Corporate Social Responsibility: new context, new approaches and new applications A comparative study of CSR in a Croatian and

a UK company

By Anne Gregory and Majda Tafra

Anne Gregory Professor of Public Relations Centre for Public Relations Studies Leeds Business School Leeds Metropolitan University Headingley Campus Leeds LS6 3QS Tel: +44 (o) 113 2837520 Email: a.gregory@leedsmet.ac.uk

Majda Tafra Public Affairs & Communication Manager Coca-Cola Beverages Hrvatska.d.d Milana Sachsa HR-10000 Zagreb Hrvatska/Croatia Tel: +385 1 2480 167 Email: majda.tafra-Vlahovic@cchbc.com

Biographies
Anne Gregory is the UKs only full-time Professor of Public Relations and Director of the Centre for Public Relations Studies at Leeds Metropolitan University, the largest department of public relations in the UK. Before moving into academic life ten years ago, Anne was a full-time public relations practitioner, holding senior appointments both in-house and in consultancy. Anne is still involved in practice being a non-executive director of the South West Yorkshire Mental Health Trust with special responsibility for finance and communication. She is editor of the Journal of Communication Management and of the UK Institute of Public Relations Public Relations in Practice series.

Majda Tafra, MIPR, is Public Affairs and Communication Manager for the Coca-Cola Hellenic Bottling Company in Croatia (Coca-Cola Beverages Hrvatska). She has held this role for five years. Before joining Coca-Cola, Majda Tafra worked as a programme and communication officer for UNICEF and a journalist and media studies teacher. She has been publishing on sustainable development and the role of communication in stakeholder relationships and corporate responsibility advocating the competitive advantage of corporate philanthropy and the need for transparency.

Abstract
There is a growing body of literature on Corporate Social Responsibility (CSR) and numerous case studies illustrating a variety of approaches by different companies and organisations. This paper takes a broad overview of the literature to draw out some of the main developments and current perspectives on CSR and reaches the conclusion that stakeholder expectations can be defined in terms of two variables depending on their perception of their relationship with the organisation: relationship intensity and content expectation. In the light of those variables, two cases, one based in Croatia and one in the United Kingdom are analysed, using published CSR Reports as the basis for comparison supplemented by information from the Reports authors. Comparisons are made based on this analysis and the overall conclusion is drawn that in Croatia, and by imputation in all developing economies, CSR can and is used as a Societal driver. In the UK and by imputation in all developed economies CSR is the result of societal accountability. To the authors knowledge this is the first such comparative analysis and as such brings new insights into how CSR can be made more relevant to the local communities of global organisations.

Corporate Social Responsibility: a new context, new approaches and new applications A comparative study of CSR in a Croatian and UK Company
By Anne Gregory and Majda Tafra 1. Introduction
There is a growing body of literature and an increasing number of published examples and Reports of Corporate Social Responsibility (CSR) programmes. However, to the authors knowledge there has been no specific comparison between how a company in an emerging economy and how a company based in a mature economy approach this issue.

This paper looks at Coca-Cola Beverages Hrvatska (CCBH), based in Croatia and Cadbury Schweppes based in the UK to make this comparison. To do this the literature is briefly surveyed to set the context and then the most recent CSR Reports of both organisations(1) are examined in depth. From this conclusion are drawn about how CSR should be conducted in emerging and mature economies.

It is recognised that these conclusions require further testing given this is an initial study, but they are put forward as reasonable propositions based on the Reports and their authors input.

2. Background and history

CSR has its origins in the social activism of the 1960s and 1970s. Awareness of issues such as equal opportunities, racial equality and workplace safety and health first galvanised the public into scrutinising business practices more closely than before, then led to these obligations being enshrined in law (Carroll 1991; Reed 1999; Dougherty 2001; Heath 2001; Le Jeune 2004). Businesses could no longer justify their existence by their economic success alone, neither could their responsibility be regarded as being only to their shareholders as espoused by Friedman (1970). Now 4

perceived as social agents, their social responsibilities required a new kind of responsiveness to a wider range of publics if their reputation was to be protected (Bowie, 1991). Indeed Andriof and Waddock (2002) see the progress of CSR thinking as travelling from being understood as just part of businesss social contract to now being embedded as part of business practice at a strategic level. Business practices in most developed democracies now conform to a set of normative standards equal opportunities, equitable remuneration, healthy work environments and safe, fairly-priced products and services (Heath 1997). Penalties for nonconformity include legislative or regulatory measures and lost sales (Heath 1997; Reich 1998). However, social values and expectations are dynamic; even as businesses try to meet these and other matter of course obligations - such as the elimination of child labour and minimising environmental impact - stakeholders bring new issues to their attention. Dougherty (2001) highlights the danger of a significant legitimacy gap emerging from the disparity between public expectations and business performance which can result in damaging stakeholder challenges to company reputation. Bodies such as Business in the Community (BitC), CSR Europe, the Institute for Business Ethics (IBE), Business for Social Responsibility (BSR) and the Prince of Wales International Business Leaders Forum (IBLF) have emerged in recent years, aiming to guide managers through the complexities of balancing stakeholder demands with business interests, towards well-managed CSR policies and processes(2). Indeed, the concept of CSR is now so established as a business consideration following the European Summit in Lisbon in March 2000, business leaders launched the European Business Campaign 2005 on CSR (CSR Europe and IBLF, 2002). In similar vein, academic research has focused on understanding stakeholders, defining what types of CSR might be undertaken, and how to reconcile CSR with more traditional business priorities. CSR has been found to make a positive contribution to the bottom line (Little and Little 2000; Moore 2003), to be a significant element in reputation management, and particularly reputation risk management (Lewis 2003; Sagar and Singla 2004), to improve operating efficiencies (Heath 1997), and to generate positive morale among employees (Lines 2004). 5

2. Current perspectives
Definitions of CSR have evolved and the term is used interchangeably with corporate responsibility and more recently sustainable development (Buchholz 1991; Le Jeune 2004). In addition, the concept has been linked to the related area of corporate reputation, where poor CSR presents a major risk to reputation, while good CSR represents an insurance policy against damage to reputation and demonstrates best practice corporate governance, reflected in triple bottom line reporting where the economic, environmental and social aspects (sometimes called the three Ps, profit, plant and people) of a business are covered (Harrison 1997; Genasi 1999; Laurence and Blakstad 2001; Wheeler 2001). More recently, academics have criticised existing models and suggested that social responsibilities, rather than business obligations or public-driven motives, should lie at the heart of CSR programmes (Moore 2003). Others argue for more comprehensive incorporation of the dialogue inherent in CSR programmes between an organisation and its stakeholders (Haas 2003; Roberts 2003). These discussions reflect the acknowledged status of CSR as a core business issue. Commonly accepted definitions of CSR reflect this. For example, BitC defines CSR as follows: Companies have an impact on society and the environment through their operations, products or services and through their interaction with key stakeholders such as employees, customers, investors, local communities, suppliers and others. Corporate responsibility means managing this impact so as to add value to the company and increase wider economic and social well-being now and over the longer term. (http://www.bitc.org.uk/programmes/key_initiatives/corporate_responsibility_index/a bout.html) BSR says CSR conduct helps companies: achieve success in ways that respect ethical values, people, communities and the environment. (http://www.bsr.org/Meta/About/index.cfm)

The IBLF defines CSR as follows: CSR or Corporate Social Responsibility means open and transparent business practices that are based on ethical values and respect for employees, communities and the environment. It is designed to deliver sustainable value to society at large, as well as to shareholders. (http://www.iblf.org/csr/csrwebassist.nsf/content/a1.html) Definitions such as this acknowledge that CSR activity takes place as a managed programme of activities in the context of ongoing relationships about which the business has no choice with diverse stakeholders including government, non profit organisations, customers, employees and others (Bowie 1991; Sutton 1997; Haas 2003; Hatcher 2003). Indeed the requirement for multi-stakeholder dialogues where a negotiated solution between the stakeholding partners who together seek mutually acceptable solutions to messy problems is seen as the best way for ward (Payne and Calton, 2002). They also accept that CSR must be part of the core business strategy, planned and executed so that it is in line with those business interests (Saiia, Carroll et al. 2003). Because of the breadth of interests involved and therefore the variety of expectations to be managed - formulating a CSR programme is a complex process (Dalton and Daily 1991). Key areas to be considered in any CSR programme include: ethics the degree to which business activities can be considered ethical governance the role of CSR in good corporate governance human rights the rights of employees, customers, outsourced workers and others affected by the activities of the business environment the impact of the business activities on the immediate and remote environment social duty the obligations of the organisation as a social partner.

Research has found that these areas will carry different weight in different societies. Expectations of organisations are, to a certain extent, culture- and society-bound (Adams and Kuasirikun 2000; Maignan and Ferrell 2003; Sagar and Singla 2004). For example, consumers in mature democracies are able to consider global issues such as ethics and human rights, since businesses already meet normative expectations about their immediate environment. However, in countries where democratic government is emerging, expectations of business may include requirements to support and even enhance the democratic process (CSR Europe and IBLF 2002; Molleda 2000). The Global Reporting Initiative (GRI), which is used by many organisations as their benchmark for CSR reporting has produced content guidelines(3) for the production of comparable CSR reports (see Figure 1).

REPORT CONTENT
Part C of the Guidelines recommends that five sections appear in a sustainability report: 1. Vision and Strategy: A statement from the CEO and discussion of the reporting organisations sustainability strategy. 2. Profile: An overview of the reporters organisation, operations, stakeholders, and the scope of the report. 3. Governance Structure and Management Systems: A description of the reporters organisational structure, policies, management systems, and stakeholder engagement efforts. 4. GRI Content Index: A cross-referenced table that identifies the location of specified information to allow users to clearly understand the degree to which the reporting organisation has covered the content in the GRI Guidelines. 5. Performance Indicators: Measures of performance of the reporting organisation divided into economic, environmental, and social performance indicators. Organisations may adopt this format or modify it to enhance usefulness of the report to its stakeholders.

PERFORMANCE INDICATORS
Performance indicators, both qualitative and quantitative, are the core of a sustainability report. The performance indicators are grouped under three sections covering the economic, environmental, and social dimensions of sustainability. In each area, GRI identifies core indicators (required for reporting in accordance with the Guidelines) and additional indicators (used at the discretion of the reporter to enrich a report). Economic indicators concern an organisations impacts, both direct and indirect, on the economic resources of its stakeholders and on economic systems at the local, national, and global levels. Included within economic indicators are the reporting organisations wages, pensions and other benefits paid to employees; monies received from customers and paid to suppliers; and taxes paid and subsidies received. In a few instances, economic performance information overlaps with that in conventional financial statements. In general, however, the two are complementary. Environmental indicators concern an organisations impacts on living and non-living natural systems, including eco-systems, land, air and water. Included within environmental indicators are the environmental impacts of products and services; energy, material and water use; greenhouse gas and other emissions; effluents and waste generation; impacts on biodiversity; use of hazardous materials; recycling, pollution, waste reduction and other environmental programmes; environmental expenditures; and fines and penalties for non-compliance. Social indicators concern an organisations impacts on the social systems within which it operates. GRI social indicators are grouped into three clusters: labour practices (e.g., diversity, employee health and safety), human rights (e.g., child labour, compliance issues), and broader social issues affecting consumers, communities, and other stakeholders (e.g., bribery and corruption, community relations). Because many social issues are not easily quantifiable, GRI requests qualitative information where appropriate.

ASSURANCE
Just as investors look to independent audits to certify the accuracy and completeness of financial reporting, stakeholders increasingly seek such assurance for sustainability reports. GRI encourages the independent assurance of sustainability reports, while recognising that no generally accepted assurance framework, protocols or practices currently exist.

Figure 1. Summary of Global Reporting Initiative (GRI) Sustainability Reporting Guidelines

In addition to content, the actual process of management and evaluation has been subject to much debate over the past decade (Pavla and Krauscz 1997; Little and Little 2000; Jackson and Bundgard 2002). The quality of these processes depends on the strategy behind the program and the outcomes associated with it. These, in turn, vary according to stakeholder expectations of the business in a particular social environment. Therefore a new insight that can be drawn from the literature is that stakeholder expectation can be defined in terms of two variables which may or may not be independent depending on the stakeholders perception of their relationship with the organisation. a. Relationship Intensity CSR is embedded in relationships that require levels of dialogue that vary in intensity. Charities, for example, may argue that financial support is most helpful. Government may ask for intermittent engagement in the policymaking process. The local community might require physical engagement of employees in community initiatives. Employees may argue for genuine two-way discussions about their working conditions and, as instrumental in the delivery of CSR in practice, want involvement in the development of the companys policies and processes. Activist groups may want both involvement from the business and involvement in the business, to ensure their interests are considered. One extreme of this continuum may be called contact engagement the other, comprehensive engagement. Contact engagement requires no action from the company other than a single or regular transaction whether, for example, for information or a donation. It may be regarded as a tick the box activity, and there is, effectively, no dialogue other than the initial discussion required to understand the stakeholder expectation. Comprehensive engagement, on the other hand, requires the company to demonstrate tangible actions or change as a result of its relationship with the stakeholder, and further, to involve that stakeholder in the longer term and in evaluation and reporting. Dialogue in this case is intensive, continuous and extended. Employee engagement is a good example of this. 10

The continuum between these two extremes tracks the level of dialogue between stakeholders and the organisation, based on the degree to which each must take into account the needs of the other. The further apart are the parties, the less the need to accommodate the others view in discussions, the lower the level of engagement. The closer together they are, the more the dialogue is characterised by mutual accommodation, respect, understanding and consideration. b. Content Expectation Content expectation of CSR programmes will vary according to the social and cultural context. In line with previous case study findings, it can be argued that obligations relating to the immediate business environment are paramount in countries where democratic government is evolving or unstable. These may include, for example: wellbeing of employees, suppliers and their communities; protection of the immediate physical environment; national or regional regulatory issues relating to business and employee rights and obligations In these countries, supranational considerations are unlikely to be of high importance in a CSR programme. Further, we suggest that supranational considerations are likely to be considered only in countries where normative obligations about business practice have been enshrined in law - and are therefore virtually guaranteed to be met. Supranational considerations may include: human rights of workers in supplier companies based in developing countries environmental impact of business practices on an international scale fairness of trade practices between trading bocks or regions

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The following case studies are analysed in light of these suggestions.

3. Coca-Cola Beverages Hrvatska (Croatia) a case study

3.1 Context Croatia is situated on the crossroads between Central Europe and the Mediterranean, along the eastern coast of the Adriatic Sea and its hinterland. It stretches from the Alps on the north-west to the Panonnian plain on the East.

According to official data(4) the total country population is 4,437,460. GDP per capita, in 2002 was 5,569.1 USD. The unemployment rate is 22.5% and the average monthly gross wage 682.4 USD. Total number of employees was estimated at 1,043,871. The countrys economy is in a transition period from a state-dominated economy to a free market economy. The period is marked by turbulence, both political and economic. The beginning of the new democratic independent state emerging from the former Yugoslavia was marked by four years of war (1991-1995). The war ruined many industrial, civilian and cultural assets and left a number of unsolved problems with hundreds of thousands of refugees, human rights abuses and political conflicts. The results of the Global Competitiveness Report for 2002/2003 published by the World Economic Forum(5), in which Croatia was included for the first time, placed Croatia in the 58th place out of 80 countries in the Growth Competitiveness Index, far behind other transition countries (those which joined EU in 2004) at the time and with only Romania and Bulgaria placed behind Croatia. It was 67 out of 80 countries in the Global Information Technology Report(5). High levels of political corruption and some other factors indicated that in most areas in connection with the government and the public sector, Croatia was ranked as poorly as other countries in transition, with the only exception of the tax system which was seen as better and more transparent than the world and EU average.

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Regarding public institutions, the benchmarking analysis showed parity with the other transition countries (with the exception of Slovenia and Hungary). Only Bulgaria was ranked lower in media censorship. Croatia also earned a very low general mark on infrastructure. Relations between employees and employers are the worst of all the countries in transition, and the ratio between salaries and productivity is the lowest compared with other countries in transition. The other transition countries (with the exceptions of Bulgaria and Romania) also ranked better in the implementation of the environmental regulation. Croatia aspires to join EU in 2007 or beyond. 3.2 CSR in Croatia What differentiates Croatia from other transition states is its immediate past history: a very special type of socialist rule, so called workers self-management, a more flexible open model of socialism, not found in any other country at the time. It was a combination of certain elements of the market economy and western democratic liberties, with state protection of labour rights and core labour and social standards. Although, from a historical distance of more than ten years, this social system is sometimes considered to have been less efficient and rather tokenistic, it has been acknowledged that it had introduced employee participation and a culture of dialogue in social and political life, and into managerial practices. This led the authors of recent research on CSR in Croatia (Bagic, Skrabalo and Narancic, 2004) to the conclusion that the current endorsement of team work and stakeholder consultations in the Croatian business community seems to be a combination of contemporary western approaches to quality management and former types of corporate governance. While this particular feature could be further debated, there is no doubt that the culture of dialogue, self- management as corporate governance and heightened awareness of human and employee rights did make fertile soil for the development of positive attitudes to CSR, first of all in the business community. In the research this was reinforced by suggesting that the country had ethical business, community relations and product quality and environmental commitment, long before foreign companies introduced basic CSR ideas.

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An enabling legislative and policy environment for CSR currently does not really exist in Croatia, although progress has been made. At the moment there are no government measures to stimulate companies, and the government appears to shrink from a CSR debate which includes the business community and civil society. The government appears to be determined to over-regulate various sectors and here, consultation with the business sector is often regarded as being of a formal nature, and tokenistic rather than a genuine engagement in substantial policy development. According to the research (the only research on CSR done so far in Croatia), CSR has been seen by some of the managers who were interviewed, as a driving force behind the commitment to human resources and investment in the community. Thus, it is contended, companies and their ownership structure have been designed to facilitate CSR achievements. In the context of the competitiveness indicators with other countries, companies commitment to strive for leading positions in the democratisation process by relating it to CSR development, could be considered a logical deduction. The other driver that emerges is the leadership of committed individuals. Finally, it is the big companies that have been shown to be the leaders, driving visible CSR policies and practices while SMEs lack knowledge and capacity in this respect. The report identified the key areas of CSR in Croatia as being community investment and philanthropy, policy dialogue, advocacy and institution building and core business activities including employment and wealth creation, training and human resources development, equal opportunity and diversity, supply/value chain development, knowledge and technology transfer, cause-related marketing, business standards and governance, relations with consumers and product integrity. The examples of best practice in this area illustrate strong positive core-value drivers behind CSR development, particularly in environmental protection, business governance and ethical business. One of the main conclusions of this report is the crucial role of leadership in driving CSR in Croatia. Leadership, in general, is high on the agenda in Croatia, and this particular category of leadership, considered a must in the ever changing, demanding business environment, ranks high on public lists. Politicians get more media coverage when promising European standards to the 14

inhabitants, but it is the business leaders, particularly those with CSR achievements and charisma, that are considered to be the main drivers in pushing the country to EU. Within this context, Coca-Cola, one of the largest companies in Croatia, is a major exemplar of CSR in practice and it is quoted in the research as a leader in the area. Its first Social Report was published in November 2003. The following describes the reporting framework used, the process for collating the Report, content of the Report and how it was communicated. Conclusions are then drawn. 3.3 Coca-Cola Beverages Hrvatska.d.d. Social Report, Nov 2003 a) Framework used and rationale

Coca-Cola Beverages Hrvatskas (CCBHs) Social Report is a stand-alone document whose aim is to set out the social impact of its core business behaviour on a number of stakeholders, including its own employees, customers, suppliers, and the wider community. It is a triple bottom line Report covering profit and loss; environmental protection; and social obligations. The Report states it wishes to be seen as a means of verifying how far the company has met standards of ethical and social behaviour. CCBC has opted for a mixed model of authorship in which the social Report was produced jointly by a CCBC employee and an independent external consultant. Whilst free to explore issues at will, the consultant was dependent on CCBC for co-operation, access to information and stakeholders, and for the final publication of the Report. In addition, the Report contains an external review by the IBLF. The narrative is based on the Social Performance Reporting Guidelines issued by the Global Reporting Initiative (see Figure 1), with a degree of adaptation to fit the Croatian context.

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b)

Process The External Consultant used various methods for gathering information: indepth scrutiny of a range of internal documents relating to all aspects of CCBHs social performance, individual interviews with key CCBH staff including representatives of trade unions, individual interviews with external stakeholders including representatives of community groups and two focus group discussions with a cross-section of stakeholders who were able to give their responses to a draft Report. Additionally, internal documents were scrutinised by the internal team and outcomes were shared with the consultant. There was ongoing discussion on the content of the Report. The Report covers the Financial Year 1 January 31 December 2002. For comparative purposes, wherever possible, two previous years 2001 and 2000 were used. As this was the first Social Report by CCBH a baseline for reporting has been established which will allow for comparisons in subsequent reporting years. The GRI Guidelines were chosen from the many global reporting frameworks available since they were regarded as the most rigorous. Annex 1 to the Report includes a GRI Content Index so that the reader can easily locate each GRI reporting element and performance indicator in the text. The main gap in the Report is on CCBHs performance in relation to the environment because in May 2002, CCBH published a separate Environmental Report. However, wherever possible, the Social Report addresses social aspects of CCBHs commitment to the environment. CCBH will produce a fully integrated Sustainability Report in 2005, the European Year of CSR, which will incorporate the Environmental Report. An interesting aspect of the Report is a statement of the methodology used. This is unusual in CSR Reports and the company justifies its inclusion not only to

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demonstrate transparency, but also in the hope of stimulating others in Croatia to produce similar reports in the future. To generate content for the Report, indicators in the GRI Guidelines and others relevant to CCBH were framed into questions and responsibility for answering each question was given to a named person in a named department. Publicly available documents on social reporting, a range of internal documents and copies of external standards, codes of practice, and relevant rule-books were also consulted. The Consultants held interviews and discussions. The interviews providing an opportunity to explain the Social Report more fully, clarified issues regarding the questions, and explored in greater depth wider contextual and organisational issues. Following a draft Report, feedback sessions were held with a small group of senior mangers to explore further issues in the Report, to clarify some information, and to discuss next steps. c) Content

The content of the Report is structured as follows. In line with the GRI Guidelines the Report has included a General Managers statement; external review and executive summary. The main body of the Report contains an overview including the company and its partners; vision and strategy; organisational profile and governance structure, policies and management systems. This is followed by information on performance containing data on economic impacts and performance, employment and labour practices, promoting and guaranteeing human rights, product responsibility and community programmes and partnerships. Recommendations and a commitment to future actions are also included.

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Contained in the Annex, are the GRI content index; the methodology of the Social Report and contact addresses.

A fuller summary of the Report is given in Appendix 1, however, a brief overview is provided here. CCBH operates under franchise from The Coca-Cola Company and is largely owned by The Coca-Cola Hellenic Bottling Company S.A (CCHBC), Europes largest soft drinks company operating in 26 countries. It has six main departments: operations, sales, finance, administration, marketing and public affairs and communicators, net sales revenue in 2002 was 109,404,000 Euros, earnings before interest and tax were 14,844,000 Euros and total employees numbered 758. The parent company, CCHBCs mission is to refresh our consumers, partner with our customers, reward our stakeholders and enrich the lives of our local communities (p 13). CCBH shares that mission. The company states its wish to be a world class selling organisation, emphasising the 4As of availability, affordability, acceptability and activation. Alongside this the companys mission embraces a commitment to enrich and support the lives of the community it lives in, to honesty and integrity in business practices, to respect the diversity and dignity of people, and to protect the environment (p 14). Its specific CSR commitment is to local communities and their social, healthrelated and environment concerns and issues. CCHBC is striving to be a valuable partner in community relationships, a neighbour of choice and a good corporate citizen. Again, CCBH takes its cue from the parent company. The Report itself lists all the key stakeholders of CCBC and summarises the nature and frequency of consultations with them. Out of those listed, contact is most often and intense with (in priority order) workforce, trades unions, customers, consumers/communities.

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Quality standards are clearly important and signified with its achievement of international production standards and its quest for ISO 14000 an environmental standard. In addition, there are clear statements about commitments to a Code of Business Conduct and modern risk management practices. Consideration of the internal stakeholding community takes up most room in the Report. A key issue has been a reduction in salaries which, although still considerably above the Croatian average, has clearly brought tensions in the workforce. The rights of workers to belong to trade unions and the Workers Council are emphasised as is the commitment to training and development, but flexibility is also a concern as the requirement for a more profitable organisation takes on new importance in the move to an open market economy. Diversity, inclusivity and equal opportunities are also recognised issues. The separate section of the Report on Human Rights also focuses on employees to a large extent, emphasising non-discrimination and fair disciplinary procedures. It also touches on fair and open business practices. Customer and consumer implementation focuses on the complaints procedure, quality assurance, product labelling and a commitment to uphold high standards in marketing. Here comparative advertising, marketing to children and consumer privacy are specifically covered. d) Communication The Report was published in the Croatian language with a summary in English and distributed after a public launch to 300 recipients in government, business and civil society. The copies were supplied with a questionnaire asking for feedback in an attempt to launch an ongoing stakeholder dialogue. The Report has also been put on the company web-site. The first results of the survey, informal feedback and feedback from focus groups are being analysed and a second round of stakeholder dialogue will be initiated in September 2004. 19

The launch of the Report has had a powerful advocacy effect on the public status of CSR in Croatia. By organising a public discussion on CSR and publishing its first social report, CCBH wanted to encourage a wider dialogue about CSR. The General Manager of CCBC who is also President of the Management Board of the Croatian Business Council for Sustainable Development, spoke at the launch of the Report (the first social report issued by any company in Croatia) stating his hope that the Report would encourage discussion and dialogue in Croatia. 3.4 Observations of this case In terms of the literature review and specifically the two variables relationship intensity and content expectation the following observations can be made on this case a) Relationship intensity While it is dangerous to make simplistic assumptions that the amount of discussion given to a particular stakeholding group or concern is a measure of their importance, it is advisable to say that it is an indicator of the current priority that the company puts on that group or concern and it is legitimate to suggest certain implications which would benefit from validation in the field. Thus: the weighting of the Report and the level of detail given indicates that there is most requirement for dialogue and engagement with, in priority order, employees, the local community, customers and consumers. There is least dialogue with suppliers, Non-Governmental Organisations (NGOs), business organisations, central and local government, public institutions with contact with the latter two being mainly related to community based activities. the centrality of community and nation-building stakeholding groups is reflected in this weighting engagement is at the local and national level

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b)

Content expectation Obligation to the immediate business environment is paramount and focuses on the well-being and human rights of employees. supporting and developing local communities which is a central tenet of the CSR programme. protection of the environment surrounding the plant and in local communities. conformity to national and where applicable, international regulations and protocols. Community involvement also features prominently in the Report. 0.15% of net sales revenue in 2002 was given in cash and kind. Donations are in line with the policy outline earlier, but the emphasis is on community building and ameliorating the effects of the war which ended in 1995. All giving is within Croatia and is a combination of national and local projects. Dialogue with local communities, both formal and informal and across a broad range of stakeholders is regarded as vital. Environmental concerns are handled at a local level, but also with Government and NGOs and pressure groups. The Report finishes with a restatement to CCBHs CSR responsibilities and a commitment to ten themes which have been identified as areas for special attention.

4. Cadbury Schweppes a case study

4.1 Context

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The United Kingdom (UK) is located just off the North West of the European Continent and has been a full member of the EU since 1973. Total population is 59.2(6) million and GDP per capita in 2002 was 28,000(7) USD. The current unemployment rate is 4.8% and average monthly earnings approximately 1750. The total number of people in employment is 28 million. The country has a free-market economy and the parliamentary system of democracy is the oldest in the world with its origins in the 1600s. The 2002/3 World Economic Forum Global Competitiveness Report(5) placed the UK 11th out of 80 countries in the Growth Competitiveness Index. Technologically the country is advanced (ranked 7th in the Global Information Technology Report) and it is politically stable. The Global Competitiveness Report also shows that political corruption is minimal, political institutions are sound and infrastructure is advanced. 4.2 CSR in the UK There are two main sets of drivers for the move toward CSR in the UK. The first set is external and require companies to respond in a reactive way to defend their market and legal position. External stakeholders including customers and activist groups are increasingly looking at the organisation behind the brand and making purchasing or hostile-action decisions based on social responsibility judgements (MORI, 2003). Because these groups impact on the business growth and reputation of organisations, shareholders too are interested in CSR. A notable recent example of this was the removal of Piers Morgan as editor of the Daily Mirror, one of the largest circulation newspapers in the UK. The Mirror had published photographs of alleged prisoner abuse in Iraq which subsequently were revealed to be fakes. In the resultant furore, it was two leading shareholders, Isis Asset Management and Deutsche Asset Management speaking out publicly about their concern for the integrity of the Mirrors editorial process and the damage to the newspapers reputation that led to the editors removal (Burrell et al, 2004). The second principal external driver is potential regulatory change. Largely in response to corporate scandals in the US including Enron and WorldCom, but also in 22

sympathy with the public mood, the UK government is proposing changes to the Company Law Act. This will require companies to provide a much more holistic valuation of their performance rather than just the financial one currently obligatory in the Annual Accounts. Proposals being considered demand reporting on factors such as stakeholder relationships, environmental impacts and risk assessment and management. In response to these external drivers numerous organisations have been very publicly promoting their CSR credentials. There has been an increase in corporate giving, volunteering and environmental initiatives. However, for many this activity has been mainly for marketing purposes (Le Jeune, 2004). The CSR philosophy has not been embedded in the organisational culture nor is it seen as the driver of fundamental policies on, for example, employment in developing nations, supplier relationships and corporate governance. Marketing-driven tokenism has led to accusations, especially from NGOs of green washing in the environmental area, where publicised activities are seen as an attempt to mask environmentally unfriendly actions elsewhere in the organisation or as an effort to bolster relatively minor improvements, or even standard practice as major achievements. More positively and proactively there are a growing number of companies whose ethos and business practices reflect a deeply embedded CSR culture. While it is fair to say that the majority of companies would ultimately conform to a narrow definition of CSR as being part of businesss social contract when maximising stakeholder return, for the leaders in the field it is clear that the wider notion of CSR as being part of business practice as a whole, is entirely applicable. These leading companies embed CSR because they regard it as morally right to act in this way - it also makes business sense. They do not do it primarily to drive profits. Principal CSR activities in the UK are cause-related marketing, volunteering, equal opportunity and diversity, business standards and governance, community investment (including sponsorship of the arts, sport and education) and philanthropy. 4.3 Cadbury Schweppes Corporate and Social Responsibility Report, May 2004 23

Cadbury Schweppes CSR Report is the second such report produced by the company, the first being issued in 2002. The first report was considerably less detailed than the second and acted as an initial benchmark. It did not include a full environment, health and safety report, which the second one does. The first report sought to give an overview of the values of the company, what the company was currently doing in CSR, and an indication of the direction of travel. The second report, which is much more comprehensive, details of performance against key performance indicators, stakeholders analysis against external and sectoral standards and presents a much more holistic approach as indicated below. a) Framework used and rationale The CSR Report is a stand alone document produced by the company. It sets out the impact Cadbury Schweppes has on all its core stakeholders including suppliers, consumers, business partners, employees, government and shareholders. The Group CSR Manager, who gathered information and data from all business units, operating regions and corporate headquarters, coordinated the writing of the Report. The CSR Board Committee was also involved in the reporting process. The Committee is chaired by a non-Executive Director and comprises the company Chairman, CEO, Chief HR and legal officers and two other nonexecutive Board members. At present there is no external verification or auditing of the Report, but the CEO makes a clear commitment to progress that in the next two years. The company recognises this as an issue. The company has some external assessment of its CSR performance in that it is included in the FTSE4Good Index, the Dow Jones Sustainability Index (DJSI) (since 2001), the DJ STOXX Index in 2003 which recognises progress in CSR and in the BitC Corporate Responsibility Index. Cadbury Schweppes publicly committed to the United Nations Global Compact in 2003. 24

While not specifically stating that it conforms to the Reporting Guidelines of the GRI (see Figure 1) the Report draws on these and from guidelines provided by the UKs Food and Drink Federation to put together its 33 Key Performance Indicators under the headings of employment practices; environment, health and safety; human rights and ethical trading community and economic. It is apparent on reading, however, that the Report covers all the areas outlined in the GRI guidelines. Before embarking on the second Report the company held three separate stakeholder focus groups consisting of NGOs, customers, interest groups such as CSR specialists, socially responsible investors and employees, specifically to obtain feedback on the 2002 Report and to gauge their expectations of the second Report. Email and telephone surveys with employees and key customers in the UK were also conducted. Whilst there was general satisfaction with the first Report as a starting point, the Company learned that: there was a requirement for more input on content from the Business Units a bottom-up approach the framework for CSR needed explaining in greater detail and its relevance for all members of the company for many employees this was purely a requirement to explain the terminology since they were already engaged in CSR. Its relationship to the companys values and principles needed clarifying. there was a need for more hard facts and figures in the Report. The cameo examples in the first Report were appreciated, but the overall tone needed to be more heavyweight to be persuasive. there were a number of key challenges that the company had to address more thoroughly principally obesity, diet and nutrition, ethical trading and managing company change especially plant closure and reorganisation the design of the Report, although in keeping with the corporate style, was regarded by some as too playful and served to trivialise the content. The second Report retained a similar design for the

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Overview, but had a much more traditional approach to the detailed sections on each topic. The company accepts that it will be necessary to continue to engage at a deeper level with a broader group of stakeholders before producing the next Report (2006). Besides these focus groups, the company has regular contact with stakeholders, for example it holds investor seminars, undertakes consumer surveys, employee team briefings, business partner and supplier dialogues and engages with government on food and agricultural policy, business issues and social and education policy and this also informed content. The Report covers the period from January 2002 to December 2003 and therefore substantially overlaps with CCBHs Report. It does not systematically use data outside the reporting period for comparative purposes or to show trends, but in some areas, for example in the environment, health and safety section and the resources section, data is supplied from 1997 onwards on topics such as time lost through injury, energy use, CO2 omissions, use of water, solid waste generation and recycling/reuse rates. b) Content The content of the Report is structured as follows. It is presented in two formats. One gives an overview for each chapter. And the other is a series of booklets, expanding on the overview, providing details on specific issues, policies, performance indicators and case studies. Following the spirit of the GRI reporting guidelines the Overview includes a statement of commitment from the CEO and the Chair of the Corporate and Social Responsibility Committee. Next follows a profile of the company and its value chain and a statement about what CSR means to the company. The management structure, along with the location and composition of the CSR Committee precedes an explanation on the Companys approach to CSR. There are then brief statements and core data concerning employees, 26

consumers, working with suppliers, working with communities and the environment. The overview finishes with a series of future commitments and aspirations under the companys five CSR pillars. A fuller summary of the Report is given in Appendix 2, however a brief outline is provided here. Cadbury Schweppes is a global company which manufactures and distributes a range of confectionary and non-alcoholic beverages. It is joint number one in chocolate, sugar and functional confectionary, second in gum and the worlds third largest soft drinks company. It operates from five regional units in: Americas Beverages, Americas Confectionary, Europe, Middle East and Africa Confectionary, Europe Beverages and Asia Pacific. There are six global functions: Human Resources, Supply Chain, Commercial Strategy, Finance, Legal and Science and Technology. Total turnover in 2003 was 6,441 million, pre-tax profit was 564 million and total employees numbered 55,799. The company enshrines its overall philosophy for business in its Business Principles. These are headed by its core purpose We work together to create brands people love (p 12). Its declared core values are integrity, openness and responsibility and the three key behaviours are accountability, adaptability and aggressiveness. The Business Principles cover corporate governance, ethical business practices, treatment of employees, consumer issues, community activities, government relations and environment issues. CSR is regarded as fundamental to the company, stemming from the philanthropic beliefs of its founders 200 year ago. CSR, it is stated, is not only the right thing to do, but good for business because it engenders trust and minimises risk. CSR is explicit in the organisations fifth strategic goal and the company is past half way on a five year programme, begun in 2001, to embed it in the business. To achieve this it has devised its sustainability KPIs and five pillars around which its CSR is built human rights and

27

employment standards; ethical sourcing and procurement; marketing; food and consumer issues; environment; health and safety and community investment. The Report lists the companys major stakeholders: consumers, customers, employees, suppliers and communities. Out of those listed, more information is given in the Report on employees, suppliers, communities and the environment. The section of internal stakeholders stresses commitment to a set of company minimum standards combined with compliance with local country standards. Significant emphasis is placed on equal employment opportunities and diversity with many examples being given from overseas operations. Individual, local and global learning and development programmes are explained as are remuneration and rewards, health and safety and wellbeing/work-life balance initiatives. The Report does give examples from the UK, but the orientation of the Report is on demonstrating fairness and progress in developing economies. The Report also covers plant rationalisation and point outs the efforts of the company to ameliorate the impact of this on employees and communities. This is reinforced by describing in detail the developing Human Rights and Ethical Trading Policy (HRET) first introduced in 2000 and which seeks to ensure ethical standards throughout the supply chain, particularly for those supplying primary ingredients such as cocoa, sugar and fruit. It also seeks to ensure labour rights and good working conditions in its plant. Again, the emphasis is on its operation in developing countries. The company has good ratings in the FTSE4Good, Dow Jones Sustainability and BitC Indices. In the section on consumers there is reference to quality assurance and to conformance to international standards, but the main focus is on issues, principally food and diet. The Report mentions policy on genetically modified ingredients, but focuses on the growing problem of obesity.

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Community involvement is a main plank of the companys CSR programme. It has a target of investing 1% of pre-tax profits globally it was 1.09% globally and 3% in the UK in 2003. Preferred areas for investment are in education and enterprise, health and welfare and the environment and there are company guidelines to measure and manage community investment, although there is local discretion. The company is involved in major initiatives at national and local levels and cites numerous external awards and recognition for its work. There is a major section in the Report on resources and the environment. The company has had an environmental policy for several years which commits it and its suppliers to improving environmental impact, using resources responsibly and protecting the ecosystems from which it draws its raw materials. A whole series of indicators are used to demonstrate performance and examples are given from both the developed and developing world. c) Communication The Cadbury Schweppes Report is published in English and was launched on the corporate website at the companys AGM in May 2004. Printed copies will be distributed in July. Copies will be made available to employees as well as other external stakeholders. It will be discussed with members of the focus groups with whom the company engaged prior to the production of the Report. 4.4 Observations on this case In terms of the literature review and specifically the two variables, relationship intensity and content expectations, the following observations can be made on this case. a) Relationship intensity Again it is important to guard against simplistic links between the amount of discussion devoted to a particular stakeholding group concern and its importance, but it can be an indicator of current priorities 29

the weighing of the Report and the level of detail indicates that there is most requirement for dialogue and engagement with, in priority order, suppliers, employees, local communities. There is at least observable dialogue with customers and consumers, NGOs central and local government. This could well be because there are already established dialogues with these groups.

there are efforts to engage a variety of stakeholders via a spectrum of issues of interest rather than by addressing their specific needs. Emphasis on the environment and ethical trading is clearly aimed at a range of stakeholders, customers, NGOs, activists, employees and shareholders. These are activities commensurate with a comprehensive engagement strategy.

the interests of indirect stakeholders, those who do not necessarily have direct contact with the company, for example primarily ingredient growers and potential activist groups are accommodated even though they may be at the contact engagement end of the scale. This could be part of a riskmanagement strategy.

b)

Content expectation Obligations go far beyond the immediate business environment. Indeed, there is an implicit assumption that the company will obey the legal framework for business in their spheres of operation and go beyond it. Hence these issues do not receive major prominence apart from to confirm this is the case. Effort is concentrated on demonstrating how the company exceeds these norms in the following areas: human rights and employment conditions of employees in developing countries human rights and ethical trading down the supply chain fairness in trading between nations and with other companies willingness to address broader food, diet and health issues beyond those concerning quality

30

contribution to communities beyond those immediately impacted by the business not only protection of the environment, but leadership in environmental good practice promotion, resource conservation and ecosystem protection.

5. Comparisons between the two cases

While clearly there are differences between the two cases, principally that one operates and reports globally, and the other is a country-specific Report for a global concern, there are a number of similarities and differences that provide useful insights. First the similarities. 5.1 Similarities Both find the GRI Guidelines appropriate with a level of customisation to suit their particular sector and company needs. The embedding of CSR within the organisational infrastructure is signalled as a key factor for both organisations. Given Cadbury Schweppes history and its earlier start in demonstrating a public commitment to CSR, it is apparent that they are further ahead in the process. The non-executive Director led CSR Committee and the Committees composition is a clear indication of this. However, given that the CCBH Report was the first country report of its kind for Coca-Cola (CCBHs parent company CCHBC published its first Social Report in June 2004), the level of commitment to date is impressive. In particular, the use of external consultants to obtain data, interpret result and write the Report provides a level of transparency and assurance not yet achieved by Cadbury Schweppes. For both organisations, systematic training on CSR for buyers and sellers is seen as vital. Both place major emphasis on the employee. Not only are the indications that their remuneration packages are at least as good as competitors, but they are usually better. Similarly with training, both in terms of its formal structure and in the amount

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provided for each employee. Equal opportunities and diversity are a central concern and although the CCBH case presents difficulties in the diversity context because of the countrys recent history, it is clear diversity is an aspiration. Both organisations respect employees rights to trade union or other types of representation. Community commitment as an expression of CSR is apparent for both organisations. Although direct comparisons are not possible because Cadbury Schweppes quote a proportion of pre-tax figures and CCBH a proportion of net sales revenues, it is clear both companies donate substantial amounts of money and merchandise. As part of their commitment to the end-consumer and the community, both organisations express concern about marketing to children, with Cadbury Schweppes not targeting advertising to children under 8 and encouraging support for parental control. CCBHs rules are not so well developed because Croatia has no specific standards on advertising to children in Croatia. However, the company does use The Coca-Cola Companys Global policy on advertising and promotion to children 5.2 Differences In many respects the key differences between the Reports are in emphasis, style and their point in company history rather than differences in principle. The most notable difference is in physical presentation. The CCBH document is simple, even stark in design and layout. It gives the impression of being a serious document where content is very much more important than presentation. Full colour materials are minimal. Single or two colour tables, pie charts and simple line graphics punctuate the body text. However, it is important to stress that this is not a cheap publication. The Cadbury Schweppes Overview booklet is full colour throughout with each page having a full colour montage as background to the text. The text itself is laid-out in a variety of ways. This style is in keeping with the corporate style. The detailed supporting booklets are much more subdued. Each has a full colour front, but inside text dominates with most illustrative materials been kept to colour panels, photographs and simple graphics. 32

It is difficult to explain this difference as just being a result of the different cultures of each company. Both have colourful, bold marketing presences. It can be interpreted as a statement of confidence. For CCBH this is the first step in a new political and economic environment. For Cadbury Schweppes this is an evolution of 200 years of socially business practice. This view is re-enforced by the level of reference to regulation and law. The CCBH Report makes many references to Croatian and International Law, protocols, conventions and frameworks and stresses conformity. While the Cadbury Schweppes Report makes reference too by ensuring compliance to international standards like the Universal Declaration of Human Rights, the ILO Conventions and local laws, it is also confident of its own processes and ways of doing things (which go beyond the law). The CCBH Report stresses its use of the GRI Guidelines, the Cadbury Schweppes Report refers to and uses some them, but structures the Report around its own CSR Pillars and company policies, for example, its HRET policy which is central to the Report. However, there are other style and tone differences that merit mention. The CCBH Report includes a section on methodology. The Report author is clear that this is not only to aid transparency, but as an encouragement to other companies in Croatia to produce a CSR Report. The notion of the company being part of a wider community with responsibilities not only to its own stakeholders, but to the new society that is being built in Croatia, is inescapable. While value judgements on the levels of honesty and/or defensiveness are dangerous, it would make this paper incomplete if this were not included. There is no reason for the authors to believe there is dishonesty in either report, but the question has to be asked about how much of the whole truth is being revealed. The CCBH Report appears to admit to more shortcomings, and that may well be the case. However, its size of operation, the size of the community in which it operates and its greater emphasis on internal stakeholders would make it highly likely that any over-emphasis of the case would be quickly uncovered. The Cadbury Schweppes Report is targeted at a much wider audience and to a greater number of stakeholders. Its orientation appears to be much more externally focused and this may partially explain why the 33

company is keen to demonstrate its CSR credentials in a more positive way. The danger is that absolute transparency lays a company open to attack even if it is, by all objective measures, doing far more then most other companies. The CCBH Report places more emphasis on human rights and opportunities for and in the workforce. Cadbury Schweppes emphasises this aspect too, but the major focus is on human rights and opportunity for those in the supply chain, particularly at primary source level. Again, history is the main explanation for this Cadbury Schweppes are a long established company operating in a free market and have had time to evolve their employee policies and practices over many years. For CCBH the environment is in transition and the company is playing a significant role in bringing together a workforce that is drawn from communities where war and politically related problems combined with nepotism and, sometimes, ethnic preferences were commonplace. Approaches to the consumer sections of the Reports are also different in emphasis. CCBH lays great weight on the safety and quality control aspects of its products. The weighting of the Report toward quality issues reflect concerns in the former communist nations over poor quality and safety. Again while quality control and assurance is highlighted in the Cadbury Schweppes Report, it is treated almost as a given. More space is devoted to the Companys response to consumer issues such as health and diet, including the growing problem of obesity. The Report recognises the link between the nature of the products the company manufactures and health issues. This is not so evident in the CCBH Report. There are also differences in emphasis in the community involvement section of the Reports. While the areas for support are broadly the same, education, lifestyle and the environment, CCBH has now included one other social inclusion obviously a key concern in the locality. While the Cadbury Schweppes covers this under health and welfare, it is interesting to note its prominent mention as a specific area for support in the CCBH Report. Volunteering and donations of staff time also play a major part in Cadbury Schweppess community programmes. This does not feature in the CCBH Report where the focus is on donations and gifts of merchandise or products.

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The environmental section of the CCBH Report is brief because a separate document was prepared on this. However, what material there is focuses on factory processes and ensuring these conform to ISO standards. The Cadbury Schweppes Report reports comprehensively on a range of factors. However, it goes beyond factory processes to look at sustainability issues down the supply chain, taking as a basic assumption the responsibility to ensure the manufacturing process is environmentally enlightened. Again, ethical trading does not feature at all prominently in the CCBH Report because most basic products come from the global company. However, the company does make a commitment to open competition and to meeting all contractual obligations. The Cadbury Schweppes Report lays great store on the ethical trading issue, emphasising its historical commitment and responding to current consumer concerns in a comprehensive manner.

6. Discussion and Conclusions

From the foregoing a number of observations and conclusions about the approaches of the two companies can be drawn which are presented in tabulated form to aid comparison.
Topic Area Reporting protocol Embedding CSR Cadbury Schweppes GRI, industry and proprietary 5 year programme building on traditional company values. Board level representation CCBH GRI 3 years into new programme. No Board level representation After a merger in 2002, CCBH became a member of CCHBC. In 2003 the company celebrated its 35 anniversary in Croatia Redundancies and salary reductions were to drive greater efficiency, but the perceived accountabilities are different in orientation for each company. Comment

Employee rights

EEO and Diversity Policies. Comprehensive Remuneration package. Plant mergers can lead to redundancies. Shareholder accountability given priority

Implementing EEO and Diversity. Developing remuneration package. Salary reductions. Employee accountability appears the priority

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Community commitment

Money, merchandise and time. Investment areas: 1) education and enterprise 2) health & welfare 3) environment

Money and merchandise. Investment areas: 1) Education 2) Environment 3) Health 4) Sport & leisure 5) Social inclusion Focus on employees Focus of product quality Aspirational, benchmarking with points to future requirements Sparing use of colour, formal, serious, full of facts and figures

CCBH focuses on community-building to mitigate the effects of the recent war and to bring communities together.

Human Rights Consumer affairs Tone and style

Focus on the supply chain Focus on food/diet issues Confident, on exposition of CSR in action as a progressive journey Colourful, bold, KPIs, full of case studies

Presentation

These indicators of similarity and difference lead the authors to propose a model of CSR reporting that is very much driven by the context in which the organisation operates and which is supported by the literature. It can be seen as a continuum summarised in the phrase CSR to build democracy, CSR because of democracy. In other words, in developing nations and economies, companies have a critical role to play in developing democratic accountabilities and building communities. Indeed, that is their principal CSR. In developed, democratic economies companies are already held accountable and their CSR has to be developed to demonstrate that accountability. The model below, illustrates the progression from one situation to the other.

ORGANISATION IN DEVELOPING DEMOCRACY CSR as Societal Driver

ORGANISATION IN DEVELOPED DEMOCRACY CSR as Societal Accountability

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This has a number of practical implications therefore for organisations who wish to operate effective CSR in developing and developed economies. DEVELOPING ECONOMIES Demonstrate compliance with regulatory framework to gain trust Explain and demonstrate principles of CSR (reframe old community philosophy) Focus on internal stakeholders to found the reality Focus of product quality to demonstrate integrity Community engagement for social cohesion Human rights of employees Environmental impact in the locality DEVELOPED ECONOMIES Demonstrate compliance plus to maintain trust Demonstrate embedded CSR (regain old community philosophy) Focus on external stakeholders to demonstrate the reality Focus on product issues to demonstrate leadership Community engagement for social concern Human rights in supply chain Environmental impact in a global context

Ethical trading practices with consumers Ethical trading practices in the supply chain. Business initiates dialogue with civil society underdeveloped civil society, weak or no pressure Ethical consumerism not developed and consumers not socially organised/ represented/legally protected Volunteering in the community not socially recognised or rewarded Civil society exerts pressure on business, demanding accountability and responsibility civil society demands dialogue Ethical consumerism developed and consumers well organised/ represented/legally protected Volunteering in the community well recognised and stimulated

Of course the above table simplifies the complex issues and situations facing organisations as they operate in a global context and the two positions would be better seen as a continuum, with the declared case on both sides being more or less true. In terms of the insights that come from the literature it can be seen that relationship intensity and content expectation are reflected in the balance of the Reports. In

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developing economies the focus is on employees and consumers. New relationships with the workforce develop driven by new market realities. At the same time, CSR can be used as a means of embedding democratic change and an acceptance of the implications of an open market economy in the wider society. Hence the orientation on the CCBH Report is on employees and consumers, where these relationships are more critical at this stage. The content expectation reflects these priorities. In developed economies, the focus is on the wider relationship with society with accountabilities reaching beyond the immediate operation of the company. Thus although employees and consumers are regarded as important, more broadly based stakeholder groups are addressed. Hence the orientation of the Cadbury Schweppes Report is to external accountabilities and relate to the supply chain, environmental issues and broader issues of governance. To the authors knowledge no such comparative study has been undertaken before. Global organisations tend to take a stance from the point of view of the country in which they are headquartered. This present study has sought to bring further insights into how CSR may be made more relevant to all the communities of global organisations. Further research is needed to explore these concepts and proposals. Fruitful lines of enquiry may include further testing of the notion of relationship intensity and content expectation development of theorising on stakeholder relationships, stakeholder dialogue/engagement in the CSR context testing the limits of organisational responsibilities for CSR exploration of the role of the public relations function in this context, especially relations to the boundary- spanning, mediation and dialoguefacilitation areas developing an understanding of what changes and opportunities CSR activities bring to the public relations function increasing understanding of how nations with a tradition of public information and propaganda models of communication can use CSR to develop new models of communication

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Acknowledgement: The authors would like to acknowledge the assistance of Lee Edwards of Leeds Metropolitan University in the preparation of this paper.

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NOTES:
1. The full Report for Coca-Cola Beverages Hrvatska (CCBH) can be found on www.coca-colahbc.hr. The CSR Report for Cadbury Schweppes is at www.CadburySchweppes.com 2. See the following websites for further information (www.ibe.org.uk; www.bsr.org.uk; www.csreurope.org; www.bitc.org.uk) 3. Full details of the Guidelines and background to them can be found on www.globalreporting.org 4. Data in this paragraph is drawn from the website of the Croatian Chamber of the Economy (Hrvatska Gospodarska komora www.hgk.hr) 5. The Global Competitiveness and Global Information Technology Reports for all participating countries are available in an individual and collated form at www.weforum.org 6. All data in this paragraph is drawn from www.statistics.gov.uk except where stated otherwise. This site gives a full profile of the UK economy. 7. Data drawn from www.oecd.org where full comparisons of GDP per capita for all participating nations can be found.

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Appendix 1 Summary taken from CCBH Social Report Pages 8 - 11

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APPENDIX 1

Summary taken from CCBH Social Report Pages 8 - 11

1. In the main Report, figures are provided which outline the main economic impacts of the company. These include: Sales Figures; Market Share; Exports; Supplier Breakdown; Costs of Goods and Services; Operating Expenses; Payroll Costs; Capital Expenditures; Dividends and Retained Earnings; Return on Tangible Assets; Earnings Before Interest and Tax; Taxes; and Financial Obligations and Contract Compliance. In a period marked by global, regional and national uncertainty, CCBH has sought to ensure a degree of stability in terms of its economic impacts on a range of stakeholders, taking steps necessary to correct negative trends at an early stage. Above all, the steady increase in the rate of return on tangible assets and on earnings bode well for the future. Investments made to modernise the production process continue to ensure that CCBH stays at the very top of technological development in the industry. In the reporting period, CCBH has increased sales by volume and reduced its costs. 2. In the reporting period, there was little change in overall employment and, notwithstanding a decision to reduce wages and salaries overall, average salaries remain well above those for Croatia as a whole and for the food and drinks production industry. There is one recognised Trades Union*, and 51.7% of the workforce are members, with all employees covered by collective bargaining agreements. A Workers Council functions according to the requirements of the Croatian Labour Law. A good record of health and safety continues to be improved upon. In the reporting period, increases in the amount of training, and improvements in quality, have been noted, with the introduction of People Development Forums (PDFs), creating a clear link between skills development and training. The proportion of women in management positions is above the figure for general female employment in the company. 3. An employee satisfaction survey found high levels of satisfaction for issues rated as important such as: Company Image; Responsibility; Dedication; and Quality but lower levels regarding: Salary; Integrity; and Managers/Supervisors. In the context of an increasingly competitive environment, there is a need for flexibility in the workforce and an intensive commitment to building new skills and competencies. In the process, new relationships between management and

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workers develop, built around core labour standards and the importance of safeguarding workers rights and interests, amongst those of other stakeholders. Inevitably, processes of restructuring can result in a decline in some aspects of workers satisfaction, and CCBH is committed to responding to real and perceived gaps between rhetoric and performance, in order to maintain its position as one of the most desired employers in Croatia. 4. CCBH adheres to international standards of the protection of human rights, as enshrined within the Croatian constitution and relevant laws. In a country in transition emerging from conflict, adherence to the rule of law, supplemented by clear codes of ethics and statements of principle, are key guarantors of human rights. As a company involved in relationships with communities, customers, consumers, employees, and suppliers, the company seeks to model high standards of behaviour and, through constant awareness and monitoring, ensure that any issues in performance are addressed and remedied as quickly as possible. CCBHs disciplinary and appeals procedures go beyond the requirements of Croatian law. 2 employees were dismissed in 2002, and 18 were subject to formal disciplinary procedures, compared with 4 dismissals and 15 disciplinary procedures in 2001. Every effort is made to provide a confidential employee grievance mechanism and to ensure non-retaliation against any employee who brings a grievance or who reports a practice which violates principles of human rights and the highest ethical standards. In accordance with the Code of Business Conduct, no political contributions are made. Lobbying takes place through industry interest groups. 5. Coca-Cola Beverages Hrvatska has established procedures guaranteeing a high level of responsiveness to consumers, with a free-phone telephone line, and quick responses to any complaints and concerns. A total of 114 consumer complaints were received in 2002. Supply chain evaluations are rigorous and focus on quality, delivery, customer service standards, and price. A Customer Satisfaction survey in 2002 found a very high rating for relationships with Sales Staff amongst all different customers, particularly relating to Courtesy; Regularity of Visiting; and Communicativeness. CCBH also pays attention to respect for consumer privacy, as in recent promotions. In Marketing, there is awareness of the importance of a balance between creativity and responsibility, with a keen desire to maintain a reputation for honesty and fairness, as well as 47

respect for diversity. A number of emerging challenges are being faced, including the link between marketing and sponsorship; cause-related marketing; and children and advertising. 6. CCBHs corporate giving is one part of its commitment to the wider community. In 2002, donations in cash and kind totalled 1.2 m HRK (160,000 Euro), a 220% increase from 2001. A total of 14 causes received direct donations of 693,000 HRK with a further 11 receiving indirect donations, purchased through a third party, of 156,000 HRK. The largest single donation was 400,000 HRK to the campaign for cochlea implants for children, in which CCBH was the largest single donor, in a campaign which raised over 15.7 m HRK. The companys donations focus on Health; Education; the Environment; Children and Young people; and Sports/Healthy Lifestyles. These are chosen as priorities based on the global commitments of the Coca-Cola Company and the specific needs of Croatian society. In addition, there has been targeting of specific towns and cities, including a major effort on sponsorship in Dubrovnik, as well as partnerships with a range of institutions and groups. 7. In each of the communities which border our plants, factories, and distribution centres, we have established good relationships with formal and informal community leaders, with schools and other public institutions, and with ordinary citizens. We have sought to consult and communicate on our plans through leaflets and attending public meetings. We have also responded to concerns regarding issues such as noise and smell by seeking independent expert advice and, in some cases, even when no clear evidence of a problem was forthcoming, acted and invested in order to reassure local citizens of our intention to be a good neighbour. 8. In looking forwards, CCBH is committed to produce a full sustainability report, incorporating all aspects of its social, environmental and economic performance, in 2005. Before then, CCBH will focus on a number of themes highlighted by the Report as meriting further attention. Health and Safety: CCBH will seek to ensure, in consultation with the Trades Union, that the workers representative on the Health and Safety at Work Committee is enabled to attend meetings of this Committee regularly.

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HIV/AIDS: CCBH will hold discussions within the company, within CCHBC, and with The Coca-Cola Company, on the need for a stated company policy on HIV/AIDS. CCBH will consult with a range of interested parties including business organisations, trades unions, Inter-Governmental organisations such as UNAIDS, medical experts, and others, on the development of such a policy. CCBH expects to make a decision on whether to pursue a formal written policy by the end of 2003. During 2004, CCBH expects that the Policy, if needed, will be written in draft form and, following consultations, will become company policy by the end of 2004. All procedural aspects of the policy should be in place by the time of the Sustainability Report in 2005.

Code of Business Conduct: A version of the Code of Business Conduct will be made available to all employees, as soon as possible. A shorter pamphlet describing the key aspects of the Code should be available to all stakeholders by the end of April 2004. In addition, CCBH aims to develop specific training on the Code for all employees by the end of 2004.

People Development Forums: In accordance with existing plans, PDFs will be cascaded through the whole workforce. In the 2005 Sustainability Report, an expanded section on training will describe the impact of this move, and should include a survey of the evaluation of skills training by the workforce which we will aim to undertake in 2004.

Equal Opportunities Policy: CCBH, with CCHBC, and in consultation with the Coca-Cola Company, will establish a Working Group to review the Companys commitment to Equal Opportunities. This group is expected to report by the end of June 2004. The company aims to produce a formal Equal Opportunities Policy statement, with associated measures and monitoring mechanisms, by the end of 2004.

Human Rights: CCBH will consult with the Croatian Business Council for Sustainable Development, with the World Business Council for Sustainable Development and others, regarding the formulation of a Human Rights Statement. The formulation of this statement should be completed in 2004 and will be extensively discussed and should be developed into a policy, likely by the end of 2004. The Sustainability Report will provide the first assessment of this policy and its value within the company and to various stakeholders.

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Recognising that most of the suppliers for CCBH are European, the statement will be of a general nature but will elaborate on the importance of human rights criteria in all contracting relationships with suppliers and customers. Marketing: CCBH will produce a short statement on social principles in advertising to reflect the increasing importance of cause-related marketing; the relationship between marketing, sponsorship and corporate giving; and the need for care in the use of and targeting of children in advertising. This statement, based on existing good practice, will be completed by the end of 2004. Community Giving: Throughout 2003 and 2004 CCBH will consult with a range of stakeholders to assess the advantages and disadvantages of holding an annual competition requesting proposals from humanitarian organisations and associations of citizens for projects which contribute to the lives of the community according to one or more key themes such as Health and Healthy Lifestyles, Education, Environmental Awareness, Sports and Leisure, and Social Inclusion. If appropriate, the first such open competition will be held in 2004, and the results reported on in the 2005 Sustainability Report. Environmental Sustainability: As already indicated, CCBH will complete all necessary steps to receive ISO 14000 certification in 2004. In addition, it will continue its relationships with a range of environmental groups including governmental bodies, non-governmental organisations, and environmental experts, and engage in a process of consultations to ensure that the reporting on Environmental issues in the 2005 Sustainability Report reflects a broad consensus on the crucial issues facing CCBH in this area. Training and Dissemination: All aspects of Corporate Social Responsibility will be incorporated into the Companys training plans, and will be reflected in company publications. In particular, the training of sales representatives will include a specific focus on their role as potential eyes and ears of a community development and community partnership approach. The company will also consider rewarding those employees who demonstrate a particularly innovative approach to social issues. * Another Trades Union was formed in 2003

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Appendix 2 Summary of the Cadbury Schweppes CSR Report provided by the authors of this paper

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APPENDIX 2

Summary of the Cadbury Schweppes CSR Report

1. The Companys People Strategy sets out values and policies in line with the Companys purpose, values and business principles. All businesses are expected to operate within the Companys minimum standards and local (i.e. country) legislation. The Equal Employment Opportunities (EEO) and Diversity Policy state that there will be fair and equitable treatment of employees regardless of gender, race, ethnic or national origin, colour, religion, marital status, age, sexual orientation, disability, social class and political affiliation within an inclusive work environment. Ethnic statistics are tracked against the appropriate national demographics the company is actively collecting data to compare local for local statistics. Cadbury Schweppes are members of the Vanguard Group of EEO Companies, the Employers Forum on Age and the Employers Forum on Disability. Training and development opportunities are provided individually as part of personal development plans to meet job and career needs; locally to support local business needs and globally, to address the strategic needs of the group and to ensue consistency for cross-company processes. The company reported an average number of training days at between 3-15 days training per employee. All managers are performance managed with the majority having personal development plans. 360o feedback tools are encouraged. The company partners AIESEC, the international students association in leadership development and exchange programmes. 70% of employees are represented via trade unions, works councils and/or collective bargaining arrangements. The CEO and management team give personal presentations around the world and employees have a confidential hotline to report any activities that might be inconsistent with the Companys business principles. Remuneration is generally comparable to that of similar companies share ownership is encouraged to those eligible and the company is working to extend that as a worldwide benefit. Wellbeing and work/life

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balance initiatives are encouraged and there are numerous flexible working benefits ranging from maternity leave for all female staff to job sharing, sabbaticals and career breaks. 2. Cadbury Schweppes deals through third parties (customers) to sell its products to consumers. Working with its customers, with consumer organisations and through direct contact with consumers via queries and complaints the company seeks to identify consumer trends and issues. In addition, advice is taken from Governments, activists, food lobbyists and the academic community. The Foods Issue Strategy Group, led by the Chairman is responsible for identifying emerging issues, setting global strategy and monitoring progress. As a result of monitoring consumer preferences, UK confectionary products do not contain genetically modified ingredients. The newly acquired Adams confectionary was quickly brought into line with this policy. The company is also aware of the increasing incidence of obesity in the Western World and in taking steps to act responsibly over this issue see below. Cadbury Schweppes has introduced a new Quality Policy and supporting standards to ensure the integrity of its products throughout the supply chain. Many factories have adopted the international, external Hazard Analysis and Critical Control Points (HACCP) programme and progress is being monitored at each site. 3. The company sees its relationship with suppliers as a critical expression of its CSR policies. A cross-functional working group consisting of senior employees and an external advisor, The Corporate Citizenship Company, monitors the Human Rights and Ethical Trading Policy (HRET). It reports to the CSR Committee. Cadbury Schweppes has about 40,000 suppliers in total. The current focus is on human rights and labour issues in the supply chain. Core labour rights preclude the use of forced labour and child labour under the age legally allowed in any country of operation. In addition children are only employed where they are protected from physical risks and their education is not interrupted. Employees can join recognised trade unions and harassment in the workplace is forbidden. Health and Safety is a priority. Remuneration and 53

equal opportunities have been covered under point 6 above. The HRET policy was developed in 2000 and was followed by a series of detailed pilot studies in China, Ghana, Indonesia, Mexico and Turkey which involved discussion with and site visits to suppliers, NGOs, governments, international organisations and a major international commodity supplier the company buys cocoa on the international commodity market. The company has developed ethical sourcing standards based on the Universal Declaration of Human Rights and the International Labour Organisation convention on labour rights. Existing suppliers implement the standards with Cadbury Schweppes buyers being trained in the standards and checking compliance with suppliers. The programme is now being rolled out across the company in a prioritised way. Major suppliers will be regularly assessed for compliance. 4. The company is committed to build community value around the world. The overall aim is to invest 1% of pre-tax profit in community programmes. There are three main areas for investment: education and enterprise, health and welfare, and environment, but local business units have latitude to invest to suit the needs of their community. They also have total discretion on how much money, time and skills or gifts in kind they will invest. The company works with BitC Per Cent Club and the London Benchmarking Group to measure and manage community investment. In the UK, cash donations are channelled mainly through a registered charity, the Cadbury Schweppes Foundation. In 2003, global contributions to charities or equivalents in cash, kind or time amounted to 6.03m, 1.09% of global pre-tax profit and an increase of about 10% on the previous year. Of this 3.3 million went on education and enterprise, 1.8 million on health and welfare, 0.3 million on environment and 0.5 million on other projects. Health and welfare initiatives focus on promoting active lifestyles such as the Chappies Little League a national schools soccer development programme for under 12s. In 2003 it became the worlds largest football tournament with 138,529 players participating. The company also supports HIV/AIDS education programmes for its African employees and access to healthcare products. It also helps numerous charities who work with HIV/AIDS sufferers. Environmental initiatives cover providing clean drinking water in Ghana and India and local clean up activities. In 54

recognition of outstanding contribution to the community the Company awards the Chairman Awards every two years. Numerous external awards have been given to the company including the Food and Drink Federation Award 2003 and Management Todays Most Admired Companies Award. 5. In terms of its approach to the environment, health and safety (EHS), Cadbury Schweppes has a ten point policy. For a number of years the company has been working with suppliers to improve environmental performance and protect the ecosystem that provides raw materials. The company is committed to implement an integrated EHS Management System that is compliant with ISO 14001 and ISO 18001. All sites are audited by Group Personnel and some are audited and certified by either ISO 14001 or the Eco-Management and Audit Scheme (EMAS). The sustainability KPIs introduced in 2003 will provide a benchmark for future measurement. The Business in the Environment Survey 2003 ranked Cadbury Schweppes 3rd in the food and drink sector. In 2004 health and safety statistics will be collected group-wide to a standard set of KPIs as opposed to local reporting standards. Those operating under the new KPIs in 2003 recorded 819.5 accidents per 100,000 employees. The company supports the Kyoto Protocol and local agreements. In 2002 and 2003, it participated in the Carbon Disclosure Project, a survey of the worlds largest 500 companies and was selected as one of the 50 global companies in the Climate Leadership Index. The UK governments standard for Company Reporting on Greenhouse Gas Emissions has been adopted. The company goes beyond its requirements and includes the CO2 used to carbonate beverages on the assumption that the gas will be released at some time. The trend for energy use, CO2 emissions and packaging is down over a six year period. The Company recognises its responsibility to maintain biodiversity and in consulting with NGOs on what its priorities should be. Current biodiversity projects include one to look for sustainable sources of palm oil. In areas such as water consumption, ozone depletion, fuel consumption and transport emissions, the six year trend is down and a range of measures are in place to minimise the potential for groundwater contamination and to 55

minimise waste which includes a comprehensive realigning and reuse programme. For example, in France 90% of solid waste is recycled. All wastewater is treated before being returned to the environment. 6. Looking to the future, the Company commits to further develop the five CSR Pillars. Some of the key features of this are: Human Rights and Employment Standards labour standards throughout the supply chain to meet highest international minimum standards confidential employee hotline for breaches of business principles global employee climate survey in 2005

Ethical Sourcing and Procurement integrate ethical sourcing, environments and quality audits in supply chain global compliance process understand better the parameters of sustainable supply of raw agricultural products and take a leadership when raising standards, for example in palm oil and cocoa. Marketing Food and Consumer Issues more research into the area of food and diet and build findings into policies and activities work with stakeholders on the issues of obesity and poor lifestyles, especially their impact on vulnerable groups Environment, Health and Safety support new ISO 14001 and ISO 18001 standards measure impact on ecosystems from which raw materials are drawn and work with partners to protect biodiversity Community build community investment into mainstream business practitioner Business Units to invest 1% pre-tax profits in targeted projects

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