them (10) have different ways of managing CSR at the top management level, adapted to their specific organizational cultures and broader governance structure, in cases where Croatian companies are part of multinational corporations. It is evident that the majority of structures in place are primarily intended for the better coordination of CSR activities, with a very few cases for the comprehensive oversight of all business operations relevant to CSR. In that context, CSR reporting is an important integrative tool, stimulating participatory assessment of past performance as well as adequacy of organizational structures and serving as a starting point for the joint monitoring of proposed improvements. Pliva is probably the example of a ‘best practice’ in Croatia, since its interdepartmental Sustainability Committee is presided over by a President of the Management Board who also reports on CSR issues.

and stakeholder engagement, coordinates the preparation of the annual CSR programme, including activities of different departments, organizes internal communication activities on CSR, as well as preparation of the CSR report. These short descriptions of different CSR governance structures set up by national CSR leaders show that each company needs to search for its own design, in line with its strategic CSR objectives, and in consideration of limitations, as well as opportunities posed by the embedded corporate culture. CSR practices may, in fact, add to the transformation of the said corporate culture, but only over a period of time, and with strong and continued endorsement on part of the leadership.

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Ericsson NT, the national leader in business excellence, has an integrated system of management of business processes, including quality (ISO 9001), environment (ISO 14001) and health and safety (OHSAS 18001). The three coordinators of these processes make up a team that prepares the annual report on quality, environment and health and safety for the annual management review with the CEO. They jointly prepare the annual programme on quality, environment and health and safety, which is monitored by the balanced scorecard system. In addition, the corporate communications department is in charge of targeted stakeholder engagement and transparency of reporting. In Holcim Hrvatska, another CSR leader, the Director of Industrial Ecology, in charge of the implementation of sustainable development principles, participates in all meetings of the management team and has voting rights, since the company’s managerial culture does not make strict divisions between formal board members and other senior managers. In Coca Cola Beverages Croatia, the CSR team is dynamic yet informal, including a deputy CEO, director of corporate communications (the key CSR person in the company) and a quality manager, with contacts with the HR department. At the level of the parent company, however, the CSR governance structure has been recently developed and includes a special CSR committee of the Board as well as CSR Council, where local communications and quality directors are also represented. At Hauska & Partner International Communications, a CSR working group has been established, with sitting members from Croatia, Austria, Serbia, the Czech Republic, and Latvia, and chaired by the CSR Director for the entire Group. She sits at the Board meetings on occasion, and reports regularly to the Board on the activities carried out by the Group. At the same time, consequent to individual Board decisions, the working group acts toward the systematic integration of individual CSR principles into consulting practices, and serves as an intermediary in the communication between employees and the Board. It should be noted that the Croatian subsidiary played the role of innovator in the CSR area within the entire Hauska & Partner International Group. In Hartmann, another sustainability leader among SMEs, with the executive staff making up less than 10% of all workforce, it is not surprising that despite strong joint focus on ongoing improvements in sustainability management, there are no clear divisions of responsibilities at the managerial levels, other than the oversight of implementation of ISO 14001, SA 8000 and OHSAS 18000 norms. Indeed, both Hauska and Hartmann have SA 8000 compliance monitoring in place, by means of quarterly meetings of the appointed representative of the management and that of the employees. In Zagrebačka Banka, the pioneer of structured corporate giving programmes that it launched in 1999, the CSR team is nestled within the corporate identity and communications and reports directly to the Chairman of the Management Board. It is in charge of external communications

CSR on Board Agendas The review of interactions between the management boards and executives in charge of the CSR programme as a whole, or its specific components, corroborates the key finding that CSR governance is not sufficiently formalized in the Croatian business community, when assessed through the lens of the parameters of this research. In the main sample of 35 companies, there is only one account of regular reporting on CSR initiatives (Podravka), ranging from environmental protection to community giving at the level of the Board, as well as the involvement of several Board members in the company’s CSR programmes, such as the corporate foundation and preparation of the annual sustainability report. The CSR issues, especially those from the area of labour relations, are occasionally discussed at the Board level. Elektrokontakt represents a case where the corporate strategy of sustainable development is a part of the CEO’s vision, resulting in his endorsement of environmental management, commitment to job security and sector-wide promotion of sustainable development. Yet, in this case, comprehensive discussions of SD achievements, other than those related to specific products, do not take place at the Board level. In contrast, in companies with highly developed management and reporting systems on various aspects of CSR, there are cases of inertia of the Board and rigidity of internal communication channels that slow down the realization of identified opportunities for elaboration and integration of different CSR practices. There are also several cases of informal communication with the CEO or other interested Board members, where the primary form of influencing the Board’s decision is advocacy and personal engagement by CSR champions within the company, rather than the preparation of periodic reviews of CSR achievements and proposals. In the supplementary sample of 12 companies with declared CSR orientation, there are three cases of direct and regular communication on CSR between Board members and the managers responsible for the implementation of CSR programmes or activities. In Pliva, the link is the 43

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president of the Sustainability Committee who is at the same time Chairman of the Board, while in Hauska & Partner, the CEO and other Board members from each national office sit on the CSR committee chaired by the Croatian CSR focal point, who is herself not a Board member. In CCBH, the CSR Council, engaging CSR managers from each local company, advises the CSR Committee of the Board of the parent company. Holcim and Ericsson NT are examples of strong and fruitful two-way communication between Boards and CSR managers, resulting in regular consideration of sustainability and CSR issues at Board meetings even though there is no Board member specifically responsible for CSR. In both cases, sustainable development and CSR have already been integrated into the overall business strategy. On the other hand, there are three cases where, despite outstanding managerial practices, formal, sporadic and often unpredictable communication with the Board is perceived as the key obstacle to faster and more comprehensive integration of CSR into the overall business strategy and corporate culture. It can be concluded that direct engagement and the genuine interest of the Board in CSR, is a prerequisite for its successful integration into the overall business strategy and its systematic deployment, regardless of the formal mandate of individual Board members. Trans-organizational learning related to the sensitive issue of leadership styles and strategic competencies can only be facilitated by reputable business associations and leadership fora, and even more effectively, by best practice examples from Croatia and other countries.

Management Systems and Certificates Among management systems and certificated related to CSR, and identified as relevant by the IET, the highest number of Croatian companies included in the main sample are ISO 14001 certified (11/35). No companies in Croatia currently apply the Eco-Management and Audit Scheme (EMAS). Only two companies hold the Social Accountability 8000 certificate and two apply the European Foundation for Quality Management (EFQM) Excellence Model, none of which form the main sample of this research. However, three are included in the supplementary sample of good practices and CSR excellence. ISO14001 was officially translated and issued as the national standard HRN EN ISO 14001 in 1998. The number of certificate holders in Croatia increased steadily during the last several years, from 19 in 2001 to 197 in 2006. The current number, however, represents only 0.2% of 72,790 active companies, 2% of 9,659 active companies with more than 10 employees or 5.5% of 3,539 active large and medium sized companies.16 16 All numbers relate to the end of FY 2005. Source for ISO 14001: Croatian Society for Quality online database based on selfreporting of nine certification agencies operating in Croatia, available at http:// kvaliteta.inet.hr/14000/14000_firme.htm. Source for numbers of active companies at the end of FY 2005: Croatian Chamber of Economy, Sector for Industry.

Graph 2 â&#x20AC;&#x201C; Main Sample Companies: Management systems and certificates Management systems and certificates 120,0 % 100,0 % 80,0 % 60,0 % 40,0 % 20,0 % 0,0 % ISO 9001

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According to the incomplete list available on the Croatian Society for Quality website, OHSAS 18001 is currently held by only 31 companies. The discrepancy between such a low number, in comparison with the number of ISO 9001 and 14001 certificates, could possibly be explained by the high legal standards prescribed in the area of occupational health and work safety.20 Only two companies obtained the SA 8000 certificate from Det Norske Veritas, one of the two certification agencies offering this service in Croatia21 – Hartmann, the Croatian facility of the Danish packaging manufacturer (certified in July 2006), and Hauska & Partner International Communications, an Austrian-based strategic communications company (certified in February 2007). No other company was in the process of applying or obtaining the certificate at the time of this research, although there are several companies expressing interest.22 Both of the certificate holders are CSR leaders in Croatia and are therefore included in

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Some early attempts were made to introduce EMAS to the wider CEE and NIS region, in which representatives of Croatian companies and government took part, such as «EMAS Eastwards», implemented in 1999-2000 by an expert group from Britain, Denmark, France and Sweden and supported by the Science & Technology Directorate-General of the European Commission.17 The legal grounds for EMAS application in Croatia will only be set this year, with the passing of the new Law on Environmental Protection, currently being discussed in Parliament. As emphasized by quality managers from several companies (Končar, Dukat, Ericsson NT, Elektrokontakt, Nexe group), none of the companies already certified with ISO 14001 should have difficulty in applying EMAS. Of the three current EU candidate countries, only Turkey reported 3 sites implementing EMAS on a pilot basis, while the situation in Croatia and Macedonia is officially reported as “not known”.18 ISO 9001 and OHSAS 18001 demonstrate an increased commitment to a systematic approach in securing the quality of products and services and more concern for occupational health and safety management. ISO 9001 is especially relevant since, as the most important international reference for quality management requirements in business-to-business dealings, it directly contributes to the export capacities of Croatian companies. It also contributes to the quality of products and services on the Croatian market, which is increasingly relevant for more demanding consumers. The number of ISO 9001 certificates increased more than five times in the period from 2001 until mid 2007. The current number of 1,733 certificates is held by 1,675 companies, representing 17% of the total number of 9,659 companies (with 10 or more employees) that have been financially active for at least the past three fiscal years (i.e. since 2003).19

17 Meima, Ralph and Starkey, Richard: «Implications of the Spread of Voluntary, Standardised Environmental Management Systems in Central and Eastern Europe.» Project Report and Summary. December 17, 2000, available at http://ec.europa.eu/ environment/emas/pdf/general/emas_eastwards_report2000_en.pdf (accessed on April 4, 2007). 18 EMAS official website, http://ec.europa.eu/environment/emas/activities/ accession_en.htm (accessed on April 5, 2007) 19 According to the online database of the Croatian Quality Society accessed on April 25, 2007. Source for the number of companies: Croatian Chamber of Economy, Sector for Industry. 20 List of laws and other legal requirements can be accessed at: http://www.zitel.hr/ sigurnost/propisi.htm 21 In addition to Det Norske Veritas (www.dnv.hr), this is SGS Adriatica (www.hr.sgs. com). 22 Source: Interview with Krešimir Paliska, Country Director of DNV.

Graph 3 – Annual growth in the number of ISO 9001 Certified Companies Croatia - ISO 9001 certificates 2001-2007 1800

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2007

Year 45

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the supplementary sample for this research. According to data obtained from the official SA8000 site, in December 2006 among the countries included in this research, only Poland and Turkey had several certificate holders (8 and 5, respectively). Croatia was among the group of five countries (together with Bulgaria, Lithuania, Hungary and Slovakia) with only one certified company at the time, while no certification has yet been conferred in Macedonia.23 Corporate social responsibility is one of the eight principles of the European Foundation for Quality management’s model of business excellence (EFQM). Two companies in Croatia applied for the EFQM Excellence Award as a self-assessment tool. CARnet (Croatian Academic Research Network), a public sector company, received the Committed to Excellence Award in 2005. The other one, Ericsson Nikola Tesla, included in the supplementary sample for this research, started with annual self-assessments of excellence in 1996 and received the Recognized for Excellence Award in 2003. Over the past two years, the company has shifted from EFQM to an internal excellence model promoted by the Ericsson Group. Podravka, included in the main sample, is a member of EFQM but has not applied the model so far. However, it took part in the EFQM’s benchmarking project Corporate Citizenship, as well as in its CSR Common Interest Day in Prague, focused on the transfer of good practice in integrating CSR principles in business practice, in line with Global Compact principles. Among the countries included in this research, the EFQM online database lists 24 companies in Hungary, 18 in Turkey, 13 in Poland, 9 in Lithuania, 3 in Slovakia and none in Macedonia and Bulgaria.24 23 The list of certified companies, dated December 31, 2006, is available at http:// www.sa-intl.org (accessed on April 3, 2007). As with Croatia, where there are currently two certified companies, the numbers may have changed for other countries as well. 24 EFQM Successful Organisations Database: http://web-1.efqm.org/temp_efqm_ full/wwwroot/levels/reco/orglist_sort_all.asp

▪▪ SPECIFIC CSR INITIATIVES RELEVANT TO CROATIA Most of the companies included in the main sample (28/35), are involved in other initiatives relevant to CSR development in Croatia. More than half of the companies included in the main sample are signatories of the CEE Code of Business Ethics (21/35) and there is a similar share of ISO 9001 certified companies (19/35). On the other hand, the main sample contains only a few active members of the relevant business associations such as HRBCSD (6/35), CEE CSR Community (5/35), or certificates such as OHSAS 18001 (4/35) or Employer Partner (1/35). There is also a relatively high proportion of Global Compact signatories (9/35), not surprising since the sample is based on the list of the most successful companies and almost all of the 61 companies that have recently committed to Global Compact principles belong to this category. It is interesting to note that 25 companies already hold the Employer Partner certificate, awarded in the area of Human Resource Management, although it was only introduced two years ago. The companies’ interest in undergoing the demanding certification process in order to demonstrate their ability to provide quality workplace, seems to be motivated primarily by the need to attract a top-quality workforce which is, despite the large number of unemployed, still difficult to find in the Croatian labour market. Acceptance of the CEE Code of Business Conduct may serve as an indicator of increased commitment to ethical business behaviour, while membership in CEE CSR Community and HR BCSD may serve as evidence of companies’ pro-activity. In April 2007, the Code of Business Conduct was

Graph 4 - Main Sample Companies’ Participation in Croatia-Specific CSR Initiatives Participation in CSR initiatives (main sample) 120,0 % 100,0 % 80,0 % 60,0 % 40,0 % 20,0 % 0,0 %

Global Compact

CEE Code

CSR Community yes

HRBSCD no

Employer Partner

Other initiatives

▪▪ 4. CSR PERFORMANCE MANAGEMENT Exploring the degree to which the performance management of CSR is developed in the Croatian business community has been the most challenging aspect of this research. In many cases it has been very hard to determine whether the quality management systems in place are conceptualized as part of the companies’ CSR efforts. Based on consultations with IET, we were guided by the more focused criterion of identifying management systems that the company links with its strategy of sustainable development or CSR, by means of set objectives and performance indicators at the level of individual employees, teams and operational units. From such a perspective, there is little evidence for the great majority of the surveyed Croatian companies (3/35) of quantifying and specifying performance improvements on CSR issues in employee evaluations and performance assessments of operational units. Overall, there is limited evidence of managing CSR issues in supplier relations, other than product quality, or environmental and health safety. On the other hand, if performance management were to be judged primarily by the existence of management systems which are relevant to one or more CSR issue, it is apparent that one third of the companies (11/35) in the main sample, operate in alignment with ISO 14001 and among them another third (4/11 or 11.4% of all companies) also manage work safety according to OHSAS. In addition, these companies do report on their environmental management and performance, by means of special environmental reports (3/11), annual reports (5/11) and websites (9/11). Considering the fact that both norms heighten the standards of environmental and work safety management beyond legal requirements

which are already rather developed25, NET Croatia considers these 11 companies to be at the level of “performance management on the way”, rather than the “no/little evidence” rating, and we suggest that they be upgraded in the final analysis of Croatian scores. In our supplementary sample of 12 companies with declared CSR orientation, there are six cases of performance management practices assessed as developed, although no company has been rated as an example of good practice in this area, due to a lack of explicit and consistent integration of CSR performance indicators at different organizational levels. There are five companies in this sample with the ISO 14001 norm, three of which also have OHSAS 18001 and all companies report on their CSR performance in special reports, annual reports and websites. The following are short descriptions of the most developed performance management practices of Croatian companies for different CSR issues, in order to provide a more vivid insight into the real situation in Croatia, where a lack of explicit CSR business targets does not necessarily indicate a lack of concern for environmental and social issues. In Coca Cola Beverages Hrvatska (CCBH) an inter-departmental, yet informal team, including the deputy CEO, quality manager and corporate communications director, monitors CSR performance at the company level. At the level of the parent company, operational units report to the CSR Committee of the Management Board and are represented at the CSR Council. CCBH is the only company surveyed in Croatia with integrated CSR objectives in the executive performance review, as evidenced by the annual business review of leadership competencies in 2007 at the level of the parent company, including Croatian executives. The company’s management processes are standardized (ISO 9001, ISO 14001, OHSAS 180001 and Coca Cola quality system TCCQS), and supervised by the quality management unit. Annual external audits are conducted in regard to ISO 14001 and TCCQS standards. The dynamic development of standardized management systems over the past few years has also been a result of the recommendations of environmental and social reporting. Since 2004, CCBH has committed to biannual sustainability reporting in line with GRI; hence CSR performance monitoring also includes data collection on the majority of GRI indicators. Ericsson Nikola Tesla, a leading communications system manufacturing company, has a highly developed quality management system, combining certified and self-developed systems. Commitment to excellence is reflected in annual self-assessments according to EFQM and their internal excellence model since 1996. Internal audits of different business operations take place on a rolling basis. In 2003, Ericsson NT received the EFQM second-level certificate/award “Recognized for Excellence” (the audit was carried out by an international team of three EFQM assessors). An 25 According Articles 20 and 21 of the Workplace Safety Act from 2003, an employer with up to 50 employees is legally obliged to employ one or more experts for workplace safety in the company, while an employer with more than 250 employees is obliged to set-up an independent workplace safety department in charge of monitoring workplace conditions.

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signed by 6% of all active companies with more than 10 employees (16% of all active large and medium sized companies), while there are currently 87 members in the CCE CSR Community (companies of all sizes and from diverse sectors, including two non-profit institutions - Economics Institute and Croatian Center for Cleaner Production). In HR BCSD, which sets higher standards for membership, there are currently 34 companies, a combination of large sectoral leaders, medium sized companies specializing in waste management and manufacturing of environmental equipment and consultancies in environmental management. Other initiatives relevant to CSR in Croatia include a variety of industry specific certificates and awards (e.g. international food production or IT equipment standards, environmental awards in tourism etc.) or initiatives (e.g. acceding to the Sustainability Charter of the European Telecommunications Network Operators’ Association (ETNO), Charter on Sustainable Development by the Cement Industry Community).

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indicator of outstanding performance in the area of human rights is the Ericsson European Equality Award (EEEA) for gender equality in business environment, which was awarded to Ericsson NT in 2001. Ericsson’s excellence model lists corporate responsibility among the main enablers of stakeholder relations. CSR is included in performance evaluation at different organizational levels – reputation assessment, assessment of corporate donations, satisfaction of external and internal customers, and ‘Dialogue’ – the annual external employee satisfaction assessment. Ericsson NT has an integrated system of management of business processes, including quality (ISO 9001), environment (ISO 14001) and health and safety (OHSAS 18001). The chief quality manager performs approx. 19 audits of organizational units, 20 supplier audits, 14 project audits, and special audits of trade compliance every year. The annual business review includes a thematic review session of the CEO with the corporate responsibility area managers. Business processes ensuring quality, environmental protection, health and safety are part of the balanced scorecard system and individual performance evaluations (the variable part of a manager’s salary is up to 15%). In INA, the national oil and gas company, while there is no specific performance management system in place that would explicitly set CSR indicators, the company applies several certified management systems in areas relevant to CSR. Performance targets for HR management include strategic prevention of lay-offs by means of job rotations, vocational retraining, early retirement programmes and employment in spin-off companies. The management system OHSAS 18001:1999 has been introduced in all organizational units, including a protocol for risk management in the workplace, with three specific instruments – SME method, WHAT/IF method and FMEA method. ISO 14001:1996 has been introduced in all productive organizational units. Annual social and EHS reporting is another important mechanism of monitoring performance, resulting in sets of recommendations, translated into action plans for the upcoming year. Elektrokontakt pays particular attention to environmental and health and safety risk evaluation, and has defined a set of critical points in this area, which are constantly monitored. They apply the ISO 14001 standard, while further improvements in health and safety represent one of the priorities of both the quality manager and health and safety manager. The latter is a certified auditor for OHSAS 1800. All the employees are regularly informed about environmental protection and health and safety programmes, through bulletin boards and quarterly periodicals. Every other year, additional health checks are organized for ‘at-risk’ production line workers, and the factory runs its own health care office. Since 2005, Elektrokontakt’s facilities have included the technological waste yard, where the increasing volume of this waste is being processed into raw materials, and subsequently sold. Since 2003, the action plans and targets related to energy efficiency and waste management brought about a 50% reduction in water usage. Elektrokontakt, being an internal supplier for the German mother company, EGO, pays great attention to the harmonization with the Europe-

an standards of product safety and environmental protection, and attempts to comply ahead of time: For instance, the Croatian factory complied with the EU directives WEEE and RoHS one year in advance of the Croatian Electric and Electronic Waste Regulation, put in force on July 13, 2007. Elektrokontakt and EGO are focused on the utilization of cleaner materials, and thus have procedures for checking their suppliers for safety and technology, in line with the above listed directives, as well as with the REACH directive, regulating the utilisation of chemicals. Carlsberg Croatia brewery stands out for its environmental record, driving the company towards maximum transparency, continuous investment in environmentally friendly technologies, and promotion of the similar practices among their employees, business partners, and suppliers. The environmental protection is encompassed in the ISO 14001 management system, and the new plant, opened in 1997, is in line with the highest environmental standards, and includes the first waste water purification facility in the Croatian beer industry. Since 2004, the waste management data, and the waste water and atmosphere emissions output indicators have been published regularly in the annual environmental report. The participation of Carlsberg in the company competition of the Car-less Week, organized every September by the City of Koprivnica, sets a good example. For the past two years Carlsberg has won the competition, as their employees seem to accumulate the most kilometres travelled without a car. As part of this occasion, the company presents bicycles to all the long-standing employees, confirming its concern for people, the environment and the community. Despite the company’s comprehensive approach to CSR, Carlsberg Croatia finds securing media attention for their activities quite difficult.

▪▪ 5. PUBLIC DISCLOSURE ON CSR IN CROATIA The limited, yet expanding scope of public disclosure on CSR Although in the initial stage, public disclosure of corporate strategies and practices related to different areas of corporate social responsibility is expanding in Croatia, both in terms of the number of reporting companies and in the scope and quality of reporting. Public disclosure is, according to our survey, the second best developed aspect of CSR in Croatia, with 29% of surveyed companies in the initial stages and 5% of those having reporting practices which are systematic, standardized and inclusive. It remains limited, however, to mostly large companies with outstanding

Economics and Management in the period 2004-2006 (see Šulenta et al., 2007). The samples of 43 companies in 2006 and 2004 and 48 companies in 2005 consisted of publicly traded companies, major financial institutions and public utilities’ providers in state ownership. The sample is therefore representative of the most important companies in the Croatian capital market, which account for 80% of market capitalization and 66% of turnover on the Croatian stock exchange. The comparison of research results for the past three years shows that Croatian publicly traded companies are expanding the scope of their public disclosure. However, the area for improvement is still immense. The very best result is 24.9% of social policy disclosure in 2006, largely due to the high percentage of companies (63%) in 2006 that used websites for the promotion of their sponsorship and donation programmes. At the same time only 2% used their website to report on their compliance with human rights standards. It is important to note that websites are the key information channel, maintained by more than 90% of companies surveyed each year by ZSEM. On the other hand, annual reports were published by 51% of companies surveyed in 2006, representing a 7% increase from the previous year. There are, however, some interesting differences in the use of the two key information channels, as websites seem to be used twice as often as the annual reports for the disclosure of sponsorships and donations and environmental policies, while annual reports are used as sources of audit information three times as much as the corporate websites. The number of companies using websites and annual reports for reporting on corporate governance structure and employee benefits is similar.

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business performance and a strong impetus for transparency, imposed by the financial markets. Our analysis also indicates the existence of a strong link between strategic orientation towards CSR, as reflected in the integration of CSR in key corporate documents (mission and vision statements, declared business goals) and public disclosure. This also applies in cases where companies’ actual CSR practices have still not matured into well-defined and consistently implemented programmes, accompanied by specific management systems. The CSR reporting process itself - especially when undertaken in a systematic, collaborative manner - serves as the turning point for the introduction of a more systematic approach to CSR in general. For instance, the preparation of the first social report based on GRI methodology has motivated a leading Croatian oil and gas company to structure its corporate giving into a transparent public call for proposals. The company has also set up a permanent cross-departmental CSR working group in charge of reporting and proposing CSR initiatives, such as the Corporate Code of Ethics. In the case of another CSR reporting pioneer (a local branch of a global sectoral leader), the enthusiasm and innovativeness of the local management, led by the corporate communications director with special interest in CSR, has impacted the quality of reporting of the entire Group, stimulated IS0 14001 certification and resulted in the formulation of several specific corporate policies, including the first corporate HIV/AIDS policy in Croatia. The key source of information which enables preliminary insight into the current CSR reporting trend is the longitudinal research “Reporting on CSR by leading Croatian Companies” conducted by the Zagreb School of Graph 5 – Results of ZSEM longitudinal research on CSR Disclosure

ZSEM Research 2004-06 Average degree of CSR disclosure by Croatian companies in annual reports and on websites

100,0 % 80,0 % 60,0 % 40,0 % 20,0 % 0,0 %

20,2 %

24,9 % 14,9 %

2006 (n=43)

16,4 %

10 %

16,7 %

2005 (n=48)

14,9 % 6,3 %

11,2 %

2004 (n=43)

% total corporate governance disclosure % total environmental policy disclosure % total social policy disclosure

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Frequency of CSR themes in Corporate Reporting in Croatia 2003-06 Data source. ZSEM Research 2003-2006 database www.zsem.hr (average percentage of reporting in annual reports and websites) Most frequently reported

Least frequently reported

Greatest improvement in reporting

Corporate governance structure 49%

Code of Ethics 3%

Sponsorships and donations +33% (primarily websites)

Sponsorships and donations 31%

Integration of environmental aspects in supply chain management 4%

Employee development and benefit policies +17%

Audit-related information 29%

Compliance with HR and labour rights regulations and standards 4%

Compliance with environmental regulations and standards +13%

Employee development and benefits policies 28%

Energy and water use 6%

Shareholders’ rights +13%

Employment policy 14%

Contacts of environmental management 7%

Health and safety policy +10% Audit-related information +10%

Evidently, corporate governance (i.e. governance structure and audit information) is the most frequently disclosed CSR topic with the most consistent trend of overall improvement. However, a closer look at the specific indicators shows a discrepancy between the relatively frequent disclosure of information on governance structure (rising from 40% in 2003 to 49% in 2005 annual reports) and audits (rising from 37% in 2003 annual reports to 49% in 2005 annual reports), less frequent, but increased information on shareholders’ rights (rising from 5% in 2003 to 16% in 2005 annual reports), while internal codes of ethics are stagnant (2% in both annual reports for 2003 and 2005). Sponsorships and donations are also among the most frequently disclosed CSR topics, followed by information on employee benefits, employment policy and compliance with environmental regulations and standards. The least frequently reported information includes compliance with codes of ethics, compliance with human rights and labour standards, and specific information on the process and results of environmental management. In the case of the latter, companies most frequently disclose their compliance with regulations and standards, such as ISO 14001. They seem to have improved disclosure on environmental impacts (not found in any annual reports in the period 2003-2005 and an encouraging improvement in website reporting from 0% in 2003 to 16% in 2006), but very seldom 50

report on the integration of environmental concerns in supply chain management. ZSEM research 2004-06 clearly indicates that CSR reporting in annual reports and websites is still largely unsystematic and focuses on those themes which are deemed interesting to investors (corporate governance), mandated by specific management standards (e.g. disclosure of environmental policy according to ISO 14001), useful for job recruitment (HR policy) and beneficial for public image (sponsorships and donations). The findings of our survey of the of 35 companies in our main sample indicates that the frequency of CSR reporting decreases, when examined out of the context of capital markets, while it is still correlated with outstanding business performance. The comparison with the recalculated data of ZSEM 2006 research26 is presented in the following Graph. 26 The data of ZSEM research 2004-2006 were additionally analysed, to compare the instances of companies reporting on any of the specific themes within the three broad categories of CSR examined in ZSEM’s research – corporate governance, environmental policy and social policy. Each company could receive only one point for each category (yes/no). Hence the data are indicative of the quantity, and not the depth of reporting on specific categories. The total number of CSR reporting was calculated as a deduction of the number of companies with no reporting in all three categories from the total number of surveyed companies. This approach was chosen in order to ensure comparability with the data gathered in the scope of our survey of 35 companies in the main randomly selected sample of 500 most profitable Croatian companies in 2005, where reporting on the web and in annual reports was noted as absent or present, with qualitative information on specifics.

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Graph 6 – CSR Reporting trends – comparisons of results of two surveys CSR reporting in Croatia Comparison of this survey and ZSEM research 2006 100 % 90 % 80 % 70 % 60 % 50 % 40 % 30 % 20 % 10 % 0%

74 % 51 % 37 % 29 % 17 %

16 %

6% CSR/SD/Env Special Reports

Use of GRI This survey (n=35)

Of the 35 companies in our sample, 13 (37%) have separate sections on CSR, sustainable development, environmental policy or donations on their websites, while 8 (20%) present some CSR information in their annual reports. The most frequently reported CSR themes, with the exception of quality assurance policy, include environmental policy, employee benefits and educational programmes and donations. It can be inferred that in Croatia, just like in other European countries, the company’ presence in the capital market serves as an important driver of public disclosure on CSR. It is interesting to note that 10 of the 13 companies with CSR information on their websites and 4 of the 6 with special CSR reports, are in the group of 16 publicly traded companies on the Zagreb Stock Exchange in the main sample of 35. This might be viewed as a further implication of the capital markets’ positive impact on corporate public disclosure on CSR. For that reason, it is expected that CSR disclosures will increase over the upcoming two years, after the launch of the voluntary Code of Corporate Governance of the Zagreb Stock Exchange and HANFA in April 2007. ZSE and HANFA intend to prepare an Annual report on corporate governance, synthesizing disclosures of individual companies. It is estimated that the first effects of the Code on the level of transparency of publicly listed companies will become visible in the year 2008, after a period of familiarization and internal reorganization of corporate reporting practices. The Code is available at www.zse.hr. The Code is accompanied by an elaborate questionnaire, which may have a two-sided effect on corporate reporting. On the one hand,

CSR on websites

CSR in annual reports

ZSEM research 2006 (n=43)

its thoroughness may confuse and discourage companies with little prior experience or interest in non-financial reporting. On the other hand, the detailed questionnaire may be welcomed by the “second-wave” of leading companies already planning to expand their CSR public disclosure and improve their overall CSR performance. Other key drivers, based on interview findings, include export orientation, i.e. requests of specific highly developed foreign clients; preparation for change of ownership; strengthening sectoral leadership position or keeping up with the competition, and commitment to excellence and organizational learning. Končar group represents an excellent example of a company gradually expanding the scope of its CSR reporting, in line with the progressive increase of interest displayed for corporate practices by their new clients from international markets, such as Australia, and the Nordic countries. The company is preparing its first sustainable development report, having first gradually expanded the scope of its CSR reporting on company web pages, and in annual reports. Končar, as a leading Croatian exporter, decided to take a logical step and structure its report along GRI guidelines, which represent the most widely accepted international standards for comprehensive sustainability reporting, and, according to the company, should not be too difficult to apply in well-governed corporations that already possess an established set of measures and indicators. The increasing importance of communicating one’s achievements was vividly described by Končar’s Marketing and Information Director, who said: “We are still not sufficiently present in the public eye when it comes to our CSR activities. For years, we

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believed that building an excellent transformer, adapted to the micro-climate at diverse localities in the world, from China to Egypt, was enough”. In view of the competitiveness of the market, and the constant need for adoption of new standards, she continued to explain that, for Končar, “the key driver towards CSR remains the international market, closely followed by the high-quality relations we’ve been cultivating for decades: there is no reason for us to feel at all inferior in front of large multinationals when it comes to CSR”. It seems that the promotion of sustainability reporting by business associations, such as HR BCSD (translation and promotion of GRI guidelines)27, over the past two years, combined with the growing number of published CSR/SD reports has stirred-up interest for reporting, as indicated by the annual plans and current reporting preparations described by 6 out of 35 interviewed companies from the main sample and 2 out of 14 companies in the supplementary sample. Considering the fact that so far only 12 companies in Croatia published separate CSR reports, the expected minimal 50% increase over the upcoming two years is of significance and will have a potential spill over effect. 27 GRI 2002 was translated in March 2006 by the consulting company MAP Savjetovanja in partnership with the Croatian Business Council for Sustainable Development, with funding by the Charles S. Mott Foundation. The translation was officially approved by GRI and published on the GRI website. G3 Guidelines (including indicator protocols) are currently being translated by the Croatian Business Council for Sustainable Development in partnership with MAP Savjetovanja, with corporate donations, small support from Charles S. Mott Foundation and in-kind support for MAP Savjetovanja. It will be officially approved by GRI and a minimum 500 hard copies will be published, as well as on GRI web in May 2007 (a section for the Croatian language has already been created). In April 2006, HR BCSD, MAP and Economics Institute organized a G3 draft guidelines consultative process including Croatian companies, trade-unions and NGOs, as a follow-up to the official G3 Sneak-peak event that took place in Zagreb in March 2006. The official version of G3 guidelines was promoted in March 2007. More on GRI in the Croatian language is available at www.hrpsor.hr

Review of CSR Reporting Leaders The preparation of separate CSR reports dates back to 1997 when INA d.d., the Croatian national oil company, published its first environmental report for the biannual period 1996-97. A decade later, there are 13 companies with experience in environmental/EHS, social or sustainability reporting, having published a total of 38 reports, including 20 environmental reports, 10 sustainability reports and 8 social reports. The reporting increased rapidly after 2002 with the first appearance of social and sustainability reports, which have both expanded the scope of reporting contents as well as opened up the reporting arena to companies which are not primarily concerned with environmental hazards, as was the case in the previous years. Social reporting was pioneered in 2004 (for the FY 2003) by Coca Cola Beverages Croatia and was soon followed by the social reports of Zagrebačka Banka, PBZ, INA and a report of the strategic communications consultancy Hauska & Partner. Pliva pioneered sustainability reporting in 2002 and was soon followed by Podravka (the only reporting company in private national ownership) and another three subsidiaries of multinationals with strong strategic orientation towards sustainable development (Holcim Hrvatska, Hartmann and Coca Cola Beverages Croatia). The reporting pioneers have hence included companies in state ownership, such as INA, formerly state-owned companies with long national leadership position such as Podravka and Pliva, as well as subsidiaries of multinationals, with long-term operations in Croatia, such as Coca Cola and Hartmann, and “newcomers” with global sustainability record, such as Holcim. The frequency of separate CSR or environmental reports is similar in both the UNDP and ZSEM survey results – there are six such companies in

Graph 7 – Increase in the number of reports

No. of reports per year

CSR Reporting Croatia for financial years 1996-2005 (total 13 reporting companies)

13 12 11 10 9 8 7 6 5 4 3 2 1 0

total number of reports environmental reports social reports sustainability reports number of reporting companies

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

key for the emerging Croatian CSR community of practice. Almost half have applied the GRI Guidelines 2002, 10 have ISO 9001 and 8 have ISO 14001 certificates. This group of CSR best reporters includes the only two companies in Croatia with SA 8000 certificates, both of which are also the only two SMEs among the 13 CSR reporters. Only two out of 13 reporters are not members of at least one business association or network specializing in CSR and both are state-owned, engaging in business with high environmental risks - hence it is not surprising that environmental reporting is their sole priority. It can be inferred that CSR reporting is primarily important to companies that invest in their market positioning and reputation, and are at the same time highly exposed to the public due to the significance of their business in the Croatian economy. The exceptions are Hartmann, a medium-size packaging manufacturer owned by a Danish multinational, and Hauska & Partner, a small communications consultancy with majority private Austrian ownership, whose outstanding reporting practices are primarily linked with internal drivers, i.e. corporate strategy and culture, as well as the specifics of their market niche (Hartmann specializes in recycled paper packaging, being the only such producer in Europe, while Hauska is building its international portfolio of strategic communications, including CSR consultancy services, which are still rare in Croatia). The motives for CSR reporting reflect specific interests and challenges faced by companies at a given time, with the exception of three

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the UNDP Survey 2007 (3 environmental and 3 sustainable development reports) and seven in ZSEM research for 2006 (2 environmental reports, 3 CSR reports and 2 sustainable development reports). The analysis of the CSR profiles of the 13 companies that have published special CSR or sustainability reports over the past 9 years indicates that the majority of them are large companies (11 out of 13), operating in the industry (9) and services sectors (4 - finance telecommunications and consulting) with clear leadership positions at the national (e.g. Podravka, INA, HEP, ZABA, PBZ), or regional levels (e.g. Holcim), or in specific fields of specialization (e.g. Hartmann, Hauska & Partner). 8 out of 13 are subsidiaries of international or multinational companies, 3 are in majority state ownership and only one is in predominantly private national ownership. 50% are publicly traded on the Zagreb Stock Exchange and four are listed among the top 15 Croatian exporters in 2005, according to the December 2006 special supplement of the national weekly ‘Nacional’. The connect between high standards of CSR reporting and engagement in other CSR related initiatives is very clear, since there is an average engagement in 4.7 initiatives per one of the 13 companies that have published at least one separate report on CSR, environment/EHS or sustainable development. In comparison, the average engagement in these same initiatives in our main sample of 35 companies is 0.9 per company. Evidently, these different CSR initiatives, ranging from peer exchange of best practices to quality management, are mutually supportive and Graph 8 – Reporting companies’ participation in various CSR Initiatives

Large (over 250 employees)

Medium (50-249 employees)

SA 8000

OHSAS

ISO 14001

ISO 9001

CSR Community

CEE Code of Ethics

Global Compact

HR BCSD

GRI

Sustainability Reporters

Social Reporters

Environmental/EHS Reporters

14 13 12 11 10 9 8 7 6 5 4 3 2 1 0

CSR Initiatives of 13 Croatian companies with published CSR, SD or environmental reports

Small (10-49 employees)

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companies that were already at the stage of integrating sustainability into their overall business strategy. The basic motive for reporting has been to communicate the already existent CSR practices in a comprehensive manner and thus improve and extend the internal and external audiences’ perception of the company’s social responsibility, especially in relation to internal business processes, such as HR and environmental management. In several cases, the first reports were prepared as a response to a specific challenge posed by external stakeholders (e.g. the spill-over effect of international negative coverage on implied environmental risks, criticism from environmental groups, assessment of potential risks related to work security and labour rights in the privatization process). CSR reporting was also undertaken in a systematic manner as a conscious starting point for CSR strategy and systems development, as well as for increasing internal knowledge of company’s CSR practices among the employees, which is directly related to more effective deployment in the future. Interestingly, the direct benefits of CSR reporting are almost exclusively related to the internal sphere of corporate relationships and practices, which is in contradiction to the general impression of CSR reports being used worldwide as a powerful PR tool. All interviewed company representatives with reporting experience have been surprised by the lack of interest on the part of the media, including specialist business journals, in the findings of their CSR reports, as well as insufficient feedback, criticisms included, received from other external stakeholders, such as trade-unions and environmentalist NGOs. It must be noted that several companies have systematically sought feedback to their reports, with very little success28. So far, the findings of CSR reports have not been critically reviewed or referred to by any civic or trade-union initiative which has publicly questioned the responsibility of a certain company, even though there were several such opportunities (i.e. in the context of a highly visible strike organized a year after the issuing of CCBH’s social report or the protests against INA’s oil refinery in Sisak). The gap between the readiness to report and readiness to respond indicates that the Croatian public, i.e. its segments which are generally interested in the social role of the business sector, are still not adequately aware of CSR, both as a concept and as a set of specific business practices and commitments. This leaves the business sector in Croatia without important external drivers for improvement, and with detrimental effects on the more widespread application of CSR, beyond a small group of mature companies driven by their own strategic priorities. Internal benefits have, however been specific and significant enough to justify CSR reporting as a regular corporate practice, as illustrated by the demonstrated commitment to continuity by 9 out of 13 companies that have issued such reports. They range from enhanced employee loyalty, 28 In cases of CCHB, INA, Podravka, Zagrebačka banka and Hauska, reports were publicly launched and accompanied by written and online questionnaires. CCBH even organized focus groups upon the publication of its first social report. In the case of INA, limited feedback received from academic experts, CSR practitioners from other companies and internal audiences (managers, employees) has been highly appreciated and used in subsequent report planning.

formulation of specific policies, introduction of the corporate code of ethics and most importantly, creation of managerial structures and specific CSR programmes within the companies. In the case of CCBH, the local reporting has had a positive impact on the parent company, which has strengthened its governance structures and expanded the scope of its sustainability reporting. In the case of Hauska & Partner International Communications, the Croatian team has acted as the initiator of systematic organizational learning related to CSR at the level of the Group, which now holds a regular annual meeting called ‘World Café’, where staff from different offices discuss strategic and ethical issues, while a permanent CSR team connecting different country offices meets on a quarterly basis. The following table presents key motives and benefits of CSR reporting as described by seven company representatives.

CSR Reporting Benefits

Strategy deployment

Reputation

▪▪ Implementation of global SD/CSR strategy, requiring performance monitoring according to corporate standards ▪▪ Manifestation of company’s traditional commitment to sustainability and strong external communications (Podravka)

▪▪ Positive ranking within the Group (CCBH. Holcim) ▪▪ CSR as a significant component in consumers’ trust in corporate brand (Zagrebačka banka) ▪▪ Enhanced employee loyalty (Zagrebačka banka) ▪▪ Positioning within emerging CSR community of practice (Hauska & Partner, INA, CCBH, Podravka) ▪▪ Further market differentiation (Holcim)

Reputation ▪▪ Communication of corporate legacy of high labour standards to new co-owner (INA) ▪▪ Environmental risk management (CCBH, Environmental Report 2002) ▪▪ Public presentation of environmental investments and accumulated expertise (INA, Environmental Report 1998) ▪▪ Extending public awareness of company’s philanthropy (Zagrebačka banka) Organizational learning ▪▪ Improving employee awareness on company’s CSR programmes (ZABA) ▪▪ Review and strategic integration of CSR practices (CCBH, Sustainability Report 2005) ▪▪ Systematic introduction of ISO 14001management system (Carlsberg Croatia) ▪▪ Group’s CSR strategy development (Hauska & Partner) ▪▪ Intellectual curiosity matched by leadership support (CCBH)

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CSR Reporting Motives

Programme and system development

▪▪ Increased employee CSR awareness (Zagrebačka banka, CCBH) ▪▪ Code of Business Ethics (INA) ▪▪ Structuring of corporate giving (INA) ▪▪ Enhanced organizational learning (CCBH, Hauska & Partner) ▪▪ Development of CSR governance (specific policies, organizational structure) and transformation of corporate culture (CCBH, INA) ▪▪ Greater focus on community partnership programmes (CCBH, Zagrebačka banka) ▪▪ Improvement of overall management systems in line with integrated sustainable business strategy (Hartmann) ▪▪ Enhanced interdepartmental coordination related to CSR (INA, T-HT Group) ▪▪ Synergy and positive effects on parent company’s CSR strategy and reporting (CCBH)

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▪▪ 6. REPORTING VERIFICATION Limited Assurance Capacities The lack of resources for the external assurance of CSR reports is the main cause of the very limited assurance of Croatian CSR reports. In our main sample of 35 companies, there are only two cases where efforts were made to organize external assurance, at the very basic level of seeking short external reviews or opinions on the relevance of the report and its compliance with GRI requirements (basic checking of the inclusion of all indicators). In our supplementary sample of 12 companies with declared CSR orientation, there are four examples of some effort being made in relation to the external assurance of CSR reports, among which only one company managed to commission external assurance on part of an U.K. consultancy which checked the sources of information, consulted with the reporting team and referred to AA 1000 standards in its independent assurance statement, published as the final chapter of the company’s report. In another two cases, independent reviews of the report’s overall quality, without examination of the contents’ authenticity, were sought. Ericsson Nikola Tesla is the only private company in Croatia which sought independent EFQM assessment in 2002, resulting in the award “Recognized for Excellence”, which has also taken into account the company’s CSR strategy and its deployment. This is still the only case of EFQM assessment conducted in a private company in Croatia. There are two companies that have attempted to organize external assurance but have not succeeded due to a lack of time and available contacts – Zagrebačka banka, as part of its social report, planned to invite its different stakeholders to prepare independent external reviews on the report prior to its publication, but had to give up on this innovative approach due to time constraints. INA inquired into options to commission assurance from an international audit consultancy, but once it discovered that no such services were available in Croatia, decided to commission an independent review from a local expert on corporate governance and CSR, which focused on checking the accordance of the report contents with GRI Index without examining the authenticity of the information presented. The issue of accessibility of external assurance is currently discussed by active members of the CSR Community and HR BCSD, with the proposal of identifying a pool of experts or creating an independent assurance committee within a business association focusing on CSR, which could be used as a resource by the reporting companies. The concern about the conflict of interest between CSR consultancy services in report preparation and external assurance services, provided by the same individuals in such a small community of practice is also being discussed. Thus, although assurance mechanisms of CSR reporting are currently lacking in Croatia, this need has been recognized by the CSR reporting leaders and support organizations.

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Good practices of CSR implementation in the country

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▪▪ GOOD PRACTICES OF CSR IMPLEMENTATION IN THE COUNTRY

The following case studies of best practices have been selected in line with the above- mentioned trends, portraying companies whose practices have been systematic and effective, both in terms of their positive social and/or environmental impact as well as their actual or potential leadership role. The selected companies are of different sizes, and operate in different industries, and jointly employ more than 1,000 people. Our aim in selecting them was to convey the message that developed CSR strategies are possible and not only in the largest and wealthiest companies. Holcim Croatia is a cement-producing company with 300 employees, and an industrial tradition going back to socialist times. Hartmann Croatia produces packaging materials, and employs 180 people in a 30 year-old factory. Hauska & Partner is a strategic communications consultancy employing 15 people in Croatia, and is part of an international group that ensures national-level representation in its regional management structures. Each of these companies seems to demonstrate that a global vision of sustainability may be translated into a locally acceptable method of interaction both inside and outside an organization.

Case Study: Holcim Croatia – How green and friendly can cement, concrete, and aggregates be? www.holcim.hr Holcim Croatia runs one cement factory (former Koromačno cement factory, a traditionally important employer), 7 concrete factories, and 3 quarries, employing a total of 400 people. The Croatian company is a dynamic member of the Holcim Group, operating in 70 countries globally, and headquartered in Switzerland. Holcim is the global leader in sustainable business practices, as demonstrated by the fact that the corporation has been holding the number one position on the Dow Sustainability Index for three years running. The passage below describes Holcim’s sustainability results, as listed on the Dow Jones Sustainability Index web page. Holcim has held the leading position in the sector for three years due to its continued efforts at integrating sustainability principles into everyday operations. The company has shown remarkable results in the areas of environmental protection, climate strategies, and recycling strategies, all aimed at the reduction of carbon dioxide emissions through the development of new products and the promotion of alternative energy sources (utilizing waste materials as fuel). Holcim has improved its results in the area of health and safety as well and has committed to further improvements by launching the ‘Safety First!’ initiative, aimed at developing a more safety-oriented work culture. Furthermore, the development and maintenance of strong stakeholder relations is also seen as very important. 24 Source: www.sustainability-indexes.com/djsi_pdf/Bios07/Holcim_07.pdf

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The company uses a wide array of methods for reaching the stakeholders, for assessing local needs in the localities it operates in, and to promote community engagement and foster educational, cultural, and social development in those communities. In Croatia, these facts are possibly not widely known, outside the competition affiliated to Croatian Association of Cement Producers, within the context of which Holcim has promoted the Cement Industry’s Sustainability Charter, developed under the auspices of the World Business Council for Sustainable Development. Other parties well informed on Holcim’s practices can be found within the Croatian Business Council for Sustainable Development, where Holcim’s usage of old tyres as alternative fuel, paired with high-efficiency air filters, is often cited as one of the best practices. However, should you visit Koromačno and neighbouring communities in the County of Istria, and ask about Holcim, you are almost certain to hear from the citizens, local authorities, and activists alike, a story of a company making extra efforts to ensure that children can swim in the sea right next to their facilities, and is always open for good partnering ideas aimed at community development. Community partnerships are key for the transfer of global strategic dedication to sustainable development. Through constant consultations and joint project planning with local authorities, schools, and NGOs, Holcim Croatia has gone beyond the role of corporate donor, and has become an important factor in community mobilization and development. Unsurprisingly, Holcim won the first national award for corporate philanthropy in May, 2007, for the best corporate giving programme. According to the President of the Board: “This award is a recognition of our efforts to direct our business towards sustainable development and Holcim will continue its activities in order to support the development of Croatia”. Holcim’s principles for awarding sponsorships and donations, as published in the company’s web page, highlight the partnership principle, and self-sustainable nature of long-term projects in the areas of environmental protection, sustainable building, education, and community development. Geographically, the programme focuses on all communities surrounding Holcim’s plants in Istria, Rijeka, Zadar, and North-West Croatia. These principles are unique in the Croatian context for their specific inclusion of anti-discrimination clauses (prohibiting the company from sponsoring anyone involved in discrimination based on race, ethnicity, gender, religion, etc.), and for the requirement for the larger organizations to transfer their knowledge to smaller community groups. Holcim’s employees are actively involved in community giving programmes, either by identifying potential projects in their communities, or by directly lending professional and organizational assistance in the projects supported by Holcim. Several examples of Holcim’s community engagement are listed below, demonstrating how a company may represent a responsible and proactive factor in community development, environmental protection and technological innovation, and not a mere source of finances .

▪▪ In 2003, when asked to provide financial support to the near-by Liburna donkey reservation, Holcim employees worked with the reservation to develop a sustainable marketing plan for the institution. The plan encompassed organized visits by grade-school children from all over the region, resulting in more than 6,000 visits. ▪▪ In 2007, Holcim signed a five-year agreement with the Faculty of Architecture and Faculty of Civil Engineering, University of Zagreb, worth over one million Kuna, providing the students with the opportunity to hear foreign guest-lecturers, attend new curricula lectures, attain mentorships for their honours theses in the area of sustainable building, and win the award for the best thesis, given out by Holcim. ▪▪ Twice a year, Holcim Croatia organize a day-long presentation and evaluation workshop for their partner community organizations, where experiences are shared, skills developed, and achievements discussed. One of the local organizations always hosts the event, thus strengthening their local network. ▪▪ In 2006, Holcim initiated the first biological revitalization of a quarry in Croatia, which runs simultaneously with the exploitation of the same quarry, Očura. In 2007, in partnership with relevant expert institutions, testing began on finding the most appropriate plants for this purpose. ▪▪ In Koromačno, company’s Croatian headquarters, where they had originally purchased an existing local cement factory, Holcim has been serving as a catalyst for citizen’s involvement in community affairs, in ways not generally expected of a foreign corporation. So-called Citizens’ Hours are being organized in the community hall, with a series of burning issues on the agenda. Holcim also publishes the quarterly community newsletter Ča je novega? (What’s on? – in local dialect), which is distributed to all citizens with the assistance of the local fishing club. ▪▪ In the industrial town of Labin, Holcim is supporting an innovative project aimed at transforming an historic mine into an underground tourist resort, implemented by an alliance of architects and cultural activists. ▪▪ All Holcim facilities host annual open-doors days, when they organize educational tours for students, and when citizens have an opportunity to have all their questions regarding Holcim’s operations answered. The comments made by Holcim Croatia’s Director for Industrial Ecology indicate the company’s dedication to dialogue as the most valuable investment in sustainability: “Personally, holding a pioneering role, and being given a chance to set the sustainability trend as a key business principle is extremely inspiring to me. The fact that our international executive board, and our parent company, trust the judgement of local managers in determining which projects are sustainable is an excellent thing. The global cement industry could not have avoided being involved in the sustainability movement by virtue of the fact that it contributes to pollution to a significant degree. At the same time, cement, aggregates, and concrete are indispensable in building, and therefore in development. Consequently,

Case Study: Sustainability principles deployed – Hartmann and SA 8000 www.hartmann.dk Hartmann Croatia is part of the Danish-owned, globally expanding company, Brødrene Hartmann, which specializes in the development, production and sale of moulded-fibre packaging. The company has existed in Croatia for over 30 years and was bought by its Danish long-term business partner in 1999. There is one manufacturing facility, located in Koprivnica. Hartmann Croatia’s workforce includes 14 managers and 166 production employees, who are responsible for 12% of total production and 10% of the total sales of Hartmann Group in Europe, serving the entire Hartmann’s market of Southeastern Europe and recently, Turkey. Hartmann Croatia is therefore strongly export-oriented (90% of sales are exported), with annual income revenue in 2006 at the level of 12.6M Euro and a profit of 8%. Hartmann is clearly competitive in the regional and European market, which is also evident by Hartmann’s inclusion among the 500 most profitable Croatian companies in 2005. Hartmann Croatia is an example of a company that is clearly and consistently committed to sustainable development, through its adherence to the Hartmann Sustainability Principles which are in line with the Global Compact to which it has been a signatory since 2003. It focuses on a safe and non-discriminatory workplace, prohibition of forced and child labour, promotion of workers’ self-organization, fair wages, anti-corruption and protection of the environment. These principles are integrated in the business strategy and management systems at the level of each specific business operation, including Hartmann Croatia, making a difference for every individual working for Hartmann. Hartmann’s global sustainability was awarded the European Commission’s Management Award for Sustainable Development in 2000, for its global lifecycle-based management model. In Croatia, Hartmann is an active promoter of sustainable development

through its membership in the Croatian Business Council for Sustainable Development, emerging Global Compact network in Croatia, Nordic Chamber of Commerce (committed to the promotion of Nordic business values – innovation, openness, responsibility and confidence) and the adoption of the Code of Business Ethics of the Croatian Chamber of Economy. Sustainable development as a strategic business is reflected in Hartmann’s mission “to provide this packaging with the minimum of resources and with the maximum value to our customers our shareholders and our employees”. In practise, this means that Hartmann’s main product – molded micro-fibre packaging for food, consumer electronics, hospital equipment etc – is made from renewable materials, primarily paper, with a controlled use of energy and water, making Hartmann the only European producer of customized, environmentally-friendly sustainable packaging. STEP (Sustainability Tool for Entire Product Chain) is Hartmann’s management model, clearly defining five progressive phases in performing environmental and human resources and safety due diligence, by means of specific tools related to production processes, people management, supply-chain management and public disclosure. In line with its management model, since 2000, Hartmann Croatia has prepared its own, triple-bottom line annual reports on sustainability, which makes it a unique medium-sized company with a continued sustainability reporting practice in Croatia. Even though the report does not follow GRI principles, it contains relevant information for preparing Communication on Progress for Global Compact (Sustainability Report 2005 is available at www.hrpsor.hr). Regarding STEP@Environment, Hartmann Croatia has achieved the STEP 4 level, which included implementation of ISO 14001 (since 2004), an Environmentally Friendly label for all its products which are fully recycled, employee education on environmental standards, controlled use of less harmful chemicals, quality control of suppliers’goods. A life-cycle assessment (LCA) is integrated into business planning and the company’s activities, which includes collaborative relationships with Unija, Distripress and Netis in Croatia, which are at the same time Hartmann’s suppliers and partners in the disposal of Hartmann’s products. Hartmann’s supply chain management has a strong positive economic as well as environmental impact on local communities and Croatia as a whole, since 98% of all supplies – mostly used paper, as well chemicals and transport services - come from Croatia. Regarding STEP@Human, Hartmann Croatia has completed STEP 4, after the company certified OHSAS in 2005 and, most importantly, SA 8000 in 2006, and is the first company in the Hartmann group, as well as in Croatia, to obtain this norm. The remaining task for achieving STEP 5 is the continuous improvement of already outstanding standards of workplace safety, labour rights protection, workers’ participation. As the very first company in Croatia certified in SA 8000 (and still only one of two), Hartmann pays close attention to employee engagement related to CSR. The following are some examples from Hartmann’s practice. All employees are introduced into the company’s sustainability strategy, by means of a booklet entitled ‘Protecting Values’, which describes Hartmann’s, values,

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our primary responsibility is to do no harm to the local communities in which we operate, and to invest into technological innovation in order for our products to be as environmentally friendly as possible. The benefits of this approach are glaringly evident, and go beyond the so-called ‘licence to operate’. It gives us a competitive advantage in the market and allows us to get feedback from a whole series of stakeholders in an instant. I am the one being called by concerned citizens when they read something about Holcim in the papers. I participate in public forums, and in events organized by environmental groups frequently, even when I find myself the only representative of the business sector there, and exposed to criticism completely unrelated to my company. Our open-doors policy pays out, as it is the only way for us to show that we in fact do practise what we preach. I daresay that in some cases, such as revitalization of the Očura quarry, Holcim finds itself one step ahead of the public and non-profit sector.”

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sustainability principles and commitments to international human rights conventions (including CEDAW and the UN Convention on the Rights of the Child). The communication protocol with employees and complaint procedures are also described, including independent biannual employee satisfaction surveys that result in action plans for each department and manufacturing unit. There is an employees’ representative responsible for monitoring the implementation of SA 8000 norm, who collects and reacts upon the employees’ complaints related to the violations of SA 8000 through open-door communication with management. Hartmann currently has no systematic programme of corporate philanthropy; however, through local community engagement it stimulates environmental awareness and recycling among citizens, especially elementary schools. In partnership with its supplier Unija, each year Hartmann organizes a day visit to its factory and the town of Koprivnica for the school that collects the largest quantity of used paper. In addition, Hartmann donates its products to local schools and financially supports art and culture in the community. The benefits of such thorough deployment of sustainability principles and corporate social responsibility are seen as directly linked to the overall success of the company. As emphasized by Hartmann’s financial director during the interview, the application of quality management systems such as ISO 9001 enabled them to double the level of productivity, environmentally sound practices helped them to reduce the water consumption by more than half, and the company’s image of the employer of choice, that enables them to attract a highly educated and committed workforce, was only enhanced by the introduction of SA8000.

Case study: Hauska & Partner International Communications (H&P): “We cannot succeed if we failed to understand each other perfectly” www.hauska.com/hr

Hauska & Partner Croatia represents an unusual, but a very inspirational example of a small international consulting company (founded by Austrian public relations expert Leo Hauska), which invested significant time and intellectual effort into developing a comprehensive corporate responsibility strategy, in order to create a strong link between its core business of stakeholder relations management and strategic consultancy, with its corporate culture, management practices, and company’s positioning in the professional and general public. The H&P Group consists of largely independent local consulting teams in Austria, Croatia, Serbia, Czech Republic, and Latvia, all represented in the management board of the Group. The company has a total of 40 employees, responsible for 3.1 million Euro turnover in 2007.

The development of H&P’s CSR strategy has taken place simultaneously over the past four years in different teams, as the result of interactions with their specific business environments in each of the countries. In Croatia, H&P joined the organizing committee of the first national CSR conference in October of 2004, and contributed its expertise in public and media relations, as well as its business contacts, particularly with the Croatian Association of Exporters whom they actively supported. The increasing engagement of the H&P Group with various business initiatives and responsible business fora in Austria, Croatia, and Czech Republic, coincided with the emergence of their new business strategy which they took from the traditional concept of public relations towards the complex consulting services of strategic communications management, crisis management, internal relations, and relations with public institutions, media, and special stakeholders, requiring permanent learning and innovation from H&P’s employees. For this reason, integrating corporate responsibility into the business strategy and culture represented an answer to the key challenges for the company – ensuring organizational cohesion, recognizing cultural diversity as a competitive advantage, and fostering professional excellence through permanent learning and sharing of often “hybrid” skills and knowledge. All of the above-represented preconditions for positioning the company in the strategic communications market, including CSR-related consultancies, added to the reputation of the company. One of H&P’s consultants in Croatia, and the director of corporate responsibility for the H&P Group, claims that the synergy of business activities and social responsibility represented a precondition for the sustainable development of the Group itself. This is the only way in which the company may be successful in a dynamic and challenging business environment “creating value not only for our clients and partners, but also for our business community and society as a whole, by promoting the best practice examples”. From the very beginning, H&P viewed CSR as an opportunity for organizational learning, for employees, clients, and business partners alike. In 2005, the H&P Group developed a document on their corporate values through a participative process, which in turn led to the development of the Code of Business Practices later that year. In the following year, they established the corporate responsibility working group, consisting of board members, and key CSR people from each of the national teams. In the context of preparating the first social report, dedicated to workplace issues, the extensive process of self-evaluation was implemented, and has, in line with GRI guidelines, included surveys and in-depth discussions on the organizational climate and employee relations, as well as an analysis of possible future actions, prioritized by their level of organizational risk. The report has been very well received in Croatia, having been presented in March, 2007 at the round table named Beyond Traditional Reporting, providing space for lively and frank discussion on benefits and challenges of CSR among business leaders, journalists, and economic experts. The report documents the commitment of the H&P Group to progress towards sustainability, in line with their organizational capacities. For

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this reason, the company decided to utilize the report as an internal tool for the analysis of achievements, opportunities, and challenges related to individual areas of responsible business and sustainability, and to use it as a management tool in bridging strategic and operational levels of business practices, with a view to integrating corporate responsibility into the overall management system. In 2006, the Croatian team decided to go one step further, and, while developing the responsible workplace practices report, decided to initiate certification according to SA8000 standard. In this process, and in collaboration with labour experts, the Rules of Procedure document was developed, and aligned fully with ILO conventions. The organizational structure for monitoring the implementation of the standard was also established, and is convened quarterly with representatives of employees and management. A special procedure for safeguarding the dignity of employees and for ensuring adherence to the Professional Code has been put in place. The views of employees and management are shared regularly, as a part of formal consultations in the process of work satisfaction assessment, and at annual meetings called The Academy, following the World Café format, where contributions as given and recorded informally, in a relaxed atmosphere, and accompanied by background music. The commitment of the H&P Group to CSR is also evidenced by the fact that the management decided to allocate 60% of the time of one of the most experienced consultants from their Croatian team to CSR coordination within the national team, and the Group as a whole. She also serves as the Vice President of the CSR Association at the Croatian Chamber of Economy, as a volunteer. The evaluation of benefits stemming from the recognition of CSR as a key strategic direction for the company, listed below, albeit in a small consultancy team of 15 in their Croatian office, may serve as an encouragement to other small companies, especially the ones that are dependent on client satisfaction, and consequently on the creativity and loyalty of their employees, to chart their own route towards sustainability. “The application of responsible business principles in our business operations has qualified us for the provision of substantive and comprehensive advice to our clients in their own CSR projects. Corporate social responsibility has given us a solid platform for true dialogue with a whole series of stakeholders. This means that we can expect from them, even if they are our competitors, honest feedback on our work, and on principal trends in society, that we can understand their expectations better and adjust our business strategy accordingly, all in line with our vision, which is directed towards sustainable growth and development. However, the greatest gains are the internal ones, as we have managed to consolidate our procedures and management practices on the basis of jointly defined values and vision for the company, which brought about greater cohesion among the country teams. Finally, I would advise everybody, once they conceptualize and declare their commitment to sustainable development, to begin the implementation process with a healthy dose of humility – we are very aware of the fact that our credibility hinges solely on the measure in which we truly practise the principles we promote”, said H&P’s corporate responsibility director.

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Conclusion & recommendations

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The review of existing literature on CSR in Croatia, enriched by the analysis of publications, and interviews with over 70 companies and stakeholders, has unequivocally demonstrated the emergence of an enabling environment for CSR in Croatia, driven by leading business associations, supported by international development agencies and, to some degree, business media. Since 2004, when concerted promotion efforts began, CSR and sustainable development have become the topics of special focus for the Croatian Chamber of Economy, Croatian Association of Employers, and HR BCSD, celebrating its 10th anniversary in 2007. The high-profile launching of the Global Compact in early 2007 showed that there are prominent business leaders in Croatia who have realized that CSR is “a global train on which you should jump, in order not to miss it altogether”, as it has been described by one of the Croatian pioneer CSR practitioners. This research corroborates the findings of the first sectoral research on CSR in Croatia conducted in the autumn, 2003 (Bagić et al:2004), that large companies with a significant percentage of international ownership, that are publicly listed and export oriented, tend to have much greater motivation and resources to organize, monitor and publicize their CSR practices. They are concentrated in the manufacturing and processing industries, financial services and telecommunications, and are often among the top leaders in their sector. Among the medium-sized companies, CSR practices that go beyond unsystematic corporate giving and employee investments are rare exceptions. While the role models exist, there is a deep information, competence and profitability gap dividing these leaders from the vast majority of SMEs that make up almost 90% of all Croatian business entities, as well as hundreds of large companies that are primarily grappling with short-term survival issues. Nevertheless, just like with any other long-term systemic transformation, it is important that a significant number of the most visible and influential companies have embraced CSR as a vehicle of their own, as well as society’s progress, and are ready to create new opportunities for learning at the level of the entire sector. CSR practices in Croatia are relatively well developed and rather frequent in the following three areas – workplace quality and safety; consumer satisfaction; environmental protection; and community investments and partnerships. The drivers for these practices include: ▪▪ Legal compliance (high labour standards, including health and safety, tradition of collective bargaining; rising environmental standards especially in the context of EU integration); ▪▪ High demand for a managerial and specialist workforce, the profiles not adequately supplied by the formal education system; ▪▪ Competitiveness of products and services in respect to consumers’ basic demands for quality and safety; ▪▪ Tradition of corporate donations as well as high visibility of such actions in the context of decreased social standards and ability of the state to provide for a variety of communal and social needs. ▪▪ Export orientation requiring introduction and certification of quality management systems.

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▪▪ CONCLUSION AND RECOMMENDATIONS

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CSR practices, which are much less frequent or developed, relate to corporate governance procedures, the integration of CSR in risk analysis and overall business strategy development, supply-chain management and socially responsible investing. The lack of such practices is largely dependent on the absence or weakness of particular external drivers, even though there are prospects for their growing importance in the upcoming years: ▪▪ The Consumer Protection Act was adopted only in 2003, and the prescribed structure of local consumer councils has still not been consolidated. While there are only two national consumer organizations, primarily dealing with basic violations of consumer rights such as monopolistic price-setting, they do not engage in the promotion of conscientious consumption; ▪▪ Parallel to the EU accession process, since early 2004, the Croatian capital market is in the stage of intense growth, with prospects of consolidation over the upcoming couple of years, both in terms of actual market capitalization as well as in terms of enhanced quality and transparency of corporate governance; ▪▪ A systematic approach to business strategy development and management is still limited to the thin layer of leading companies. Unlike three years ago, interested companies can now access several resource websites, enrol in education modules on CSR and corporate governance, download CSR development related manuals or just call up one of the business associations or support organizations for advice. Sector- based CSR initiatives are also underway. Indeed, in the economy that is still transiting from the rule of force and favours in the 1990’s to the rule of law and the prospects of EU integration, CSR has served as a rare business area where ‘coopetition’ is cultivated, long before most of its practitioners start using this new buzzword. The situation was similar three years ago, when we conducted the first overview of CSR practices in Croatia and discovered that many companies had been implementing the CSR practices for decades before they stared naming it in a way that corresponded with the trend in global economies. CSR as a platform for cooperation is also evidenced by the growing partnerships between the business sector and civil society organizations, inventing new channels for systematic and change-oriented corporate support for community development, environmental protection, education, etc. The recent increase of transparent donation programmes has been influenced by consultations with NGOs and the sharing of best practices in corporate philanthropy among the companies. The respect for local cross-sector dynamics and the context-specific learning pace has been the success formula of CSR funding and TA support provided by different international and supranational organizations and foundations. Flexible and responsive support by external actors, especially in the initial phases, can help catalyze and solidify local collaboration, leading to its self-financing, as was the case with the translation and promotion of the Global Reporting Initiative, CSR education modules or the project of the Croatian Association of Banks.

The academic community is also increasingly oriented towards the creation of applicable knowledge about CSR, through research projects and education programmes that reflect the strategic needs of the business sector, such as the enhancement of corporate governance and exploration of correlation between competitiveness and corporate responsibility. Courses in business ethics and CSR appear more often in economics and management university programmes of different public and private institutions, with potential positive effect on the future generations of business leaders and entrepreneurs. It is also encouraging that a growing number of managers are reflecting upon their CSR practices as part of their graduate research projects. It is apparent that the current drivers for CSR in Croatia are primarily internal, stemming from the companies’ assessments of long-term opportunities and risks, related to productivity, efficiency, market integration and establishing positive relationships with its stakeholders. External drivers, other than those promoted within the business sector and associated stakeholders, are much weaker. While the business media are increasingly reporting on CSR, a general lack of investigative journalists - hindered by the commercial interests of media owners, driven by media consumers’ preferences and profits from advertising - results in a lack of in-depth, more sophisticated coverage of CSR issues and scrutiny of the published CSR reports. In that respect, impacting editorial policies by means of education and partnership projects, as well as enhancing opportunities for independent media projects will be key in the future. Watchdog initiatives undertaken by NGOs and trade-unions are developing more slowly, due to a lack of organizational capacities for consistent, evidence-based monitoring, beyond the periodic focus on outstandingly problematic cases of environmental and human harm. In that respect, mobilizing Croatian citizens, especially the urban middle class, to engage in socially conscious consumption and direct funding support to watchdog organizations is a potentially valuable, untapped resource. The striking predominance of non-state actors in CSR promotion is, on the one hand, a guarantee that socially responsible business values and practices are being rooted and developed in a structured, voluntary manner. On the other hand, the apparent lack of systematic incentives provided by the Government, paralleled by the dragged-out process of the establishment of the rule of law and transparency, is hindering a more extensive adoption of CSR beyond the circle of strategically oriented, mostly profitable companies. In other words, unbiased and consistent sanctions of illegal corporate actions are needed as much, if not even more, than tax incentives, awards and TA funding programmes to get companies which are not breaking the law to engage in responsible performance beyond legal requirements. The upcoming two years of intense EU accession process will be instrumental to enhancing the efficiency of Government actions supportive of CSR that should complement the continuing efforts of the business sector, academia and civil society.

The development of CSR rests upon the interdependence of external and internal drivers for CSR, which combine the identification of opportunities as well as the acknowledgment of risks to long-term business competitiveness, increasingly contingent on trusting and stable relationships with a range of stakeholders. While a conducive environment for CSR in Croatia is clearly emerging, there is a need to strengthen Government efforts and external drivers, primarily media coverage and independent monitoring. There is also a need to continue supporting the initiatives of the business sector, civil society and academia that are underway or have been conceptualized. The exchange of best practices with counterpart organizations in other European countries that have had different traditions and scope of CSR engagement can be most beneficial for the accelerated expansion and elaboration of the Croatian efforts at the sector and individual company level. The major challenge of ensuring a critical mass of CSR-aware companies, including SMEs, may thus be overcome in a reasonable timeframe. The key areas of improvement of CSR practices at company level relate to the integration of CSR into overall business strategies, which need to be deployed in a systematic manner, and be responsive to different stakeholders’ interests and needs. At this level, it is essential to link activities connected to CSR with the issue of the company’s competitiveness: ▪▪ More attention should be paid to company development strategies. Also, the way in which CSR systems and activities may contribute to achieving strategic goals should be considered. ▪▪ Within strategy development, it is necessary to consider which groups are vital to the company in achieving those goals (stakeholder analysis); to initiate systematic dialogue with them; and to formulate CSR programmes accordingly. ▪▪ It is particularly important to manage the value chain responsibly, which includes transfer of knowledge, technologies and skills from large enterprises to SMEs, and encourages adoption of responsible practices and standards on their part. ▪▪ It is necessary to define CSR not only as a part of corporate vision and mission, but also as explicit and measurable business goals which are systematically managed. Results in this area should become a part of the performance evaluation system of all employees, and particularly the management, teams and operational units. ▪▪ It is necessary to consider the possibility of instituting CSR within a company, i.e. formalizing typically informal collaborative relations between departments; and establishing institutional relationships among the management in charge of CSR and relevant department managers. ▪▪ CSR programmes and results should be reported on. It may start as a note on the website and in the annual report, and develop into regular and standardized reporting based on international guidelines, depending on the company’s capacity

Further strengthening the capacities of business associations that are engaged in the promotion and advocacy of CSR and sustainable development may be achieved in collaboration with international organizations through: ▪▪ Defining, documenting, and promoting responsible business practices standards, as well as rewarding the best Croatian practices; ▪▪ Authentic and systematic implementation of self-regulatory mechanisms (codes of ethics, code of corporate governance, anti-corruption measures) at the business associations level; ▪▪ Promoting responsible supply chain management by reporting on the best practice, establishing specific guidelines and creating educational packages; ▪▪ Encouraging and promoting sector responsible management initiatives in a similar way; ▪▪ Ongoing promotion to business associations and international agencies’ reports (UNDP – Global Compact) with a possible award for the best annual report on CSR; ▪▪ Promoting the practice of independent verification of corporate reports on CSR through education and establishing a Croatian experts database; ▪▪ Developing methods and systems of technical support to SMEs on introducing CSR; ▪▪ Spreading knowledge, skills and information on this topic in all parts of Croatia, in cooperation with business associations’ local branches; ▪▪ Increasing the number of resources available on the Internet, particularly manuals and toolkits; ▪▪ Ensuring sustainability, public impact, and companies’ participation in the ongoing Croatian CSR benchmarking project, with the Croatian Chamber of Economy and Croatian Business Council for Sustainable Development as project owners; ▪▪ Joint actions towards the Government aimed at establishing a wider and more efficient consulting process to create public policies related to sustainable development and business community interests; ▪▪ Encouraging and financing Croatian scientists’ research on CSR, and disseminating the results.

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Recommendations for Accelerated Development of CSR in Croatia

Enhancing CSR awareness among the media may result in a higher quality and greater scope of information on corporate social responsibility being available to the general public. Funding support by the Government and international development programmes is suggested for the following activities: ▪▪ Regular inclusion of journalists and editors in CSR education programmes organized by business associations ▪▪ Integration of CSR contents in formal journalist education and in regular informal education organized by Croatian Association of Journalists and other professional associations; ▪▪ Exchange of best practices with leading European business media; 69

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▪▪ Reaching agreement on unambiguous guidelines distinguishing paid/sponsored articles from the journalistic articles; ▪▪ Media companies promoting the idea of reporting on their own corporate social responsibility. Further expansion of local academic engagement in the research and promotion of CSR, enabled by adequate funding from the public and private sector and the EU, will definitely guarantee the timely creation and sharing of needed, locally relevant knowledge on CSR drivers, obstacles and innovative actions: ▪▪ Enhancing accessibility of local CSR research, by creating a CSR scientific bibliography; ▪▪ Accessibility of funding for academic projects on CSR (research, conferences, publications); ▪▪ Fostering international cooperation among academic institutions on CSR; ▪▪ Regular engagement of academics in applied research projects initiated by the business sector and NGOs,( e.g. benchmarking, assurance, independent monitoring); ▪▪ Fostering cooperation of academic institutions, student organizations and the business sector (individual companies or business associations) on CSR programme development and reporting (e.g. in the scope of internship programmes or service learning); ▪▪ Further integration of CSR related topics into formal education, i.e. all relevant undergraduate and graduate curricula; ▪▪ CSR related topics should be integrated into earlier phases of education. Strengthening the complementary role of the Government in CSR promotion is of the utmost importance, yet, it can only work if it is based on a partnership principle with the business sector. The following actions are suggested: ▪▪ Setting up a regulatory framework that would motivate companies to introduce responsible business practices; ▪▪ Institutionalizing responsibility for CSR promotion within the Government and/or public administration; ▪▪ Reinforcing the role of social dialogue and social partners in reaching not only legislative solutions, but also public policies related to sustainable development; ▪▪ Practically promoting the European partnership concept, and adopting the obligation and practice of consulting the non-governmental sector, including the business sector, when creating public polices related to sustainable development. The creation of a national consulting practice code is one possibility; ▪▪ Analysing the effectiveness of the Profit Tax Act stipulation on tax relief of up to 2% of gross income, for donations;

▪▪ Setting up an efficient and comprehensive data collection system on the use of norms and environmental protection and social responsibility labels, and promoting their adoption; ▪▪ Creating guidelines for including CSR standards into a criteria for public procurement procedures; ▪▪ Educating public administration employees and officials on the basic concepts of sustainable development. Strengthening the capacity of civil society organizations to engage in partnerships with the business sector and to act as credible and constructive watchdog organizations, entails a variety of cost-effective investments on the part of donor organizations and the Government: ▪▪ Implementing education programmes dealing with socially responsible buying and consumption, and advertising the programmes to the general public; ▪▪ Increasing civil society organizations capacity for independent and systematic monitoring of corporate practices; ▪▪ Increasing civil society organizations capacity for cooperation with the business sector in areas of common interest; ▪▪ Fostering and rewarding successful cases of inter-sector partnerships focused on community development; ▪▪ Exchanging regional and international best practices regarding CSO involvement in CSR.

Appendixes

ACC E L E R AT I N G C S R P R AC T I C E S

Key CSR Related Events (December 2004 – May 2007)

Date

Event

Main Organizer(s)

ACC E L E R AT I N G C S R P R AC T I C E S

▪▪ APPENDIX 1 2007 May 24-26

7th International Conference on ’Enterprise in Transition’: Towards the Enhancement of Social Responsibility and Business Ethics: Modern Theory And Practice

Faculty of Economics of the University of Split (www.efst.hr/eitconf/topics.php)

May 14-17

8th Conference on Quality in Croatia: ’Socially Responsible Business Practice’

Croatian Quality Society (http://kvaliteta.inet.hr)

April 18-20

Seminar on entrepreneurial philanthropy, held in Zadar

IMPACT, European Centre for International Cooperation, UNDP, NESsT and National Foundation for Civil Society Development

March 23

International conference ‘Moral Capitalism—Why Not?’

Varaždin County, Croatian Association of Managers (HUM-CROMA) and Caux Round Table (CRT) (www.croma.hr)

March 20

The Global Compact Launch Ceremony

UNDP (www.drustvena-odgovornost.undp.hr)

March 6

Presentation of the GRI 3 and a one-day expert workshop on sustainability reporting

Croatian Business Council for Sustainable Development (HR BCSD), Croatian Chamber of Economy, and GRI (www.hrpsor.hr)

February / March

Global Compact / CSR workshops

UNDP, in collaboration with Croatian Chamber of Economy, Croatian Employers’ Association, HR BSCD, AmCham, BCBN, and Nordic Chamber

2006 October 19

Conference on Community Investment: Practical Approaches for Businesses

Academy for Educational Development (AED), UNDP, the International Leaders Business Forum (IBLF), and the Croatian Chamber of Commerce - Community for Corporate Social Responsibility with financial support from the U.S. Agency for International Development (USAID) (www.aed.hr)

October 27-29

Education Modules on CSR —Training for Trainers

Association of Management Consultants (AMC), MAP Savjetovanja d.o.o., UNDP, Charles S. Mott Foundation (www.ups-amc.org)

October 20

Workshop on business ethics

UNDP, with Croatian Employers’ Association, Croatian Competitiveness Council, and IBLF

June-October

Three-month pilot of free workshops on managing personal finances for public

Croatian Banking Association (CBA), UNDP (www.hub.hr)

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January-December

TA to SMEs with focus on environmental protection in tourism.

Croatian Center for Cleaner Production

March 16

Conference on Best Good Governance Practices

MAP Savjetovanja and CSR Community of the Croatian Chamber of Economy (www.map.hr; www.business.hr/map.pdf)

March 10

Regional forum on CSR in SMEs in CEE

Croatian Ministry of Economy, Labour and Entrepreneurship (MELE) and UNIDO

February 23

GRI Guidelines Introduced at a Sneak Peek; presentation of the Croatian GRI2 translation

Croatian Business Council for Sustainable Development (HR BCSD) (www.hrpsor.hr/ upload/GRISmjernice_2002.pdf)

2005 November

Announcing the first 11 recipients of the Employer Partner Certificate

Selectio d.o.o., Croatian Association of Employers (HUP) and UNDP (www.poslodavacpartner.org)

October 5-7

Workshop on CSR at the National Conference on Social Entrepreneurship

Small and Medium Entrepreneurs’ Association (UMIS-SMEA)

September 28-30

Round table on CSR at the National Conference of HUOJ

Croatian Association for Public Relations (HUOJ) (www.huoj.hr)

September 27-30

Round table on intersectoral partnerships for environmental protection at EMAT Fair

Dolphin Dream Society and UNDP, with Zagreb Fair (www.zv.hr/sajmovi/033/index_en.htm)

December

Publishing ‘Winning with Integrity’, a CSR handbook for companies

UNDP

July

Training on CSR for Croatian consultants and managers (Torino, Italy)

UNDP, with ILO, UNSSC, and IBLF

May 23

CSR Community within Croatian Chamber of Economy established; Code of Business Ethics adopted

Croatian Chamber of Economy

May 19

Seminar on «Social Responsibility – Trends in Croatia and Abroad»

Zagrebačka banka (ZABA), International Center for Education of Journalists (ICEJ) (www.zaba. hr/info/abo/news/press/habo_press280.htm)

2004

December 8

National Conference on the Promotion of CSR: Agenda 2005

Institute of Economics and Konrad Adenauer Stiftung (www.poslovniforum.hr/agenda/ program_1.asp)

October 24-31

Study trip of a multisectoral group of CSR practitioners to the UK

AED/World Learning in cooperation with IBLF

May

2 workshops on intersectoral partnerships between the business and civil sectors at Brijuni islands

AED/World Learning, with IBLF

List of Researched Companies and Stakeholder Organizations

Name and positon of person(s) interviewed

Date

Branislav Bibić, Secretary General

20.03.2007

Company

Website

Research methods

AGENCIJA ZA KOMERCIJALNU DJELATNOST proizvodno, uslužno i trgovačko d.o.o.

www.akd.hr

Website review

Anamarija Company d.o.o. Sesvete

www.anamarija.hr

Website review

Atlantic Grupa

www.atlantic.hr

Website review Review of Prospectus 2006 Interview

AUTO-KREŠO d.o.o. za nabavu i prodaju autodijelova, unutarnju i vanjsku trgovinu na veliko i malo

www.autokreso.hr

Website review

Bina-Istra d.d.

www.bina-istra.hr

Website review

Centrometal d.o.o. Macinec

www.centrometal.hr

Website review

CHROMOS BOJE I LAKOVI, d.d.

www.chromos-bil.hr

Website review

CHROMOS-SVJETLOST, Tvornica boja i lakova, d.o.o.

www.chromos-svjetlost.hr

Website review

Dalekovod

www.dalekovod.hr

Website review Review of Annual Report 2005 Written response to interview guide

Nikolina Peribonio, CSR

26. 03. 2007.

Dukat d.d.

www.dukat.hr

Website review Review of Environmental Reports 1998 and 2003 Interview

Damir Brlek, Director of the Environmental Protection Department

28.03.2007

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▪▪ APPENDIX 2

03.05.2007.

ACC E L E R AT I N G C S R P R AC T I C E S

Đuro Đaković-Zavarene posude dioničko društvo

www.duro-dakovic.com

Website review Telephone contact

Josip Popović

03.05.2007.

Elektrokontakt

www.ekz.htnet.hr

Website review Interview

Ernest Lehotkai, Quality Assurance Manager

02.04.2007

FIMA

www2.fima.com

Website review Interview

Artur Gedike, Marketing and HR Executive Director

13.04.2007

Financijska agencija FINA

www.fina.hr

Website review Review of Annual Reports 2002-2005 Telephone and email contact

Franck d.d.

www.franck.hr

Website review

HGspot

www.hgspot.hr

Website review

Hrvatska lutrija

www.lutrija.hr

Website review Review of Annual Report 2005 Written response to interview guide

Areta Čuturaš, Executive Director for HR potentials Nora Cecić, Assistant to Executive Director for games

17.04.2007.

INA Industrija nafte d.d.

www.ina.hr

Website review Review of Social Reports and Environmental Reports 2003-05 Interview Telephone and email correspodnence

Svea Švel-Cerovečki, Sector of Strategic Planning and Business Development, Head of Working Group for Sustainable Development and CSR; Iva Jurković, Sector of Corporate Communications; Darko Limanović, Sector of Corporate Communications; Snježana Tabak, Sector for Human Resource Management;

11.04.2007

JANAF

www.janaf.hr

Website review Interview

Rikardo Marelić, Executive Secretary, Management Board Office

05.04.2007

Kerum d.o.o. Split

www.kerum.hr

Website review

Koka d.d. Varaždin

www.vindija.hr

Review of Prospectus 2003 and other information available at Zagreb Stock Exchange Telephone and email contact"

Končar Grupa

www.koncar.hr

Website review Review of Annual Report 2005 Interview Email correspondence

Renata Godek, Director of Corporate Communications; Smilja Hero, Head of Quality Management

21.03.2007

Konstruktor inženjering d.d. Split

www.konstruktor-split.hr

Website review Review of Annual Report 2005 and internal newsletters 2004-07 "

www.lim-mont.hr

Website review

M-SAN Grupa

www.msan.hr

Website review

NEXE Grupa

www.nexe.hr

Website review Review of Annual Report 2005 Interview

NINA COMMERCE društvo s ograničenom odgovornošću za trgovinu i usluge

www.elviton.hr

Website review

PBZ

www.pbz.hr

Plava Laguna

Krešimir Knežević, Management Systems Sector Director

05.04.2007

Website review Review of CSR Reports 2004 and 2005 and Corporate Governance Report 2005 Review of parent company Banco Intesa Sustainability Report 2005 Detailed written response to interview guide

Suzana Markotić Šilović, Senior Advisor for Public Relations, Office of Management for Corporate Communications

28.03.2007

www.plavalaguna.hr

Website review Review of Annual Report 2005 Interview

Loreto Radojković, Assistant Director; Vedran Banovac, Project Manager; Danira Račić, Director of the Sector for Economics and Finances

10.04.2007

Podravka d.d.

www.podravka.hr

Website review Review of Sustainability Report and Annual Report 2005 Interview Email correspondence

Matija Hlebar, CSR Reporting Coordinator, Department of Corporate Communications

19.03.2007

Strabag d.o.o.

www.strabag.hr

T - HT Grupa

www.t.ht.hr

Website review Review of Environmental Reports 2004 and 2005, and Annual Report 2005 Interview

Termocommerce d.o.

www.termocommerce.hr

Website review

VALAMAR (RIVIERA POREČ d.d.)

www.valamar.com

Website review Telephone and email correspondence

Marina Majić, PR specialist

VIRO

www.secerana.hr

Website review Review of Prospectus 2006 Interview

Ana Smoljo, Senior Consultant with Hauska&Partner International Communications, Media Contact for Viro

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LIM-MONT - d.o.o.

Melanija Bago, HR department Alemka Lisinski, Head of Corporative Communications Department , Miroslav Bijele, Assistant Director, Quality Assurance and Support Department, Ivan Mijačika, Director of Region 2-South

03.04.2007

21.03.2007

ACC E L E R AT I N G C S R P R AC T I C E S

Supplementary Sample Atlas

www.atlas.hr

Website review Interview

Željko Banović, Corporate Services Director

30.03.2007

Carlsberg

www.carslberg.hr

Website review Interview

Nina Butić, Public Relations

02.04.2007

Coca Cola Beverages Croatia

www.coca-colahbc.hr

Website review Review of Social Report 2003, Sustainability Report 2004, secondary literature Interview

Zoran Bogdanović, Country General Manager; Majda TafreVlahović, Director of Corporate Communication

10.04.2007

Croatia Airlines

www.croatiaairlines.hr

Website review Interviews

Ivan Mišetić, President and CEO; Ernest Nemet, Safety Manager Dubravka Turkalj, Sustainability Advisor

12.04.2007 02.05.2007.

Ericsson Nikola Tesla d.d.

www.ericsson.hr

Website review Review of Annual Report 2005, Global Sustainability Report 2005 and EFQM application for Recognized for Excellence award, 2002 Interview

Ivica Oslić, Company Quality Manager; Snježana Bahtijari, Communication Director

05.04.2007

Hartmann

www.hartmann.dk

Website review (global website with section on Croatia, local site under construction) Review of Sustainability Report 2004 Interview Review of company CSR booklet provided at the interview

Sanja Grotić, Head of Human Resources Department Dubravko Lakuš, Director of Finance

18.04.2007.

Hauska&Partners International

www.hauska.com/hr

Website review Review of Social (workplace) Report 2005 Attendance at roundtable where Social Report was promoted, March 13, 2007 Interview

Andreja Pavlović, Senior Consultant, Corporate Responsibility Director for Hauska&Partner Group

Holcim

www.holcim.hr

Website review Review of Sustainability Report 2004 Review of newsletter Ca je novega and company booklet on sustainability strategy Interview Email correspondence

Žarko Horvat, Director of Industrial Ecology

21.03.2007

www.hrt.hr

Website review Interview Review of ETNO guidelines on corporate responsibility, provided by interviewee

Nela Gudelj, Head of Educational Department; Ante Rončević, Assistant of the General Director

30.03.2007

Mercator

www.mercator.hr

Website review Interview

Jadranka Čulo Petrovčić

23.03.2007

Nestlé Adriatic d.o.o.

www.nestle.hr

Website review (local and global) Review of Global Environment Report 2000 Interview

Olivera Međugorac, Head of Corporate Affairs and Communications

23.03.2007

OTP Banka

www.otpbanka.hr

Website review Written response to interview guide

Danijela Omelić, Public Relations

04.04.2007

PLIVA Hrvatska d.o.o.

www.pliva.hr

Website review Review of Sustainability Reports 2002-2005 Interview

Sanja Fresl, Sustainable Development Coordinator, Department of Corporate Communications; Damir Šmida, Director of Health, Safety and Environment

28.03.2007

Zagrebačka banka (ZABA)

www.zaba.hr

Website review Review of Social Report 2004 Interview

Sandra Cvetko, CSR Reporting Coordinator, Director of Corporate and Market Communications

22.03.2007

ACC E L E R AT I N G C S R P R AC T I C E S

HRT

List of Interviewed Stakeholders Croatian Business Council for Sustainable Development

www.hrpsor.hr

Mirjana Matešić, Executive Director

16.03.2007

Croatian Chamber of Commerce CSR Community

www.hgk.hr

Ruđer Friganović, Head of Industry Sector; Snježana Bahtijari, CSR Community President; Andreja Pavlović, CSR Community VicePresident; Marko Gjeldum, CSR Community Secretary

11.04.2007

Croatian Employers AssociationCoordination for Sustainable Development

www.hup.hr

Maja Stanojević-Pokrovac, Coordination for SD leader; Mirjana Matešić, HR BCSD

30.03.2007

Croatian Standards Institute

www.hzn.hr

Stanka Miljković, Public Relations, Dragutin Funda, Director general

27.03.2007

ACC E L E R AT I N G C S R P R AC T I C E S

Department of Organization and Management, Economics Faculty, University of Zagreb

www.efzg.hr

Mislav Ante Omazić

03.05.2007

Det Norske Veritas Adriatica d.o.o.,

www.dnv.hr

Krešimir Paliska, Country Manager

22.03.2007

Island of Knowledge

www.otok-znanja.hr

Domagoj Račić, Corporate Governance and CSR reporting expert

15.04.2007

Vesna Roller, Editor at Poslovni dnevnik; Renata Ivanović, free-lance business journalist; Ratko Peter, Radio 101; Krešimir Sočković; Tomislav Cerovec, Croatian Radio; Milan Koštro, RTL Journalist; Tihomir Dokonal, Banka Magazine

26.03.2007.

Media representatives group interview

Ministry of Economy, Labour and Entrepreneurship

www.mingorp.hr

Ivana Halle, Head of Special Goods and Chemicals Management Department, Industry and Privatization Directorate, Focal Point for UNIDO Project

02.04.2007

NGOs—group interview

www.potrosac.hr www.zelena-akcija.hr

Ilija Rkman, President of Consumer Association 'Potrošač'; Toni Vidan, Green Action, President of the Civil Society Council; Vesna Kesić, NGO activist and external member of the Parliamentary Committee on Human Rights and Ethnic Minorities

26.03.2007

Nordic Chamber of Commerce in Croatia

www.nordicchamber.hr

Jasmina Zečirević, Executive Director

26.03.2007.

Office for Social Partnership

www.socijalnopartnerstvo.hr

Vitomir Begović, Head of the Office; Dubravka Matić, Advisor on Economic-Social Policies

19.03.2007

www.sssh.hr www.glas.hr www.nhs.hr

Tomislav Kiš, General Secretary of Novi Sindikat; Zdenka Gizdić, President of Matica, Croatia's public service union; Ana Miličević-Pezelj, Union of Autonomous Trade Unions of Croatia, Head of Organization, Education and Publishing Department; Luka Benko, Legal Advisor Glas.Hr, Marijan Sokačić, independent Croatian unions, Coordinator for NGO Cooperation

26.03.2007.

Zagreb School of Economics and Management

www.zsem.hr

Mirna Koričan, lecturer and CSR Researcher - Zagreb School of Economics and Management

03.05.2007

ACC E L E R AT I N G C S R P R AC T I C E S

Trade Unions—group interview

ACC E L E R AT I N G C S R P R AC T I C E S

Definition of Ratings According to Metodology by IET

Strategy

Governance

- No/little evidence: there is no specific strategy for managing CSR risks and opportunities; there are no guidelines, toolkits and policies related to CSR; there is no specific budget for CSR activities.

- No/little evidence: there are no policies related to transparency, accountability, or CSR issues; there is no executive/manager responsible for CSR issues; CSR does not appear on Board agenda.

- On the way: there is some evidence of a strategy for managing CSR risks and opportunities but the CSR programme does not/partly supports the strategic goals of the company; there is a budget allocation for CSR activities and CSR communication.

- On the way: there is an executive/manager responsible for CSR issues in the company, but reporting to Board on CSR is ad hoc, not required nor regular; collaboration between departments on CSR issues is not expected.

- Good practice: there is a specific strategy for managing CSR risks and opportunities; the CSR programme supports the strategic goals of the company; CSR has been taken into consideration as a tool for the achievement of strategic goals; there are toolkits and guidelines that help implement CSR as part of the business strategy.

- Good practice: there is a named individual accountable for CSR issues at the board level/ senior management; there are regular reports to the Board on CSR; there are policies to promote the transparency and accountability of the company.

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â&#x2013;Şâ&#x2013;Ş APPENDIX 3

Performance Management Stakeholder Engagement - No/little evidence: there is no/very limited interaction with stakeholders, stakeholders are not clearly defined, stakeholder relations are not managed. - On the way: there is ad hoc interaction with stakeholders, no regular stakeholder dialogue on CSR, but company reacts to concerns on CSR; the company feels pressure from stakeholders, but stakeholder priorities are not identified. - Good practice: there are existing processes for managing stakeholder relations and conducting stakeholder dialogue; stakeholders opinions and issues raised are prioritised and are taken into account in the business strategy.

- No/little evidence: there are no management systems relevant to CSR; performance improvements on CSR issues are not quantified; there are no set/specific goals, objectives and targets to drive improvement; CSR issues are not managed in supplier relations. - On the way: there are several management systems that are relevant to CSR; there is some quantification of performance improvements on CSR issues. - Good practice: there are management systems that are relevant to CSR; performance improvements on CSR issues are quantified; there are set/specific goals, objectives, targets to drive improvement; CSR issues are managed in the supplier relations; environmental, social or fair-trade labels are used on products.

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Public Disclosure - No/little evidence: no/very limited information in the public domain (report or web), beyond legal requirements. - On the way: ad hoc information on CSR in public domain; measurement systems are being set up to structure information on CSR performance - Good practice: structured/standardized information on CSR & related policies, performance in the public domain

Assurance - No/little evidence: there has never been any assurance process by an independent organization at the company. - On the way: an assurance process by an independent organization is planned or being prepared/indicated at the company. - Good practice: CSR/SD/Environmental Report has been assured by an independent organisation.

Bibliography Note: all websites were accessed between March 8 and May 8, 2007

Referenced literature: Bagić, Aida, Škrabalo, Marina, and Narančić, Lana. An Overview of Corporate Social Responsibility in Croatia [Pregled društvene odgovornosti poduzeća u Hrvatskoj]. Zagreb: AED, 2004, 2006. Available at: http://www.aed.hr/hr/dokumenti/200403_CSRreport.pdf (Croatian, 2004); http://www.aed.hr/hr/dokumenti/CSR_Report_2006.pdf (Croatian, 2006); http://www.iblf.org/docs/CSRinCroatia.pdf (English, 2004) Bajuk, Jože, Cvijanović, Vladimir, Dadić, Tatjana, Račić, Domagoj and Melita Veršić Marušić. Korporacijsko upravljanje u javnim dioničkim društvima u Republici Hrvatskoj [Corporate Governance in Public Joint Stock Companies in the Republic of Croatia]. March 2005. Available at: http://www. vse.hr/edukacija/korporacijsko-upravljanje.pdf Barbić Jakša, Čolaković, Esad, Parać Branko and Josip Šaban. Nadzorni odbori – vodič kroz sustav korporativnog upravljanja, Zagreb:CROMA, 2006 Bežovan, Gojko, Siniša Zrinščak i Marina Vugec “Civilno društvo u procesu stjecanja povjerenja u Hrvatskoj i izgradnje partnerstva s državom i drugim dionicima [Civil Society in Croatia in the Process of Building Trust and Partnership with State and Other Stakeholders] /Civil Society Index Report/ “: CERANEO and CIVICUS, 2005. Čolaković, Esad. Menadžerski ugovori – modeli, savjeti i prakse. 2nd edition. Zagreb: HUM-CROMA. 2006 Državni ured za reviziju [State Audit Office]. “Izvješće o radu na reviziji pretvorbe i privatizacije [Report on Privatization Audit]”, 2004. Available at: www.revizija.hr/hr/izvjesce/revizije-pretvorbe-i-privatizacije Eterović Heidi, Kurešević Ela and Andreja Kocijan (eds.) Časno do pobjede. Priručnik za društveno odgovorno poslovanje. [Winning with Integrity. Handbook on Corporate Responsibility] UNDP, 2005. Available at: www.drustvena-odgovornost.undp.hr

European Commission. “Croatia 2006 Progress Report” {Com(2006) 649 Final}. Brussels. 2006 Available at: http://ec.europa.eu/enlargement/ pdf/key_documents/2006/nov/hr_sec_1385_en.pdf

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Global Reporting Initiatives [Globalna inicijativa za izvješćivanje]. Smjernice za izvještavanje o održivosti 2002. Zagreb, 2006. Available at: www.hrpsor.hr/upload/GRISmjernice_2002.pdf Grčar, Ivica and Hrvoje Mateljić. “Tvrtke moraju sastavljati čak tri različita financijska izvješća” [“Companies are Obliged to Publish Three Different Financial Reports”]. Lider poslovni tjednik. Zagreb: April 6, 2007. pp. 12-13 Hrvatska Agenda 2005 za odgovorno poslovanje [Croatian Agenda 2005 for Responsible Business Practice].”Promicanje društveno odgovornog poslovanja u Hrvatskoj: Agenda za 2005. godinu - program konferencije, prijedlog inicijativa, zapisnik, sudionici [Promoting CSR in Croatia: Agenda 2005 - Conference Programme, Initiatives Proposal, Report, Participants]”, Zagreb, 8. 12. 2004. 2004. Available at: www.poslovniforum.hr/ agenda/program_1.asp Hrvatska gospodarska komora [Croatian Chamber of Economy]. Croatia - Your Business Partner, 2006. Available at: http://www2.hgk.hr/ en/pdf/Partner_06_en.pdf Hrvatska gospodarska komora [Croatian Chamber of Economy]. Odabrani ekonomski indikatori hrvatskog gospodarstva [Selected Economic Indicators of Croatian Economy].” 2007. Available at: http://hgk.biznet.hr/ hgk/tekst.php?a=b&page=tekst&id=362 Jošić, Mislav. “Investicijski fondovi i EU u procesu razvoja tržišta kapitala u Hrvatskoj” [“Investment Funds and the EU in the Process of Development of Capital Markets in Croatia”]. In Zbornik ekonomskog fakulteta u Zagrebu. Vol. 4. 2006. Available at: hrcak.srce.hr/index.php?show=clanak_ download&id_clanak_jezik=16840 Krkač, Kristijan ed. Uvod u poslovnu etiku i korporacijsku društvenu odgovornost [Introduction into Business Ethics and Corporate Social Responsibility] Zagreb: MATE d.o.o. and ZŠEM, 2007. Ministarstvo gospodarstva, rada i poduzetništva [Ministry of Economy, Labour and Entrepreneurship]. Hrvatska izvozna ofenziva: Strategija za razdoblje 2007-2010. [Croatian Export Offensive: Strategy for the period 2007-2010]. Zagreb: Ministarstvo gospodarstva, rada i poduzetništva. 2007. Available at: http://kenny2.globalnet.hr/www.mingorp.hr/UserDocsImages/hio/HIO_Strategija.pdf

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Priručnik o društveno odgovornom poslovanju [Handbook on business social responsibility]. Integra Foundation and Ruke—Small and Medium Enterprise Development Association. 2006. Available at: http:// iintegra.infotech.sk/downloads/20_Publications2_cr.pdf Stubbs, Paul, Tafra Vlahović, Majda and Denis Redžepagić. “Creating Sustainability Competencies Through Reporting in Croatia.” Seventh International Conference on “Enterprise in Transition”, Faculty of Economics at the University of Split. May 24-26, 2007, Bol, Brač, 2007. Available at: http:// paulstubbs.pbwiki.com/f/Stubbs%20Tafra%20Redzepagic%20Split.pdf Šulenta, Leslie, Mirna Koričan and Andrijana Mušura. Reporting on Corporate Social Responsibility by Leading Croatian Firms 2006: Zagreb School of Economy and Management (ZSEM) February 2007. Available at: www.zsem.hr UNDP. Izvješće o društvenom razvoju Hrvatska 2006. Neumreženi. Lica socijalne isključenosti u Hrvatskoj. [Human Development Report Croatia 2006 - Unplugged: Faces of Social Exclusion in Croatia.]: United Nations Development Programme (UNDP) Croatia, 2006. Available at: http://www.undp.hr/upload/file/130/65076/FILENAME/WEB_ hrvatska_verzija.pdf (Croatian); http://www.undp.hr/upload/file/130/65078/FILENAME/WEB_ engleska_verzija.pdf (English) Ured za javnu nabavu Vlade Republike Hrvatske – [Government of the Republic of Croatia. Office for Public Procurement]. Priručnik javne nabave za naručitelje [Manual for Contracting Authorities], 2006. Vlada Republike Hrvatske [Government of the Republic of Croatia]. Strateški okvir za razvoj 2006.-2013. [Strategic Development Framework 2006-2013]. Zagreb: Government of the Republic of Croatia, 2006. Available at: http://www.strategija.hr World Bank. Croatia: Living Standards Assessment. Volume 1: Promoting Social Inclusion and Regional Equity. November 2006. Available at: http://www.worldbank.hr/WBSITE/EXTERNAL/COUNTRIES/ECAEXT/CRO ATIAEXTN/0,,contentMDK:21192606~pagePK:141137~piPK:141127~t heSitePK:301245,00.html

Meima, Ralph and Starkey, Richard “Implications of the Spread of Voluntary, Standardised Environmental Management Systems in Central and Eastern Europe.” Project Report and Summary, 2000. Available at: http://ec.europa.eu/environment/emas/pdf/general/emas_eastwards_report2000_en.pdf Omazić, Mislav Ante. “Društvena odgovornost i strategije hrvatskih poduzeća. [Social Responsibility and Strategies of Croatian Companies] “. Zagreb: Doktorska disertacija. Ekonomski fakultet Sveučilišta u Zagrebu [Doctoral Dissertation. Faculty of Economics, University of Zagreb], 2007. Vuković, Sonja. Vodič kroz međusektorsku suradnju [Guide to InterSectoral Cooperation]. Osijek Udruga za kreativni razvoj SLAP [Association for Creative Development SLAP], 2003.

Referenced legal acts: All legal acts in Croatia are published in Narodne Novine (NN) [Official Gazette] and are available on the official website http://www.nn.hr/ sluzbeni-list/sluzbeni/index.asp Pravilnik o znaku zaštite okoliša. NN 64/96 [Regulation on Environmental Label. Official Gazette 64/96] Prijedlog Zakona o zaštiti okoliša [Draft Law on Environmental Protection]. 2007 Zakon o javnoj nabavi NN 117/01, 92/05 [Public Procurement Act. Official Gazette 117/01, 92/05] Zakon o porezu na dobit. NN 177/2004, 90/2005, 57/2006 [Law on Profit Tax. Official Gazette 177/2004, 90/2005, 57/2006] Zakon o privatizaciji. NN 21/96, 71/97, 73/00 [Law on Privatization. Official Gazette 21/96, 71/97, 73/00] Zakon o radu. NN 137/04 [Labour Act. Official Gazette 137/04]

Consulted literature: Begović, Vitomir, ed. Kolektivno pregovaranje u Republici Hrvatskoj [Collective Bargaining in the Republic of Croatia]. Zagreb: Vlada Republike Hrvatske - Ured za socijalno partnerstvo [Government of the Republic of Croatia, Office for Social Partnership], 2006.

Brlek, Damir. “Sirela’s Complete Wastewater Purification System and Further Treatment of Sludge by Composting Method - An Eco-Efficiency Case Study.” 5th International Conference on Ethics and Environmental Policies. Business Styles and Sustainable Development. April 2-6, 2003, Kyiv.

Zakon o trgovačkim društvima. NN 111/93, 34/99, 52/00, 118/2003 [Company Act. Official Gazette 111/93, 34/99, 52/00, 118/2003] Zakon o tržištu vrijednosnih papira. NN 84/02 [Securities Market Act. Official Gazette 84/02] Zakon o zaštiti na radu. NN 59/96 [Workplace Safety Act. NN Official Gazette 59/96] Zakon o zaštiti okoliša. NN 82/94, 128/99 [Law on Environmental Protection. Official Gazette. 82/94, 128/99]

Note: Companies’ websites are not included, as they are provided in the list of contacted organizations Academy for Educational Development (AED) www.aed.hr Agencija za zaštitu okoliša www.azo.hr American Chamber of Commerce www.amcham.hr. Business.hr http://business.hr Centar za civilne inicijative www.cci.hr Certifikat Poslodavac Partner www.poslodavacpartner.org Nordic Chamber of Commerce in Croatia www.nordicchamber.hr Det Norske Veritas www.dnv.hr Donacije.info www.donacije.info Državni inspektorat Republike Hrvatske www.inspektorat.hr Državni zavod za statistiku www.dzs.hr EFQM. Succesful Organisations Database http://web-1.efqm.org/ temp_efqm_full/wwwroot/levels/reco/orglist_sort_all.asp. Eko Kvarner www.ekokvarner.hr Ekonomski fakultet, Sveučilište u Splitu http://www.efst.hr/eitconf/index.php Ekonomski fakultet, Sveučilište u Zagrebu www.efzg.hr EMAS http://ec.europa.eu/environment/emas/activities/accession_en.htm Fond za zaštitu okoliša i energetsku učinkovitost www.fzoeu.hr Hrvatska banka za obnovu i razvitak www.hbor.hr Hrvatska gospodarska komora www.hgk.hr Hrvatska udruga banaka www.hub.hr Hrvatska udruga poslodavaca www.hup.hr Hrvatska udruga za odnose s javnošću www.huoj.hr Hrvatski centar za čistiju proizvodnju www.cro-cpc.hr Hrvatski poslovni savjet za održivi razvoj (HRPSOR) www.hrpsor.hr Hrvatski zavod za norme www.hzn.hr Hrvatsko društvo za kvalitetu http://kvaliteta.inet.hr Hrvatsko udruženje menadžera i poduzetnika - CROMA www.croma.hr Lider, poslovni tjednik www.liderpress.hr MAP Savjetovanja d.o.o. www.map.hr

Ministarstvo gospodarstva, rada i poduzetništva - Odjel za zaštitu potrošača http://potrosac.mingorp.hr Ministarstvo vanjskih poslova i europskih integracija - Uprava za međunarodnu gospodarsku suradnju http://hgd.mvpei.hr/hr/gospodarstvo/ Ministarstvo zaštite okoliša, prostornog uređenja i graditeljstva www.mzopu.hr ODRAZ - Održivi razvoj zajednice www.odraz.hr Poslijediplomski studij Poduzetništvo, Sveučilište Josipa Jurja Strossmayera u Osijeku, Ekonomski fakultet u Osijeku http://www.pspefos.hr/. Potrošač - Društvo za zaštitu potrošača Hrvatske www.potrosac.hr SGS Adriatica www.hr.sgs.com Sigurnost u okolišu i graditeljstvu (SOG) i ZITEL d.o.o Sigurnost u radnom i životnom okružju http://www.zitel.hr/sigurnost/propisi.htm SMART - Udruga za razvoj civilnog društva www.smart.hr Social Accountability International http://www.sa-intl.org Središnji državni ured za razvojnu strategiju i koordinaciju fondova Europske unije www.strategija.hr STUDIO ARTLESS www.studio-artless.hr The Integra Foundation www.integra.sk Udruga Lijepa naša www.lijepa-nasa.hr Udruga poslovnih savjetnika - Association of Management Consultants www.ups-amc.org UNDP - Projekt društvene odgovornosti poduzeća www.drustvenaodgovornost.undp.hr UNDP- Projekt poticanja energetske efikasnosti u Hrvatskoj www. energetska-efikasnost.undp.hr United States International Grantmaking www.usig.org/countryinfo/croatia.asp VERN Veleučilište www.vern.hr Vlada Republike Hrvatske - Ured za socijalno partnerstvo www. socijalno-partnerstvo.hr Vlada Republike Hrvatske – Ured za javnu nabavu www.javnanabava.hr Selectio d.o.o. www.moj-posao.net Zagrebačka burza http://www.zse.hr Zagrebačka škola ekonomije i menadžmenta www.zsem.hr Zagrebački velesajam www.zv.hr/sajmovi/033/index_en.html Zajednica za društveno odgovorno poslovanje, Hrvatska gospodarska komora www.hgk.hr/wps/portal/ZajednicaZaDOP Zelena akcija [Green Action] www.zelena-akcija.hr

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Consulted websites:

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United Nations Development Programme (UNDP) The Office of the Resident Representative in Croatia RadniÄ?ka cesta 41 10 000 Zagreb E-mail: registry.hr@undp.org www.undp.hr