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CONTENTS GLOSSARY OF ACRONYMS ...................................................................................................... 3 EXECUTIVE SUMMARY ............................................................................................................. 4 I. INTRODUCTION .................................................................................................................. 7 Scope of the study ........................................................................................................... 8 Methodological approach .................................................................................................. 9 Outline of the study.......................................................................................................... 9 II. CONTEXT ....................................................................................................................... 10 III. CSR RELATED POLICY GUIDELINES AT EU LEVEL .................................................................... 13 A. POLICY DOCUMENTS RELATED TO CSR ............................................................................. 15 B. POLICY DOCUMENTS RELATED TO SMALL AND MEDIUM SIZE ENTERPRISES .............................. 32 C. POLICY DOCUMENTS RELATED TO SUSTAINABLE BUSINESS DEVELOPMENT.............................. 33 IV. CSR POLICY FRAMEWORK IN THE TARGETED COUNTRIES .......................................................... 37 BOSNIA AND HERZEGOVINA (BiH) ........................................................................................ 37 CROATIA ........................................................................................................................ 39 MACEDONIA .................................................................................................................... 42 SERBIA .......................................................................................................................... 44 Analysis of the CSR policy elements and their coherence with EU CSR policies ....................... 46 V. PRIVATE SECTOR (SMEs) AND CSR IN THE TARGETED COUNTRIES .............................................. 51 VI. MAIN CONCLUSIONS AND RECOMMENDATIONS ...................................................................... 68 BIBLIOGRAPHY ................................................................................................................... 73

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GLOSSARY OF ACRONYMS BiH

Bosnia and Herzegovina

CEE/SEE

Central East Europe/South East Europe

CRO

Republic of Croatia

CSR

Corporate Social Responsibility

EC

European Commission

EMAS

Eco-Management and Audit Scheme

EU

European Union

GTZ

German Technical Cooperation

HRPSOR

Croatian Business Council for Sustainable Development

ISO

International Organization for Standardization

MK

Republic of Macedonia

NGO

Non-governmental Organization

OECD

Organization for Economic Co-operation and Development

SME

Small and Medium –sized Enterprise

SRB

Republic of Serbia

UNDP

United Nations Development Program

UNGC

United Nations Global Compact

UNIDO

United Nations Industrial Development Organization

USAID

US Agency for International Development

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EXECUTIVE SUMMARY Sustainable development is one of the key paradigms in today‘s economy. Over the past several decades, globalization and economic growth has resulted in increased impact on communities and the environment. Although these processes in many instances improved the wellbeing of people, it also contributed to environmental degradation and increasing inequalities among vulnerable groups and communities. Consequently, in today‘s interconnected global economy, the long-term value and success of business are inextricably linked to the integration of environmental, social and governance issues into company‘s management and operations. Moreover, in the last decade, innovation with sustainable and equitable development in mind has brought new solutions to the global as well as local challenges. Corporate Social Responsibility (CSR) is a concept of responsibility of the company (large as well as SMEs) for the impacts of its decisions and activities on society and the environment through transparent and ethical behaviour. CSR is not an add-on to the company‘s business but it should be integral part of the business strategy at all levels. It is directly connected to sustainable development requiring the company to look into its financial, social and environmental performance. CSR was initially introduced with a focus on the large multinational companies. Nevertheless, in the last years it‘s been increasingly recognized that CSR is relevant for the SMEs as well in particular having in mind their importance for the global economy and their cumulative impact on the employment, environment and social development. Moreover, when CSR is strategically integrated throughout the SME‘s business process it supports companies goals for enhanced productivity, decreasing operational costs and market access. UNIDO has already engaged in providing support for the SMEs that look into integrating CSR. In this context, UNIDO initiated a project targeting the SMEs in the CEE/SEE Region that showcase that the Triple Bottom Line (TBL) approach is an effective tool to improve SME‘s competitiveness and responsible business behaviour. For this purpose, UNIDO has developed a practical tool called the ―Responsible Entrepreneurs Achievement Programme‖ (REAP). In addition, UNIDO has initiated and supported the establishment of the Regional CSR Network for Small Businesses in the CEE/SEE. In June 1993, the then President of the European Commission Jacques Delors made an appeal to European businesses to address Europe's structural problems of unemployment, restructuration and social exclusion. Since then, the EU has consistently addressing the importance of contribution that businesses can make in the area of social cohesion, economic competitiveness, sustainable development etc. EU‘s commitment to encouraging CSR was reflected in many of their policies and various Directorates General (DGs) of the European Commission have been dealing with the issue of CSR within their competencies. Some of the key milestones in the targeted EU CSR policies include: 1) Green Paper Promoting a European framework for Corporate Social Responsibility from 2001; 2) Communication of the Commission concerning Corporate Social Responsibility: A business contribution to Sustainable Development 2002, COM(2002) 347 final; 3) Establishment of the European Multi Stakeholder Forum on CSR in 2002; 4) Communication from the Commission The Partnership For Growth And Jobs: Making Europe A Pole Of Excellence On Corporate Social Responsibility, COM(2006) 136 final; 5) Launching of the European Alliance on CSR in 2006; 6) Communication from the Commission A renewed EU strategy 2011-14 for Corporate Social Responsibility, COM(2011) 681 final, 2011. This research study is complementary to the work that UNIDO has been already doing in promoting CSR in CEE/SEE Region. The main aim of the research study is to gather information, analyze and elaborate on the readiness of the CEE/SEE private and public

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sectors to engage and approach compliance with the EU CSR policy framework. The study is initiated in order to address the increasing commitment of the European Commission to promote CSR concept among current and prospective member countries. The countries from the region have the long-term goal of integrating into the EU and along these lines the EU policies and approach to CSR gains increasing importance and relevance for the accession process. The research study compares and contrasts the CSR policies and practices of several countries in the CEE/SEE region: Bosnia and Herzegovina, Croatia, Macedonia and Serbia. Furthermore, the study examines the current performance and challenges of the region‘s business sector (in particular SMEs). Finally, it provides a series of recommendations for further advancement of the policies and support for the private sector in the countries covered by the study. The study showed that the level of development of CSR related policies and practices differ among the four Balkan countries which indicate different levels of readiness of the public institutions. In two of the countries, Macedonia and Serbia the governments have introduced national CSR agenda as the main strategic document for promotion and development of CSR in the respective countries. The National CSR Agendas in Macedonia and Serbia are in line with the EU CSR policies in terms of understanding of CSR, its role for sustainable development and creating jobs and growth as well as the objectives and measures which use appropriate mix of instruments to support the uptake of CSR by the businesses and other stakeholders. The Agendas are developed with high participation of all relevant stakeholders; they are based on the analysis of the local CSR context and envisage appropriate government structures for their implementation. Macedonia has already established multi stakeholder body i.e. National Coordinating Body for CSR as well as CSR Unit within the Ministry of Economy. Serbia is expected to officially establish its structure in 2012. The situation in Bosnia and Herzegovina and Croatia is somewhat different. CSR as a concept is not reflected in the main development documents of Bosnia and Herzegovina. Although the government shares the vision and a need for sustainable development, it seems that there is lack of awareness among the public institutions about the concept of CSR, its role and development potential. There is an evident need for extensive awareness raising and capacity building of the institutions on CSR as a concept and on CSR related policies. The public authorities in Croatia are familiar with the concept of CSR as it is reflected in the strategic documents related to sustainable development and sustainable production and consumption. Some measures for promoting CSR in the country are incorporated however, their scope is limited to some environmental aspect and they don‘t reflect the complexity of the concept of CSR. The public policies in both countries could benefit from more targeted and elaborated approach on CSR. In the last year there has been increased public debate among the stakeholders in Croatia about the need for targeted CSR policies. None of the CSR related policies in the Balkan countries identify distinction between the uptake of CSR between the large companies and the SMEs. More targeted approach to the particular needs and challenges of the SMEs should be adopted. Furthermore, there is a need for incorporation of CSR in the sector specific policies (employment policies, entrepreneurship policies, environmental etc) to ensure more effective and efficient integration of CSR. The big challenge for the public authorities is the implementation of the adopted measures which requires increased capacity throughout the administration as well as resources. In these lines, public authorities can benefit from additional capacity building

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on CSR as well as regional exchange of experience which could be facilitated by the Regional CSR Network for Small Businesses in CEE/SEE. The small and medium sized enterprises in all four Balkan countries are increasingly familiar with the concept of CSR as majority of the surveyed companies were able to identify CSR in relation with the triple bottom line and engagement with stakeholders. There is still number of companies that identify CSR through the compliance with national legislation as well as through the philanthropic activities which indicates further needs for raising awareness. For most of the companies, the media is the first source of information thus engaging media in promotion of CSR should be intensified. Public policies should incorporate more balanced approach in raising awareness activities and equally address all aspects of CSR relevant for the SMEs. This should be conducted in a simplified way to avoid overwhelming the SMEs which struggle with lack of funds, know-how, human resources and time. CSR public policies targeting the SMEs also have to include measures to alleviate the obstacles identified by the SMEs and to increase their readiness to uptake CSR in their business operations. This can be implemented through mix of instruments such as: a) free of charge direct counselling/mentoring; b) government financial incentives; c) measures that will create linkages with larger firms and facilitated participation in business networks. CSR public policies have to be more assertive in promoting the CSR business case for the SMEs in a targeted way. Promotion of REAP case studies from the SMEs in the region should be promoted as it will contribute to increased understanding of full benefits from integrating CSR into the business operation of the SMEs. Furthermore, there is a need for more proactive approach by the other stakeholders in creating networking opportunities and exchange of CSR experience among the managers from the SMEs in the region. The Regional Network for Small Business in the CEE/SEE can also play important role in promoting CSR among the SMEs in this regard.

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I. INTRODUCTION Businesses are integral part of the society and they inevitably influence it in positive as well as negative ways. With the globalization, and growing financial and economic interdependence, their impact on communities and environment has increased. In addition, the nature of the challenges today‘s societies are facing (climate change, depletion of natural resources, human rights, health issues, increased poverty etc) requires intervention and engagement by all stakeholders in a collective action: the governments, the enterprises, civil society organizations, institutions. Corporate Social Responsibility (CSR) is the responsibility of the company for the effects its decisions and activities have on society and the environment. It is voluntary effort, achieved through transparent and ethical behaviour and takes into consideration the expectations of company‘s stakeholders (employees, consumers, suppliers, shareholders, investors, local communities, NGOs etc). CSR is directly connected to sustainable development requiring the company to look into its financial, social and environmental performance. It has to be strategically integrated throughout company‘s business process, supply chain, products, and customer relations. And it can be done perfectly in line with company‘s quest for facilitated market access, enhanced productivity or decreasing operational costs. In the past decades, the CSR discourse has been primarily focused on the large multinational corporations. And while the impact of an individual global corporation on the environment and society is significantly larger than the impact of a single small and medium sized enterprise (SME), SME should not be overlooked by the policy makers and initiatives to promote CSR. SMEs represent 99% of all European business, providing two out of three jobs in the private sector and contribute to more than half of the total value-added created by the businesses in the EU. In this perspective, the cumulative social and environmental effects of their business operations are significant. Appropriate policies and initiatives that stimulate and promote responsible entrepreneurs and small businesses can have large positive impact on the long-term economic stability and sustainable development. The United Nations Industrial Development Organization (UNIDO) believes that the establishment and development of highly productive, socially minded and environmentally sustainable SMEs is extremely important for sustainable economic growth. In the light of an increasingly globalized world markets, with dwindling raw-materials, water and energy supplies, businesses with a sustainable outlook will be able to compete and perhaps survive in the dramatically different business world of the future. In the last decade, UNIDO has worked with SMEs around the world and supported them in integrating the concept of Corporate Social Responsibility in their business practices. In this context, UNIDO initiated a project on ―Presenting the TBL approach as effective tool to assist SMEs in CEE/SEE Region to adopt social and environmental programmes‖. The project has showcased that the Triple Bottom Line (TBL) approach is an effective tool to improve SME‘s competitiveness and responsible business behaviour by building 1) on the principles of lean manufacturing to improve their organization and production processes, help SMEs to 2) integrate social considerations into their way of doing business and to 3) engage in better environmental management practices to further enhance efficiency and cut costs. For this purpose, UNIDO has developed a practical tool called the ―Responsible Entrepreneurs Achievement Programme‖ (REAP). The project was implemented in several CEE/SEE countries such as Croatia, Serbia, Bosnia and Herzegovina and Ukraine.

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In 2008, UNIDO launched a project which aims to establish a Regional Network for Corporate Social Responsibility (CSR) Competence and Small Business to enhance the environmental and social conditions in small and medium-sized enterprises (SMEs) operating in Central, South and Eastern Europe (CEE/SEE). The Regional Network will assist local SMEs in the participating countries to conduct business in a socially and environmentally responsible manner.

GOAL OF THE STUDY The main aim of the research study is to gather information, analyze and elaborate on the readiness of the CEE/SEE private and public sectors to engage and approach compliance with the EU CSR policy framework. The study is initiated in order to address the increasing commitment of the European Commission to promote CSR concept among current and prospective member countries. The countries from the region have the long-term goal of integrating into the EU (with some of them already being candidate countries), and along these lines the EU policies and approach to CSR gains increasing importance and relevance for the accession process. The research study compares and contrasts the CSR policies and practices of several countries in the CEE/SEE region: Bosnia and Herzegovina, Croatia, Macedonia and Serbia. The findings are presented as a base-line study which can also serve as a basis for measuring progress over time. The study examines the policies in comparison with the EU Policy Framework and Guidelines related to CSR and Sustainable Business Development. Furthermore, based on the EU recommendations and guidelines with respect to the private sector, the study examines the current performance and challenges of the region‘s business sector (in particular SMEs). Finally, it provides a series of recommendations for further advancement of the policies and support for the private sector in the countries covered by the study. The research study is intended to be utilized by the Regional CSR Network for Small Business as well as by UNIDO for further programming in this area. It can also be utilized by the authorities in the respective countries as a baseline in the process of improving the legal and institutional framework for CSR. However, it can also serve as resource material to the Regional CSR Network for Small Business in CEE/SEE, the practitioners, institutions and organizations involved in the issue of CSR in the region.

SCOPE OF THE STUDY The research study primarily focuses on three aspects:  Overview of the CSR movement at the EU level and emergence of EU-wide CSR related standards and policy guidelines;  Comparison between the core EU CSR related policy guidelines and standards with the ones currently under implementation in CEE/SEE target countries;  Preparedness of the CEE/SEE countries‘ private sectors for EU accession in terms of CSR, social and environmental standards and current performance at the policy level The analysis provides comparative discourse in the abovementioned areas in all countries covered with the study where such information could be obtained. More specifically, the specific objectives of the study are to:  Identify existing EU policy documents and guidelines related to CSR and Sustainable Business Development (related to the SMEs) ;  Provide overview of the main guiding principles and recommendations from the EU policies for the policy makers, the private sector and other CSR related stakeholders;

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 Identify and review the existing CSR related policies in the four targeted countries;  Assess the existing level of understanding and CSR performance of the SMEs in the four targeted countries;

 Address the needs and challenges of the private sector and other stakeholders in 

the targeted countries; Formulate recommendations and suggest specific options for advancing CSR policies and practices in the region.

METHODOLOGICAL APPROACH The predominant methodology used in the research study was desktop review of existing documents and web sites from the EU and the respective countries. An effort was made to include most recent regulation and policy documents. CSR related policy documents in the target countries were obtained with support from the local partners and experts on CSR. Information is processed taking careful consideration about its relevance and comparability1. In terms of the preparedness of the private sector, the study used the data obtained through previously conducted research commissioned by UNIDO for the purposes of the Regional CSR project2. The research was conducted among the SMEs in 2009 in Croatia, Bosnia and Herzegovina and Serbia. The aim of the survey was to show the level of understanding on CSR among the SMEs in the Balkan countries as well as to show their readiness to implement the CSR principles in their companies. The issues addressed in the survey included: a) SMEs‘ understanding of the definitions and CSR activities, b) the obstacles companies face in implementing CSR, c) the expected impact of CSR implementation and d) their readiness to invest in implementing CSR principles in their company. Same methodology was used to conduct the survey among the SMEs in Macedonia in the period of December 2010 – May 2011. Thus, the data obtained in all countries is compatible and provides possibility for appropriate comparative analysis. In addition, other relevant documents and studies were used as well to the extend applicable to the study such as the Baseline study on CSR practices in the new EU Member States and Candidate Countries commissioned by UNDP conducted in 2007.

OUTLINE OF THE STUDY The research study is organized in several chapters that follow the objectives. After the introduction, Chapter II briefly describes the context that initiated the creation of this study and provides general information on CSR at EU level as well as in the targeted countries. Chapter III provides overview of the existing standards and policy guidelines issued by the European Commission outlining separate recommendations for the public and the private sectors. Chapter IV outlines the existing policy framework related to CSR in the four targeted countries and assesses their compatibility with the EU policy framework. Chapter V focuses on the private sector in the targeted countries, their awareness and existing CSR practices. The chapter also identifies the bottlenecks, needs and challenges of the private sector in incorporating CSR into their operations. The final chapter summarizes the key conclusions and provides recommendations and options for policies that will promote and encourage CSR in the region.

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http://csr-net.org/ In 2008, UNIDO launched a project which aims to establish a Regional Network for Corporate Social Responsibility (CSR) Competence and Small Business to enhance the environmental and social conditions in small and medium-sized enterprises (SMEs) operating in Central, South and Eastern Europe (CEE/SEE). More information available at http://www.unido.org/index.php?id=5650 2

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II. CONTEXT Today, it‘s widely recognized that the companies are an integral part of society and that through their operations they inevitably affect it. With ever greater awareness about and concerns with the problems related to environmental degradation and pollution, poverty and poor health as well as persistent social difficulties and imbalances, the expectation that businesses cannot ignore their role in addressing these has sharply increased. (Social Responsibility of an organization3 represents the responsibility for the impacts of its decisions and activities on society and the environment through transparent and ethical behaviour that:  contributes to sustainable development including health and the welfare of the society;  takes into account the expectations of stakeholders;  is in compliance with applicable law and consistent with international norms of behaviour; and  is integrated throughout the organization and practised in its relationships Corporate Social Responsibility (CSR) enables the companies to achieve their business goals while at the same time taking into consideration the social aspects and the environment. Besides reducing the risks in case the company does not address these aspects, applying CSR principles can also bring business benefits for the company. Incorporating CSR can improve company‘s productivity, competitiveness, public image, improved access to the capital markets as well as encourage innovation and contribute to the development of new products and services. In view of the increasing importance of CSR, many worldwide initiative and standards have been and are being introduced to encourage and promote the concept such as: the Global Compact of the United Nations (UNGC) , which is a strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption; Global Reporting Initiative, whose purpose is to promote sustainability reporting and to make it a standard practice for all organizations; The United Nations-backed Principles for Responsible Investments (PRI) were devised by the investment community and they provide a voluntary framework by which all investors can incorporate environmental, social and corporate governance issues into their decision-making and ownership practices and so better align their objectives with those of society at large; the OECD Guidelines for Multinational Companies provide voluntary principles and standards for responsible business conduct in areas such as employment and industrial relations, human rights, environment, information disclosure, combating bribery, consumer interests, science and technology, competition, and taxation; AccountAbility (AA1000), as leading global organization that has been focused on "mainstreaming" sustainability into business thinking and practice through setting standard for Corporate Responsibility and Sustainable Development; International ISO Standards etc. The principles and guidance provided through these initiatives offer companies specific guidelines on integrating CSR. The European Commission puts considerable emphasis on CSR and strives to incorporate its principles into EU policies. According to the new CSR policy of the European Commission, CSR is the responsibility of enterprises for their impacts on society 4. While in the EU, the discussions around CSR have been ongoing for a few decades, CSR is relatively new concept in the region of Central, South and Eastern Europe (CEE/SEE). As the countries underwent the process of transition from the socialist system, economic sustainability 3 4

Definition according to the new ISO26000 Guidance on social responsibility A renewed EU strategy 2011-14 for Corporate Social Responsibility, COM(2011) 681 final, 2011

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represented a continuous challenge for entrepreneurs especially SMEs which didn‘t have time and resources to pay attention to social and environmental responsibility5. Moreover, the general public did not put pressure on the companies to incorporate such issues into their day-to-day operations. While in the countries in Western Europe, the emergence of CSR was driven by the pressure from the consumers and various civil society organizations, according to the UNDP‘s Baseline Study6, in the CEE/SEE Region it appears that the businesses themselves (mostly multinational companies) supported by local, membership based business organizations and international institutions are the main agents of change. The awareness and power of non-governmental organizations (NGOs) to put pressure is limited. Increasingly, governments are taking pro-active role in promoting CSR in the countries in the region. The survey conducted within this project frame showed somewhat similar picture with increased role of the media. Namely, most of the surveyed SMEs heard about CSR for the first time through the media and other businesses. In Bosnia and Herzegovina United Nations Global Compact Network also played important role in conveying the CSR principles (for more information refer to Chapter V).

Trends in CSR public policy within EU and CEE/SEE In June 1993, the then President of the European Commission Jacques Delors made an appeal to European businesses to address Europe's structural problems of unemployment, restructuration and social exclusion. He invited enterprises to fight against social exclusion and to adopt a European Declaration against Social Exclusion. Since then, the EU has consistently addressing the importance of contribution that businesses can make in the area of social cohesion, economic competitiveness, sustainable development etc. EU‘s commitment to encouraging CSR was reflected in many of their policies and various Directorates General (DGs) of the European Commission have been dealing with the issue of CSR within their competencies. In the key strategic documents7 of the European Commission, it is emphasized that "public policy has a key role in encouraging a greater sense of corporate social responsibility and in establishing a framework to ensure that businesses integrate environmental and social considerations into their activities. Businesses should be encouraged to take a pro-active approach to sustainable development in its operations both within the EU and elsewhere". The EU has thus committed to integrate the economic, social and environmental considerations into its policies and actions and to integrate CSR principles in many of its policies such as: social policy and employment policy, enterprise‘s policy, the environmental protection policy, the policy of consumers protection, rules and procedures for public procurement policy and external relations. At a national level, EU Member States often encourage CSR through indirect or partial legislation and voluntary regulatory initiatives. For example, a frequently applied approach is green public procurement that, according to the EC Survey of 20058 on the state of play on green public procurement, is applied in seven Member States (Austria, Denmark, Finland, Germany, Netherlands, Sweden and UK). The National action plan for the sustainable purchases on the open market for the period from 2007 to 2009 adopted by the French Government in March 2007 calls on the public agencies to make use of sustainable and therefore socially responsible procurement9. In Belgium, some of the federal contracts

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Baseline Study on CSR practices in the new EU member States and Candidate Countries, UNDP, 2007 Ibid. 7 Green Paper: Promoting a European Framework for Corporate Social Responsibility, COM(2001) 366 final, 2001 8 Green Public Procurement in Europe 2005, Status Overview 9 ―Corporate Social Responsibility: National public policies in the European Union‖, European Commission, DirectorateGeneral for Employment, Social Affairs and Equal Opportunities, 2011 6

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for public procurement are giving advantage to those who meet criteria for inclusion of disadvantaged groups10 and so on. Another approach to regulation that is often used by governments is compulsory reporting on social and environmental aspects of the enterprises‘ operations. Such legislation is, in slightly different ways and with regard to different sectors or industries, applied in France, Denmark, Netherlands, Norway and Sweden. Other member states have passed more comprehensive laws on CSR. In December 2008, Denmark passed a law on CSR 11. The Law obligates the largest 1100 companies, investors and state owned enterprises in Denmark to include CSR information in their annual financial reports. The information should include: (1) information about CSR policies or CSR initiatives in the company; (2) information how these policies are implemented in practice; and (3) information on achieved results as well as expectations of the management regarding the future of CSR/CSR initiatives. Given that CSR is a voluntary activity, if the company does not have policy on CSR, they must include a statement of their position in relation to CSR in their report. Some of the European countries have furthermore adopted strategies for CSR. This trend is particularly present in the countries of Eastern and Southeast Europe. CSR Strategy 2006-2008 was adopted by the Ministry of Social Welfare and Labour of Lithuania. Republic of Macedonia adopted a national agenda on CSR from 2008 to 2013. Republic of Serbia adopted the National Strategy for CSR in July 2010 and so on. These documents include specific targets for additional activities in the field of CSR related legislation. In 2008, Denmark has adopted an Action Plan for CSR, while Norway in 2009 published a White Paper on CSR. Both documents contain guidelines for developing a supportive framework for CSR. CSR action plans and strategies were also adopted by Belgium in October 2006, Bulgaria in 2009, Germany in 2010, and Hungary and the Netherlands in 200712.

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―Corporate Social Responsibility: National public policies in the European Union‖, European Commission, DirectorateGeneral for Employment, Social Affairs and Equal Opportunities, 2004 11 Resources of the Danish Government Center for CSR 12 ―Corporate Social Responsibility: National public policies in the European Union‖, European Commission, DirectorateGeneral for Employment, Social Affairs and Equal Opportunities, 2011

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III. CSR RELATED POLICY GUIDELINES AT EU LEVEL Although EU aims to achieve greater political visibility of CSR, considering that CSR is based on the voluntary principle, EU believes the approach that would impose greater obligations and administrative requirements for enterprise risks being contra-productive and would be on contrary to the principles of good regulations13. Thus, EU policies related to CSR are carefully balanced and they mostly provide principles and guidelines for consideration by the states, companies as well as the other stakeholders. In the context of CSR and Sustainable Business Development policies, in the last decade the European Commission has developed numerous documents categorized as: policies, guidelines and other resource documents such as reports, decisions etc (see Box 1). In the scope of this study, the relevant policies will be reviewed and outlined in detail. Particular emphasis will be given on policy segments related to the integration of CSR in the SMEs. The guidelines and additional documents will not be covered in details; they will rather serve as resource materials and will be referenced throughout the document.

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Communication from the Commission, Implementing the Partnership for Growth and Jobs: Making Europe a pole of excellence on Corporate Social Responsibility, COM(2006) 136 final, 2006

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Box 1. List of EU Policies, Guidelines and other documents related to CSR and Sustainable Business Development I. POLICIES A. Corporate Social Responsibility Policy Documents adopted by the European Commission 1. GREEN PAPER Promoting a European framework for Corporate Social Responsibility 2001 2. COMMUNICATION FROM THE COMMISSION concerning Corporate Social Responsibility: A business contribution to Sustainable Development 2002, COM(2002) 347 final 3. COMMUNICATION From The Commission To The European Parliament, The Council And The European Economic And Social Committee Implementing The Partnership For Growth And Jobs: Making Europe A Pole Of Excellence On Corporate Social Responsibility, COM(2006) 136 final 4. COMMUNICATION FROM THE COMMISSION To The European Parliament, The Council And The European Economic And Social Committee and the Committee of the Regions: A renewed EU strategy 2011-14 for Corporate Social Responsibility, COM(2011) 681 final, 2011 Policy Documents adopted by the European Parliament 5. Resolution on CSR 2002 6. Resolution on CSR 2003 B. Small and Medium Enterprises 1. COMMUNICATION FROM THE COMMISSION to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions implementing the Community Lisbon Programme– Modern SME Policy for Growth and Employment, COM(2005) 551 final, 2005 2. COMMUNICATION FROM THE COMMISSION to the European Parliament, the European Economic and Social Committee and the Committee of the Regions - ―Think Small First‖, A ―Small Business Act‖ for Europe, COM(2008) 394 final, 2008 C. Sustainable Business Development 1. PRESIDENCY CONCLUSIONS Göteborg European Council 15 and 16 June 2001 2. COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT On the review of the Sustainable Development Strategy 2005 3. Renewed EU Sustainable Development Strategy 2006 4. COMMUNICATION FROM THE COMMISSION concerning Sustainable Consumption and Production and Sustainable Industrial Policy Action Plan, COM(2008) 397 final II. GUIDELINES A. Corporate Social Responsibility 1. A guide to communicating about CSR 2. Guidelines to Enhance CSR in the Construction Sector III. OTHER A. Corporate Social Responsibility 1. COUNCIL DECISION of 12 July 2005 on Guidelines for the employment policies of the Member States 2. COUNCIL DECISION of 18 July 2006 on guidelines for the employment policies of the Member States 3. COUNCIL DECISION of 10 July 2007 on guidelines for the employment policies of the Member States 4. European Competitiveness Report 2008 - Item 5. Overview of the links between Corporate Social Responsibility and Competitiveness 5. Initiatives to promote CSR and Sustainable and Responsible Investment (SRI) - Eurosif 6. A collection of good practice cases among small and medium-sized enterprises across Europe 7. Corporate Social Responsibility in the EU - Centre for European Reform B. Small and Medium Enterprises 1. Report of the round table on ‘Fostering CSR among SMEs‘ from Multi-stakeholder forum on CSR 2. Opportunity and Responsibility - How to help more small businesses to integrate social and environmental issues into what they do 3. Evaluation of SMEs‘ access to public procurement markets in the EU - DG Enterprise and Industry; Final Report, 2010 4. COMMUNICATION FROM THE COMMISSION - A programme to help small and medium-sized enterprises comply with environmental legislation

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A.

POLICY DOCUMENTS RELATED TO CSR

The EU policies that explicitly deal with the issue of Corporate Social Responsibility have evolved during the last decade in line with the raised levels of awareness and knowledge on CSR, the increased expectations from the various stakeholders as well as the advancement in the national and sector specific policies and practices. In 2001, the European Commission launched the Green paper on CSR which was intended to stimulate debate and process of consultation on the EU level related to CSR. In these lines, this document was focused more on presenting the main views and concepts related to CSR and how companies can integrate CSR rather than on specific policy measures. With the Communication from the Commission on Corporate Social Responsibility: A business contribution to Sustainable Development from 2002 and afterwards the Communication from 2006, the EU introduced policy framework– strategies with specific measures that were afterwards transposed in various EU funded programme initiatives. Those programme initiatives included research, projects to support the uptake of CSR from the SMEs, producing reports on the business case for CSR, support for establishment of CSR platforms in the EU and candidate countries, projects that support CSR in targeted sectors such as textile, construction, chemical industry etc. Furthermore, these documents identify CSR as one of the key elements of the Lisbon agenda in relations to sustainable development and creating jobs and growth. Some of the key milestones of the Communications from 2002 and 2006 are the launch of the EU Multi Stakeholder Forum on CSR as a joint platform for stakeholders to exchange experience and reach common ground on guiding CSR principles as well as the launch of the business-led initiative European Alliance for CSR. In its last Communication from 2011 ―A renewed EU strategy 2011-14 for Corporate Social Responsibility‖, the Commission outlines the progress made as a result of the EU policy efforts. The evaluation of the previous policies shows that: the number of European companies that signed up to the United Nations Global Compact has increased more than three times since 2006; the number of organizations registered in Environmental Management and Audit Scheme (EMAS) has risen from 3,300 in 2006 to 4,600 in 2011; the number of EU companies signing transnational company agreements with global or European workers‘ organizations, covering issues such as labour standards, has increased; the membership in the Business Social Compliance Initiative, a European, business-driven initiative for companies to improve working conditions in their supply-chains, has increased by more than 10 times; the number of European enterprises publishing sustainability reports according to the guidelines of the Global Reporting Initiative also has risen from 270 in 2006 to 850 in 2011. The last Communication from 2011 also provides new definition on CSR which identifies that the respecting the law and the collective agreements are pre-requisite for the social responsibility of the companies. This is important for the Balkan countries covered with this research as the baseline studies showed that it is usual that many companies would identify complying with the legal obligations as CSR. Another important aspect for the candidate countries is that the newest EU CSR strategy explicitly states that the internationally recognized CSR guidelines and principles will be addressed as part of the accession process of the countries wishing to join the EU. The EU policies have also evolved in the aspect of uptake of CSR in the SMEs, . While the Green paper from 2001 states that ―The corporate social responsibility concept is mainly driven by large companies, even though socially responsible practices exist in all types of enterprises, public and private, including SMEs and co-operatives‖, the following Communications from the European Commission acknowledge the relevance and importance of CSR for the SMEs. Moreover, each subsequent Communication related to CSR has increased the emphasis on the SMEs making clear distinction about their

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particular challenges and the need for more targeted and adapted approach when promoting CSR among the SMEs. The process of introducing policy documents developed by the European Commission was accompanied by several resolutions on CSR passed by the European Parliament which are also considered as important milestones in the evolution of the EU CSR policies. Policy Documents adopted by the European Commission GREEN PAPER Promoting a European framework for Corporate Social Responsibility 2001 This document is one of the first policy documents with a main focus on CSR in a holistic and comprehensive manner. The challenge of European Union was to include businesses to contribute in building dynamic, competitive and cohesive knowledge-based economy through incorporating corporate social responsibility. This policy has a role to encourage and to establish framework for corporate social responsibility. The aim of the Green Paper was to launch a wide debate on how the European Union could promote corporate social responsibility at both the European and international level, in particular on how to make the most of existing experiences, to encourage the development of innovative practices, to bring greater transparency and to increase the reliability of evaluation and validation. It suggests an approach based on the deepening of partnerships in which all actors have an active role to play14. The emphasis on the partnerships remains the key paradigm of all follow up EU policies related to CSR. Having in mind the complexity of the issue of CSR and the different definitions used by various stakeholders, the Green paper is important document since it paved the road for common understanding of CSR on the EU level which allows for more coordinated approach in developing CSR related policies and programs as well as the sector based policies. Definition of CSR (Green paper): The Green Paper is the document that gives the first definition on CSR within EU policies: ―Corporate social responsibility is essentially a concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment‖15. It identifies being socially responsible with going beyond compliance and ―investing ―more‖ into human capital, the environment and the relations with stakeholders‖. It however emphasize that CSR is not a substitute to regulation and legislation in the areas covered by the concept. The Green paper acknowledges that CSR was mainly promoted by the large or multinational companies. Nevertheless, it stresses its relevance to the SMEs as well and acknowledges that further awareness raising and support to incorporate it. The Key Elements of CSR The Green paper presents the key elements of CSR categorized in two dimensions: internal dimension, within the company; and external dimension, that extends beyond the company and reaches local community and all the stakeholder of the enterprise: business partners, suppliers, costumers, public authorities, NGO‘s representing local community etc. Within these dimensions the document gives guidelines and recommendations for the companies as well as the other stakeholders. The Green Paper does not make a difference in the recommendations between the types of enterprises. Recommendations from the document apply to all enterprises: from SME‘s to multinationals. Nevertheless, in several places throughout the document the Green Paper does make 14 15

Green Paper: Promoting a European Framework for Corporate Social Responsibility, COM(2001) 366 final, 2001 Green Paper: Promoting a European Framework for Corporate Social Responsibility, COM(2001) 366 final, 2001

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referral to the needs of the SMEs and suggests sharing of best practices and mentoring from the large companies to the SMEs. The Internal Dimension Within this dimension, the Green Paper provides list of measures that companies can incorporate in order to be socially responsible. Areas covered within the internal dimension are: 1) Human resources management, 2) Health and safety at work, 3) adaptation to change, and 4) Management of environmental impacts and natural resources.

1. Human resources management (HRM) Relevant measures suggested by the Green paper on HRM include: - life long learning: contributing to a better definition of training needs of all employees; valuing learning; supporting the transition from school to work for young people; providing environment that promotes and encourages lifelong learning by all employees, particularly by the less educated, the less skilled and older workers; - empowerment of employees; - better information throughout the company; - better balance between work, family, and leisure; - greater work force diversity; - equal pay and career prospects for women; - profit sharing and share ownership schemes; - concern for employability as well as job security; - responsible recruitment practices: involving in particular non-discriminatory practices, facilitating the recruitment of people from ethnic minorities, older workers, women, the long-term unemployed and people at disadvantage.

2. Health and safety at work Health and safety at work has been approached mainly by means of legislation and enforcement measures. But, the outsourcing, as a new trend, makes the companies dependant on the safety and health performance of their contractors as well. In these lines, companies can adopt set of measures not only in terms of their compliance with the legislation but also to promote health and safety among their contractors (suppliers etc). Governments and organizations are also encouraged to take action in promoting this CSR aspect. The Green paper proposes following measures and recommendations: - Companies, governments and sector organizations could promote health and safety at work by (i) using them as criteria in procurement procedures and by (ii) using them as a marketing element for promoting their products or services; - Including of occupational safety and health criteria to varying degrees into existing certification schemes and labelling schemes for products and equipments. In these lines, certification schemes of management systems and subcontractors focusing primarily on occupational safety and health have been launched in some countries16; - Development of generic procurement schemes based on uniform requirements for contractor occupational safety and health training or management systems. In this

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The Swedish TCO Labelling Scheme for office equipment is a voluntary label that intends to stimulate the manufacturers to develop more occupational and environmentally safe office equipment; assist purchasers to choose office equipment less problematic for the users and the external environment; and to provide purchasers and the vendor with a clearly defined label, thereby saving time, work and costs in the purchasing process

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case there is a third party to carry out the ―certification‖ or initial approval of the contractors17.

3. Adaptation to change The Green paper is emphasizing the importance of the companies‘ readiness to adaptation and restructuring in a socially responsible manner. This would mean that the company would take into consideration the interests and concerns of all those who are affected by the changes and decisions. Measures could include: - open information and consultation of those affected through the restructuring; - careful preparations by identifying major risks, calculating all the costs, both direct and indirect, associated with alternative strategies and policies, and evaluating all of the alternatives which would reduce the need for redundancies; - undertake joint efforts involving the public authorities, companies and employees' representatives to safeguard employees' rights and enable them to undergo vocational retraining where necessary, modernize production tools and processes in order to develop on-site activities, mobilize public and private financing and to establish procedures for information, dialogue, cooperation and partnership etc - engage in local development and active labour market strategies through involvement in local employment and/or social inclusion partnerships.

4. Management of environmental impacts and natural resources This aspect refers to ―win-win‖ opportunities that are good for the business as well as for the environment. It sets out a number of proposed policy measures aimed at businesses such as: - establishment of a compliance assistance programme to help business understand European Community environmental requirements; - development of national, but harmonized, company environmental performance reward schemes that identify and reward good performers and encouraging voluntary commitments and agreements; - Utilise the opportunities associated with improved environmental performance (such as the European Eco-Efficiency Initiative etc). The External Dimension According to the Green Paper, the external dimension of CSR involves large range of stakeholders such as business partners and suppliers, customers, public authorities and NGOs representing local communities etc. The document provides insight into the areas covered within this dimension and includes suggested measures to be undertaken mostly by the companies as well as the other stakeholders.

1. Local Communities In order to any company to be successful it needs to be integrated into their local setting especially having in mind that they employ from the local labour market, in case of SMEs they have local customers; they use and rely on the local resources etc. In these lines some of the activities that company could undertake are: - provide additional practical vocational training, assist environmental charities, recruitment of socially excluded people, provision of child-care facilities for employees, partnerships with communities, sponsoring of local sports and cultural events or donations to charitable activities; - financial institutions can provide community investing, which consists of direct investments in projects benefiting specific communities or constituencies, especially in economically disadvantaged areas. 17

The Dutch Safety Contractors Checklist (SCC) aims at evaluating and certifying occupational safety and health management systems of contractor companies offering their services to the petrochemical and hemical industry. The Danish IKA Procurement provides guidelines to define the requirements in tenders for cleaning agents.

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2. Business partners, suppliers and consumers Building relationships with the suppliers, alliance, joint venture partners and with franchisees are important for every company. The effect of the CSR activities of one company will inevitably have an effect to their economic partners as well. CSR measures in this area could include: - promote entrepreneurial initiatives in the region such as mentoring schemes offered by large companies to start-ups and local SMEs, or assistance to smaller firms on social reporting and communication of their corporate social responsibility activities; - corporate venturing to facilitate the development of new innovative enterprises; - provide products and services in an efficient, ethical and environmentally aware manner.

3. Human rights Human rights are a very complex issue that is of particular importance for the European Union and is incorporated in many of its policies. Besides the European Union and international laws and binding rules, companies can implement other measures to ensure compliance and advancement of human rights. Such measures could include: - adopting voluntary codes of conduct (accompanied with proper implementation and verification) based on the ILO fundamental Conventions and other international instruments. Such codes should be applied at every level of the company and production line; - full disclosure of information by companies is important, including to local communities; - training for local management, workers and communities on implementation pf the code of conduct; - conduct ongoing verification performed following carefully defined standards and rules i.e. the so-called ―social auditing‖; - continuous monitoring involving stakeholders such as public authorities, trade unions and NGOs. A balance between internal and external verification schemes could improve their cost effectiveness, in particular for SMEs;

4. Global Environmental Concerns Companies are increasingly actors in the global environment, utilizing resources from across the world etc. For this reason it is important that they pursue CSR internationally. This can be achieved through measures undertaken by the companies such as: - encourage better environmental performance throughout company‘s supply chain within and make larger use of European and international management and productrelated tools; - support initiatives such as the UN Global Compact etc. Holistic approach towards CSR Besides defining the key dimensions of CSR, the Green Paper also outlines the basic CSR principles. It emphasizes the importance of a holistic approach to CSR acknowledging that although companies increasingly recognize their social responsibility they have yet to adopt management practices to appropriately incorporate it. In these lines the Green Paper refers to the following aspects:  Social Responsibility integrated management which would move the company from adopting mission statements, code of conduct etc towards adding socially or environmental dimension in their strategies, plans and budgets i.e. that CSR becomes integral part of corporate strategic planning and routine operational performance;  Social responsibility reporting and auditing underlining the need for global consensus on the type of information to be disclosed, the reporting format as well

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as the reliability of the evaluation and audit procedure. It is also recognized that increasingly there are public initiatives that support the development of social and environmental reporting; Quality in work stressing the importance of investing in people; Social and eco-labels as a market-based (rather than regulatory) incentive; Socially responsible investment – funds invested in companies based on specific social and environmental criteria as an emerging market. The document points out the need for increased awareness of the potential returns of SRI within the financial markets which was undertaken by some of the EU countries (UK, France, Germany, the Netherlands, Italy etc).

Finally, the Green Paper invites public authorities, enterprises of all sizes, social partners, NGOs and all other stakeholders to engage in consultation process and building partnerships to build a new framework for promotion of CSR. COMMUNICATION FROM THE COMMISSION concerning Corporate Social Responsibility: A business contribution to Sustainable Development, COM (2002) 347 final The Communication from the Commission concerning CSR: A business contribution to Sustainable Development marks the first EU Strategy on CSR. The Strategy directly reflects on the outcomes from the consultation process on the Green Paper on CSR from 2001. In the process of consultation on the Green Paper, Commission received 250 responses. Around half of these responses came from business association, individual entrepreneurs, and employers‘ organization. The other half of the responses came from civil society organization and trade unions. As a first strategic document on CSR, the Communication provides cohesive approach to CSR based on a consensus among the stakeholders about its main characteristics (see below). This document aims to: 1) emphasize that ―CSR may be a useful instrument in furthering Community policies‖ and 2) to facilitate convergence in the different CSR instruments (management standards, labelling and certification schemes, reporting, etc.). In these lines, this strategic document provides action framework with specific measures related to: improving knowledge on the impact of CSR, exchange of experience, building capacities, convergence of transparency of CSR tools as well as integration of CSR into the sectoral EU policies. The document acknowledges the need for joint action by all relevant stakeholders. The document mainly addresses the European Institutions, Member States, Social Partners as well as business and consumer organizations, individual enterprises and other parties. Nevertheless, this document is quite relevant for the Candidate and developing countries. In the Strategy the Commission explicitly states that it ―is prepared to involve the candidate countries as much as possible in the implementation of this strategy. It will also promote CSR as an incentive to enhancing sustainable development and good governance in developing countries‖. Upgraded CSR Definition The Communication concerning Corporate Social Responsibility: A business contribution to Sustainable Development 2002 gives upgraded definition for CSR from the Green Paper. The Green paper for CSR, as presented before in this report gave only basic direction, defining CSR as ―Corporate social responsibility is essentially a concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment‖. This communication enhances the definition presenting the main characteristics of CSR: ―CSR is a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary

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basis. Despite the wide spectrum of approaches to CSR, there is large consensus on its main features: - CSR is behaviour by businesses over and above legal requirements, voluntarily adopted because businesses deem it to be in their long-term interest; - CSR is intrinsically linked to the concept of sustainable development: businesses need to integrate the economic, social and environmental impact in their operations; - CSR is not an optional "add-on" to business core activities - but about the way in which businesses are managed‖.18 Principles for Community action The Communication acknowledges that having in mind the contribution CSR makes towards sustainable development, there is an increasing role for public institutions in promoting socially and environmentally responsible practices by enterprises. In these lines, the European Commission proposes to build its strategy to promote CSR on a number of principles such as:  recognition of voluntary nature of CSR;  need for credibility and transparency of CSR practices;  focus on activities where Community involvement adds value;  balanced and all-encompassing approach to CSR, including economic, social and environmental issues as well as consumer interests;  attention to the needs and characteristics of SMEs;  support and compatibility with existing international agreements and instruments (ILO core labour standards, OECD guidelines for multinational enterprises) As outlined in the Communication, the Strategy of the European Commission incorporates 7 (seven) areas with specific proposed measures in each of them:

(1) Increasing knowledge about the positive impact of CSR on business and societies in Europe and abroad, in particular in developing countries While most of the companies agree that CSR has positive impact on competitiveness and innovation, there is a need for solid evidence in particular in SMEs, which would be the best and most effective argument to encourage the uptake of CSR among enterprises, in particular through measures such as:  strengthening research on how and under which circumstances enterprises adopting CSR can contribute to the objective of enhanced competitiveness and a more sustainable development: the establishment of a priority area on "citizens and governance in the knowledge-based society" in the Framework Programme 2002-2006 of the European Community for research, technological development and demonstration activities, will contribute to gaining this knowledge;  supporting activities promoted by businesses, social partners, education and training institutions and other stakeholders, aiming at raising awareness and improving knowledge about CSR;  analysis and dissemination of information about CSR practices and their results for companies and for host countries.‖19

(2) Developing the exchange of experience and good practice on CSR between enterprises According to the business associations and the individual enterprises, the exchange of experience and good practice among the businesses are considered as an 18

COMMUNICATION FROM THE COMMISSION concerning Corporate Social Responsibility: A business contribution to Sustainable Development, COM (2002) 347 final 19 COM(2002) 347

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important way to promote CSR. This would help companies to identify common challenges and options for cooperation. In addition, it would contribute to reducing costs of adopting CSR by the individual enterprises. Following measures are proposed:  Reinforcing the effectiveness of existing fora for the exchange of good practice and experience at local, regional, national and EU level through better networking and coordination of their activities;  Integration of CSR into the work of European business support networks would facilitate dialogue and co-operation between them.‖20 In addition, the exchange of experience and good practices between Member states is also welcomed especially with regard to awareness raising strategies and activities with a particular emphasis on SMEs.

(3) Promoting the development of CSR management skills This area refers to education and training of managers, employees and other actors to promote CSR within the educational system on all levels and in particular in the field of business administration. The approach could be further developed between education systems, companies, employee representatives and other stakeholders, including consumers. As financial support in this area, the Structural Funds, especially the European Social Fund could be used to promote CSR in management training and for other employees, as well as to develop teaching materials and courses in educational institutions, including those active in lifelong learning, in co-operation with enterprises.

(4) Fostering CSR among SMEs This Communication for the first time recognizes the specific situation and different needs of the SMEs compared to the large, multinational companies. The European Commission recognizes that ―the CSR concept was mainly developed by and for large multinational companies‖. The available research21 showed that 50% of surveyed SMEs carry out socially and environmentally responsible activities especially towards their external stakeholders. Nevertheless, many SMEs are not aware that what they do is CSR, they conduct it in a more intuitive ways and most of their activities are occasional and often not directly related to their business. Because of the simplicity of SME‘s and they mainly manage their social impact more intuitive and informal than the large companies, this Communication recognizes that CSR concept should be adapted to suit the situation of SMEs. Following the EU Strategy on SMEs ―Think Small First‖, the European Commission strives to adapt the CSR concepts, practices and instruments to specific situation of the SMEs. For this reason, within its strategy the EC has incorporated specific measures to encourage CSR among the SMEs. It addresses the importance to assist SMEs in adopting more strategic approach to CSR. The measures are focused on raising awareness about the economic benefits of CSR as well as a risk management tool. They include22:  work towards a better understanding of SMEs‘ current social and environmental engagement, including research into SME-specific aspects of CSR and the business case;

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COM(2002) 347 21The 2001 ENSR survey of over 7,000 SMEs in: European SMEs and Social and Environmental Responsibility, report published in the 7th Observatory of European SMEs, 2002, European Commission, Enterprise DG (http://europa.eu.int/comm/enterprise/enterprise_policy/analysis/observatory.htm) 22 COM(2002) 347

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 foster the exchange and dissemination of good practices cases identified with

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the help of Member State and candidate countries experts, SME representative organisations, business support organisations and consumer organisations (e.g. through publications, on-line collection of good practices etc.); facilitate the development and dissemination of user-friendly, tailor-made tools for those SMEs that wish to engage in or further develop socially responsible actions on a voluntary basis (information material, SME-toolkit, etc.); bring the attention of SME associations and business support organisations to CSR issues with a view to their integration into support provision for responsible entrepreneurship initiatives in SMEs; facilitate co-operation between large companies and SMEs to manage their social and environmental responsibility (e.g. supply chain management, mentoring schemes etc.), in accordance with national and EU competition rules; raise awareness among SMEs with regard to the impact of their activities on developing countries, and promote SMEs proactive policies, in particular in the fields of core labour standards, eradication of child-labour, gender equality, education, training, health-care assistance and insurance.‖

(5) Promoting convergence and transparency of CSR practices and tools The transparency is considered to be one of the key elements of CSR because it helps companies and other stakeholders to measure the achieved results and improve their practices. CSR benchmarks on social and environmental performance are useful in providing transparency and over the years there have been numerous guidelines, principles and codes in this area. The Communication points out the need for convergence of concepts, instruments and practices which would increase transparency. It is especially desirable in the following fields:

 Codes of Conduct. The EC invites CSR EMS Forum to review the effectiveness  

and credibility of the existing codes and how convergence can be promoted at EU level; Management standards. The EC will promote EMAS as a CSR instrument exploring the opportunity to apply it on the social performance of companies and other organizations; Accounting, auditing and reporting. In these lines companies are encouraged to publish a ―triple bottom line‖ in their annual reports that measures their performance against economic, environmental and social criteria. The EC invites the CSR EMS Forum to develop commonly agreed guidelines and criteria for measurement, reporting and assurance by mid-2004.; Labels. Within the consumer policy strategy 2002-2006, the EC commits to examine existing private labelling schemes, their effectiveness and the need for further measures in this area. Commonly agreed guidelines for labelling schemes supporting ILO core conventions and environmental standards should be developed; Socially responsible investment. The EC invites occupational pension schemes and retail investment funds to disclose information on how they take account of social, environmental and ethical factors in their investment decisions. It also encourages initiatives that aim at monitoring and benchmarking practices of such funds.

(6) Launching a Multi-Stakeholder Forum on CSR at EU level The increased need for convergence and transparency in number of areas related to CSR as well as the need for ―ownership‖ of the CSR principles by the businesses and other stakeholders, requires structured and partnership-based approach. Therefore, as one of the areas of the strategy, the Commission proposed to set up

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an EU Multi-Stakeholder Forum on CSR (CSR EMS Forum). The aim of the CSR EMS Forum is to promote transparency and convergence of CSR practices and instruments, through:  exchange of experience and good practice between actors at EU level;  bringing together existing initiatives within the EU, and seeking to establish common EU approach and guiding principles, including as a basis for dialogue in international fora and with third countries;  identifying and exploring areas where additional action is needed at European level.‖23 CSR EMS Forum would function in two-level structure: 1) two plenary meetings at political level each year and 2) theme-based Roundtables with relevant stakeholders and experts. The Commission also invited the CSR EMS Forum to address and to agree on guiding principles on the following issues:  the relationship between CSR and competitiveness (business case);  the contribution of CSR to sustainable development, in particular in developing countries, and to gender mainstreaming;  SME-specific aspects (tools, coaching/mentoring practices by large enterprises, supply chain aspects);  effectiveness and credibility of codes of conducts, to be based on internationally agreed principles, in particular the OECD guidelines for multinational enterprises;  development of commonly agreed guidelines and criteria for CSR measurement, reporting and assurance; definition of commonly agreed guidelines for labelling schemes, supporting the ILO core conventions and environmental standards;  disclosure on pension and retail funds SRI policies. The CSR EMS Forum was established in 2002 and in 2004 it issued major report on its work including the reports of four thematic-forums. In the following years plenary meetings were organized in 2006, 2009 and 201024.

(7) Integrating CSR into Community policies According to the Communication, CSR practices can contribute to the objectives of EU policies, in particular the strategy for sustainable development and policies in the context of the Charter of Fundamental Rights of the EU. To ensure coherence with the EU policies the EC commits to further promote the integration of CSR principles into EU policies and to setting up an inter-service group on CSR within the EC in order to share information and achieve consistency between the action of the EC in this area. Consequently, the document proposes integration of CSR into following policies:  Employment and social affairs policy,  Enterprise policy,  Environmental policy,  Consumer Policy,  Public procurement policy,  External relations policies, including development policy and trade, and  Public administrations.

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COM(2002) 347 http://ec.europa.eu/enterprise/policies/sustainable-business/corporate-social-responsibility/multi-stakeholderforum/index_en.htm 24

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COMMUNICATION FROM THE COMMISSION to the European Parliament, The Council And The European Economic And Social Committee Implementing The Partnership For Growth And Jobs: Making Europe A Pole Of Excellence On Corporate Social Responsibility, COM (2006) 136 final The European Commission with the Communication from 2006 aims to give political visibility to CSR, to acknowledge what companies have done by now and to support them to do more. The Commission has reviewed achieved accomplishments on CSR at EU level and aligned the working methods and priorities with the Strategy for Growth and Jobs. This Communication is focused on CSR as support to sustainable growth and more and better jobs as well as on the need of partnerships among all stakeholders. In these lines, the CSR practices are not considered to be a substitute for public policy, but they can contribute to a number of public policy objectives, such as:  more integrated labour markets and higher levels of social inclusion, as enterprises actively seek to recruit more people from disadvantaged groups;  investment in skills development, life-long learning and employability, which are needed to remain competitive in the global knowledge economy and to cope with the ageing of the working population in Europe;  improvements in public health, as a result of voluntary initiatives by enterprises in areas such as the marketing and labelling of food and non-toxic chemicals;  better innovation performance, especially with regard to innovations that address societal problems, as a result of more intensive interaction with external stakeholders and the creation of working environments more conducive to innovation;  a more rational use of natural resources and reduced levels of pollution, notably thanks to investments in eco-innovation and to the voluntary adoption of environmental management systems and labelling;  a more positive image of business and entrepreneurs in society, potentially helping to cultivate more favourable attitudes towards entrepreneurship;  greater respect for human rights, environmental protection and core labour standards, especially in developing countries;  poverty reduction and progress towards the Millennium Development Goals. In the established EU Multi-Stakeholder Forum on CSR (CSR Forum), the Commission had a facilitating role and brought together representatives of business, trade unions and civil society. The Commission in this Communication welcomes the Forum‘s work and final report of June 200425, and agrees with stakeholders that the report‘s recommendations, should be fully implemented by the relevant actors, and that would help advance CSR in Europe and globally. In this Communication, the success of the Forum in achieving a measure of consensus among participants is recognized. The significant differences of opinion between business and non-business stakeholders are also notified. The Forum reached consensus on the need for further awareness-raising and competency-building activities. However, there was no consensus on topics such as company reporting requirements or the need for European standards on CSR. European Alliance for CSR To increase the political visibility of CSR and to accommodate the notion that the enterprises are the primary actors in CSR, in this document the European Commission announces its support to the launching of a European Alliance on CSR. The Alliance represents a political umbrella for new and existing CSR initiatives by large companies, SMEs and their stakeholders. The EC encourages enterprises to support the Alliance to 25

Final results & recommendations, European Multi Stakeholder Forum on CSR, 2004

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make CSR information available to all stakeholders, including to consumers, investors and the wider public. In addition, the Commission will continue to support stakeholders in developing their capacity to assess and evaluate CSR practices. The Alliance can be endorsed by companies from the accession countries as well. Proposed actions to promote further take-up of CSR practices In addition to the areas and measures defined in the CSR strategy from the COM (2002) 347 final, this Communication defines further aspects aimed at promoting CSR. Regarding the SMEs, it is important to note that the Communication in its proposed actions separately addresses the aspect of SMEs in each of them. The proposed actions include:

 Awareness-raising and best practice exchange. The Commission remains committed to

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exchanging of best practices putting an emphasis on the SMEs, Member states where CSR is a less known concept as well as in acceding and candidate countries. This was addressed in, for example, some of the financial support mechanism of the Commission such as the Grant programme to Support to National CSR Platforms in 2009. Support to multi-stakeholder initiatives. The Commission will organise regular review meetings of the Multistakeholder Forum. It will also continue to promote and support CSR initiatives by stakeholders, including social partners and NGOs. Cooperation with Member States. Member States can employ a broad range of instruments to encourage CSR thus the cooperation with Member States and acceding countries is important aspect of EU CSR policies. In order to effectively promote CSR among the SMEs within the Member States, the Communication proposes crucial role of the regional levels in undertaking activities in support of CSR. Consumer information and transparency. According to the Communication, the EC will examine, in consultation with all relevant stakeholders, the need for further voluntary actions to achieve the objectives of transparency and information for consumers including on issues of public health. Research. The document identifies increased need for interdisciplinary research on CSR, in particular on: links at the macro- and meso-levels between CSR, competitiveness and sustainable development; the effectiveness of CSR in reaching social and environmental objectives; and issues such as innovation, corporate governance, industrial relations, and the supply chain. CSR in the SMEs is a topic that should be additionally researched but also reflected in other CSR research. Education. EC recognizes that CSR is a lifelong learning issue. In the Communication, EC invites business schools, universities and other education institutions to incorporate CSR into education, as a cross-cutting issue, in particular into the curricula of future managers and graduate students. SMEs. In order for CSR to contribute to growth, jobs and sustainable development, it is crucial that the issue of CSR as practiced by SMEs is properly addressed. The EC acknowledges the need for targeted approach towards the SMEs that will also involve active cooperation of mainstream SME intermediary organisations and support providers. The EC is committed to actions that will facilitate the exchange of experience about how best to encourage CSR amongst SMEs in Europe. In the period of 2006-2008, the EU Commission financed 14 projects targeting CSR in the SMEs. The international dimension of CSR. The EC will further promote CSR globally towards the contribution of enterprises to the achievement of the UN Millennium Development Goals. It states its commitment to further promote awareness and implementation of internationally recognized instruments for CSR.

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COMMUNICATION FROM THE COMMISSION to the European parliament, the council, the European economic and social committee and the committee of the regions. A renewed EU strategy 2011-2014 for Corporate Social Responsibility COM(2011) 681 final The COM(2011) 681 final is the latest EU Strategy on CSR. Its adoption is a result of: 1) requests by the Council and the European Parliament to the Commission to further develop its CSR policy; 2) commitments made by the European Commission in the strategic documents such as Europe 2020, the Integrated Industrial Policy for the Globalisation Era COM(2010)614, Single Market Act COM(2011)206 and 3) the economic crisis and its effect on the consumer confidence and level of trust in the businesses. This communication is recognizing the increasing importance of CSR for the enterprises and for the society as a whole. In terms of integration of CSR within the SMEs, the document acknowledges that with most of the SMEs, in particular microenterprises, CSR efforts will remain ―informal and intuitive‖ and that this will influence the way they integrate CSR into their operations. Thus the actions proposed within this strategy take careful consideration not to place additional administrative burden to the SMEs. Compared to the previous strategies, this strategy also provides more direct, explicit measures by the European Commission to be integrated and financed through various EU Programmes (as outlined below). The latest EU strategy on CSR is also important for the accession countries since it explicitly states that the integration of internationally recognized CSR standards and principles will become part of the accession process for the countries that aspire to become EU members. This increases the relevance and importance of the CSR related policy for each of the Balkan countries addressed in this research. Besides the noticeable progress in the field of CSR in Europe, the document identifies important challenges that still remain to be addressed. Thus, in its renewed strategy, the European Commission outlines a ―Modern understanding of corporate social responsibility‖ which introduces new definition on CSR as well as new elements in an effort to extent the impact of the EU policies in this area. The Modern understanding of CSR according to the newest EU Strategy includes the following elements:

(1) A new definition In this communication the basic definition on CSR is simplified and CSR is defined as ―the responsibility of the enterprises for their impacts on society. Nevertheless, as part of the definition the Commission provides further explanation about the primary principles of implementing CSR. ―Respect for applicable legislation and for collective agreements between social partners, is a prerequisite for meeting that responsibility. To fully meet their corporate social responsibility, enterprises should have in place a process to integrate social, environmental, ethical, human rights and consumer concerns into their business operations and core strategy in close collaboration with their stakeholders, with the aim of: – maximising the creation of shared value for their owners/shareholders and for their other stakeholders and society at large; – identifying, preventing and mitigating their possible adverse impacts.‖

(2) Internationally recognized principles and guidelines The companies are recommended to use internationally recognized principles and guidelines as their formal approach to CSR, such as: OECD Guidelines for Multinational Enterprises, the ten principles of the United Nations Global Compact, the ISO 26000 Guidance Standard on Social Responsibility, the ILO Tri-partite

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Declaration of Principles Concerning Multinational Enterprises and Social Policy, and the United Nations Guiding Principles on Business and Human Rights.

(3) The multidimensional nature of CSR The multidimensional nature of CSR is shown through the principles, guidelines and policies on CSR. CSR covers human and labour rights, employment policies, environmental issues, combating bribery and corruption. In addition, the Commission promotes the three principles of good tax governance: transparency, exchange of information and fair tax competition – in relations between states.

(4) The role of public authorities and other stakeholders Even though the companies are expected to incorporate CSR practices by themselves, the public institutions could contribute with developing a mix of voluntary policy measures or regulations, for example: to promote transparency, to create market incentives for responsible business conduct, to ensure corporate accountability. Other stakeholders, like CSOs and trade unions, identify problems and put pressure for improvements but also to collaborate with the enterprises and other stakeholders in co-building solutions.

(5) CSR and Social Business Initiative The Social Business Initiative (SBI) supports specific types of businesses: mainly social and/or environmental that reinvests profits for that purpose, and whose internal organization reflects the societal objectives26. For these types of enterprises the CSR and SBI are complementary.

(6) CSR and social dialog The Commission supports and facilitates initiatives and recognizes that CSR contributes and supplements social dialog. This strategic document also contains Agenda for action for the period 2011-2014 that will support the promotion and implementation of the above stated CSR elements. The Agenda contains commitments by the Commission but also suggestions for the companies, Member State and other CSR stakeholders. The Agenda outlines the following actions:

(1) Enhancing the visibility of CSR and disseminating good practices This will be achieved through support to peer learning, exchange of good practices, programmes that support dialogue between the enterprises and other stakeholders, dissemination of responsible practices through supply chains etc. In regard to the SMEs, the Commission intends to provide capacity building to SME intermediary organization in order to improve the quality of advice SME receive. In these lines, the Commission will create Multistakeholder CSR platforms in relevant industries and will launch a European award scheme for CSR partnerships between enterprises and other stakeholders

(2) Improving and tracking levels of trust in business Recognising the existing gap between the citizens‘ expectations and what they perceive to be the reality of business behaviour‖, the Commission envisages specific measures to address the issue of misleading marketing related to the environmental impacts of products and will initiate an open debate with enterprises and all stakeholders on the future role of the businesses, survey on citizen trust and attitudes towards CSR etc.

(3) Improving self and co-regulation processes 26

COM(2011) 682 final

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To improve the effectiveness of the self and co-regulation processes, the Commission is committed to launch a process in 2012 to develop a code of good practice for self- and co-regulation exercises.

(4) Enhancing market reward for CSR: a. Consumption, b. Public Procurement, c. Investment In these lines the Commission envisages revision in the legislation dealing with these issues such as the Sustainable Consumption and Production Action Plan, Public Procurement Directives etc. Regarding the public procurement, it emphasizes that the integration of social and environmental considerations in the public procurement should be conducted in a way that (among others) will not discriminate against the SMEs and add additional administrative burden for the enterprises. (5) Improving company disclosure of social and environmental information To achieve this in a manner that will support enterprises the Commission will draft legislative proposal on transparency of the social and environmental information provided by companies in all sectors. While drafting the proposal, testing will be conducted on the SMEs to ensure the appropriateness of the proposal for their work. (6) Further integrating CSR into education, training and research The document acknowledges the importance of integration of CSR in the educational curricula especially in the secondary and higher education. Research is also supported through the 6th and the 7th EU Framework Programmes. To further support education and training on CSR, the Commission will support CSR related activities within programmes such as Youth in Action and EU Lifelong learning. (7) Emphasising the importance of national and sub-national CSR policies Recognizing the role of the policies on national, regional and local level, the Commission will create a peer review mechanism for National level policies. It also encourages the Member States to update their priorities lists related to promotion of CSR. In regards to the local and regional level, the Commission encourages the authorities to use the EU Structural Funds especially for supporting SMEs and building partnerships to address poverty and social inclusion. (8) Better aligning European and global approaches to CSR

a. Focusing on internationally recognized CSR principles and guidelines The Commission will monitor the commitments made by the EU enterprises with more than 1000 employees to account the international CSR standards. It also invites all large companies to make commitments to integrate at least one of the CSR international standards as well as to respect the ILO Tri-partite Declaration of Principles Concerning Multinational Enterprises and Social Policy by 2014.

b. Implementing the UN Guiding Principles on Business and Human Rights Addresses the issue of coherence of EU policy in relation to business and human rights. To achieve this, the Commission intends to engage in dialogue between relevant stakeholders in this area in order to raise the understanding of the challenges companies face when integrating human rights into their operations. In this regard, the Commission, in cooperation with enterprises and other stakeholders, will develop human rights guidance for companies and in 2012 will publish a report on the EU priorities in the implementation of the UN Guiding principles on Human Rights (with follow up periodic progress reports). It also

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invites the companies to adhere to the human rights as part of their social responsibility and the Member states to develop National plans to implement the UN Guiding principles.

c. Emphasising CSR in relations with other countries and regions in the world This action is of particular importance for the accession countries. The document explicitly identifies that the internationally recognized CSR standards and principles have to be accounted by the countries that wish to join the EU. This is an issue that the Commission will address in the accession process thus increases the relevance of the CSR policies in the Balkan countries. Policy Documents adopted by the European Parliament Corporate Social Responsibility P5_TA(2002)0278 European Parliament resolution on the Commission Green Paper on promoting a European framework for corporate social responsibility (COM(2001) 366 _ C5-0161/2002 _ 2002/2069(COS)) With this Resolution, the European Parliament endorsed the Green Paper on corporate responsibility. It emphasized the importance of the huge response to the Commission‘s consultation as well as voluntary initiatives by companies and employers‘ organizations, coalitions of NGOs and trade unions to promote corporate social responsibility. It also notes that such voluntary initiatives promoting the business case for CSR should be preferred to legislation as a more effective and efficient way of achieving measurable outcomes. The European Parliament in this resolution specifically calls on Codes of Conduct and Social Reporting: - Annual social and environmental impact assessment reports to be independently verified and include all levels of the company, its supply chain and business partners, where appropriate; - Calls on all European private and collective pension funds to state their ethical criteria in their investment policies; - Calls on the Commission to put forward a proposal on social labeling; - Calls on the two sides of industry at European, national and company level to agree on codes of conduct that uphold women‘s rights particularly regarding (1) equal pay for work of equal value, (2) the quality of women‘s employment, (3) measures to combat discrimination on recruitment, (4) the adoption of innovative and effective measures to combine family and professional life, (5) the improvement of career opportunities for women, (6) basic and further training opportunities for women enabling them to adapt to technological and economic developments, thereby facilitating their professional reinstatement, (7) health and safety issues and (8) combating duress, mobbing and sexual harassment at the place of work; The European Parliament also calls on creation of an EU multi-stakeholder platform for corporate social responsibility as well as to improved role of stakeholders and dialogue with them. The European Parliament also recommends mainstreaming corporate responsibility issues in European policies and in legislations of national governments.

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Corporate Social Responsibility P5_TA(2003)0200 European Parliament resolution on the Communication from the Commission concerning Corporate Social Responsibility: A business contribution to Sustainable Development (COM(2002) 347 — 2002/2261(INI)) With this Resolution, the European Parliament endorsed the Communication from the Commission concerning Corporate Social Responsibility: A business contribution to Sustainable Development (COM(2002) 347). The Resolution welcomes the ―attempt to define a European framework to promote environmentally and socially sound business practice‖27. It also ―Welcomes the successful setting up of the EU Multi-Stakeholder Forum on CSR as an autonomous group run by its members‖. The European Parliament in this resolution emphasizes many recommendations based on the implementation of the Green Paper and the Communication COM(2002)347. Among others, they include the following:

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Insists that environmental, development, enterprise and social aspects of CSR be treated with equal emphasis;

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Points out that the Communication from the Commission does not pay much attention to the gender impact of, or gender policy issues in relation to, CSR principles; considers that active promotion of women's business development, workforce diversity and work-life balance, above and beyond their legal obligations, may strengthen companies' sense of social and environmental responsibility;

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Considers that integration of CSR into EU policy-making must be fully in line with the integration of sustainable development as agreed at the Gothenburg European Council;

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Calls on the Commission to follow up its Green Paper on integrated product policy (COM(2001) 68) by submitting a White Paper containing the full set of guidelines and proposals which will make it easier for both producers and consumers to make full use of the instruments and opportunities offered by the market in order to ensure that the latter functions in a way more in accordance with the practice of sustainable development;

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Calls on the Commission to submit proposals designed to allow companies ready access to information and to training which will enable them to draw up, with as little effort as possible, sustainability records — pillars which are essential to the sustainable positioning of companies on both national and international markets;

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Stresses that companies should indicate in their reports the environmental standards they apply when they operate and invest in third countries and illustrate how these standards relate to relevant pieces of EU environmental legislation;

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Asks the Commission to speed up the process of developing EU-Ecolabel criteria for more product categories and to consider a proposal on social labelling, and calls on Member States to promote eco-labelled products more effectively and to ensure that environmental claims of a self-declaratory character are not permitted;

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Supports the Commission in its desire to secure the clear advancement of CSR principles and policies at the EU level at the end of the two years' work of the Multi-Stakeholder Forum, and calls on Forum members to make every effort to secure consensus for future action on this basis.

P5_TA(2002)0278

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B.

POLICY DOCUMENTS RELATED TO SMALL AND MEDIUM SIZE ENTERPRISES

The new approach in the SME policies is based on a comprehensive view of SMEs‘ role in society that highlights their importance as an important factor of economic and social cohesion at local and regional level. Taking into consideration that the SMEs represent 99% of all European enterprises, their cumulative impacts on the environment and society are considerable and cannot be overlooked in the overall CSR discourse. Moreover, as identified in the EU policy documents most SMEs are committed to corporate social responsibility, ―which allows them to improve their performance and competitiveness while having a positive impact on the local community and the environment‖. In these lines, the EU policies related to SME development are complementary to the CSR policies and can stimulate enhanced integration of the social responsibility principles into the business operations of the SMEs. COMMUNICATION FROM THE COMMISSION – Implementing the Community Lisbon Programme Modern SME Policy for Growth and Employment COM(2005) 551 final The purpose of this Communication is to set out objectives and actions specifying how to make the measures of the Community Lisbon programme beneficial to SMEs. This Communication creates a policy framework for SME actions and integrates the objectives of the existing enterprise policy instruments. This document does not directly relate to corporate social responsibility measures implemented by SMEs but is rather focused on policies that promote the development of SMEs. However, the new approach in this document adopts the understanding of the SMEs‘ role in society and highlights their importance as a factor of economic and social cohesion at local and regional level. Furthermore, this document acknowledges that many SMEs are committed to CSR ―which allows them to improve their performance and competitiveness while having positive impact on the local community and the environment‖. The Communication presents actions such as:  Promotion of entrepreneurship and skills;  Improving SMEs‘ access to markets;  Improving SMEs‘ growth potential. Under this action, EC aims at strengthening the innovation and research capacity of SMEs and increase the volume of technological transfer. It will provide specific support to SMEs through the Environmental Compliance Assistance Programme to boost innovation while improving their environmental performance;  Strengthening dialogue and consultation of the European Commission with SME stakeholders. COMMUNICATION FROM THE COMMISSION - ―Think Small First‖, A ―Small Business Act‖ for Europe COM(2008) 394 final With the EU Communication - Modern SME Policy for Growth and Employment COM (2005) 551 final, EU has placed the SME‘s needs at the centre of the Lisbon Growth and Jobs Strategy. With this Communication, EU aims to improve the overall EU policies in relation to entrepreneurship and ―to promote SMEs‘ growth by helping them tackle the remaining problems which hamper their development‖. This document is not directly connected to corporate social responsibility measures, however, in some of the proposed principles it addresses the challenge of the SMEs in terms of environmental performance. The Communication recognises the central role of SME‘s in European economy and strives to create a comprehensive policy framework for EU and Member states through a set of 10 principles to guide the conception and

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implementation of policies both at EU and Member State level. These principles are as follows: I. II. III. IV. V. VI. VII. VIII. IX.

X.

C.

Create an environment in which entrepreneurs and family businesses can thrive and entrepreneurship is rewarded; Ensure that honest entrepreneurs who have faced bankruptcy quickly get a second chance Design rules according to the ―Think Small First‖ principle; Make public administrations responsive to SMEs‘ needs; Adapt public policy tools to SME needs: facilitate SMEs‘ participation in public procurement and better use State Aid possibilities for SMEs; Facilitate SMEs‘ access to finance and develop a legal and business environment supportive to timely payments in commercial transactions; Help SMEs to benefit more from the opportunities offered by the Single Market; Promote the upgrading of skills in SMEs and all forms of innovation; Enable SMEs to turn environmental challenges into opportunities. It would be achieved by ―providing more information, expertise and financial incentives for full exploitation of the opportunities for new ―green‖ markets and increased energy efficiency, partly through the implementation of environmental management systems in SMEs‖; Encourage and support SMEs to benefit from the growth of markets.

POLICY DOCUMENTS RELATED TO SUSTAINABLE BUSINESS DEVELOPMENT

In the last decade, the sustainable development has been the guiding principle of almost all EU policies. Targeted policies in this area increasingly recognize the role of the business sector in achieving sustainable development and social cohesion. At the same time, the importance of the sustainable growth of the enterprise itself is also acknowledged. The contribution of the enterprises to the sustainable development has been the basis of the first Communication on CSR from 2002 and has been emphasized in all subsequent CSR strategies. In this regard, the EU policies related to sustainable development (including sustainable business development) are directly related to the CSR policies. Although often they don‘t explicitly refer to the concept of CSR, their guiding principles and measures are directly connected to the environmental issues addressed by the companies within their CSR strategies. In addition, the sustainable business development policies seek collaboration between all key stakeholders which links to the stakeholder engagement approaches advocated for within the CSR strategies. Also, some of the policy measures outlined in the sustainable development strategies are included in the EU and the National CSR strategies of the EU and candidate countries such as the Green public procurement, eco labelling etc. PRESIDENCY CONCLUSIONS Göteborg European Council 15 and 16 June 2001 The European Council met in Göteborg on 15 and 16 June 2001 to issue political guidance for the Union. One of the issues was the Council to agree on the strategy for sustainable development and add an environmental dimension to the Lisbon process for employment, economic reform and social cohesion. In this strategy the sustainable development is defined as a fundamental objective under the Treaties of the EU: ―to meet the needs of the present generation without compromising those of future generations.‖ The strategy approaches various issues regarding sustainable development. This report will present environmental priorities whereas they are correlated with corporate social responsibility principles.

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European Council developed environmental priority in four priority areas: climate changing, transport, public health and natural resources. - Combating climate changing: The Council reaffirmed its determination to meet the indicative target for the contribution of electricity produced from renewable sources to gross electricity consumption by 2010 of 22 percent. - Ensuring sustainable transport: ―A sustainable transport policy should tackle rising volumes of traffic and levels of congestion, noise and pollution and encourage the use of environment-friendly modes of transport as well as the full internalisation of social and environmental costs.‖ - Addressing treats to public health: ―The European Union must respond to citizens' concerns about the safety and quality of food, use of chemicals and issues related to outbreaks of infectious diseases and resistance to antibiotics.‖. It was recommendation, European Parliament and European Council to adopt the chemicals policy thereby ensuring that within a generation chemicals are only produced and used in ways which do not lead to a significant impact on health and environment; European parliament and the Council agreed on the final adaptation of the European Food Authority and Food Law Regulation. - Managing natural resources responsibly: ―The relationship between economic growth, consumption of natural resources and the generation of waste must change. Strong economic performance must go hand in hand with sustainable use of natural resources and levels of waste, maintaining biodiversity, preserving ecosystems and avoiding desertification.‖ COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT On the review of the Sustainable Development Strategy 2005 In developing this document the Commission consulted with European Council and Parliament, the Member States, NGOs, citizens and stakeholders. The objective of this review is to further develop the Sustainable development strategy. The key issues presented in the Review of the Sustainable development strategy are: climate changing and clean energy; public health; social exclusion, demography and migration; management of natural resources; sustainable transport; global poverty and development challenges. This report is addressing the issues related to CSR principles and which most frequently are integral part of the CSR strategies of the enterprises. -

-

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Climate changing and clean energy: ―Climate change is happening. It cannot be prevented but it can be contained at acceptable levels and its negative impacts can be significantly decreased. It is a global problem that demands global solutions. More effort is needed to reduce greenhouse gas emissions, not only in the EU but by other major emitting countries and emerging economies. It is also essential that the EU adapts to climate change and helps developing countries in particular to do likewise.‖ Management of natural resources: ―Governments have a major role in ensuring success, by providing a predictable, long-term regulatory framework that rewards eco-innovation to support businesses now looking to develop sustainable activities. Public authorities have the purchasing power to generate momentum for change. In the EU, for example, public bodies (such as local authorities, schools, hospitals) buy EUR 1 600 billion worth of products and services each year – 16% of our GDP. This can be used to create the critical mass needed for the market success of sustainable technologies.‖ Sustainable transport: ―The benefits of mobility can be provided with much lower economic, social and environmental impacts. This can be done by reducing the need for transport (e.g. by changing land-use, promoting telecommuting and

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videoconferencing), making better use of infrastructure and of vehicles, changing modes, for example to use rail instead of road, cycling and walking for short distances and developing public transport, using cleaner vehicles and developing alternatives to oil such as bio-fuels and hydrogen powered vehicles. The benefits of more sustainable transport are wide ranging and significant: tackling congestion thereby cutting costs to businesses, saving people time and improving access for regional and local development, reducing climate change and biodiversity impacts, increasing security of energy supply by reducing oil dependence; improving the local environment and reducing impacts on health, in particular in urban areas.‖ COMMUNICATION FROM THE COMMISSION concerning Sustainable Consumption and Production and Sustainable Industrial Policy Action Plan, COM(2008) 397 final The issue of Sustainable Consumption and Production and sustainable industrial policy are one of the aspects in the area of sustainable development which are directly linked to the CSR as they are directly linked with the operations of the enterprises. In 2008, the European Commission adopted the Communication on the Sustainable Consumption and Production and Sustainable Industrial Policy Action Plan. As a document, it presents action plan for improving the energy and environmental performance of products and foster their uptake by consumers. What makes this document relevant to the CSR policies is that it provides systematic approach to incentives and procurement and reinforcing relevant information to the consumers in a more transparent, coherent and simplified framework. Main features of the Communication are:  Expanding the Ecodesign Directive beyond the energy-using products towards other environmentally significant products. It is taking a life-cycle perspective enacting implementing measures on specific products and their environmental aspects (such as energy consumption, waste generation, water consumption, extension of life-time) following impact assessment and consultation of interested parties. It will be based on improved, advanced benchmarks and will include periodic reviews of minimum requirements.  The Labelling of Products will be further developed. The Energy Labeling Directive will be extended to cover wider range of products. The labelling will provide increased transparency in terms of information available to the consumers while the Ecolabel, as a voluntary label will complement the information and will serve as a "label of excellence".  Incentives. A number of Member States are already (in compliance with the Treaty and State Aid rules) providing incentives for development and acquiring of energy and environmental performing products and ―greening‖ their procurement practice to foster their uptake. In these lines, under the Labelling Directive, the Communication makes efforts to harmonize the public procurement and incentives in relation to energy and environmentally performing products. Although the Member States are allowed to freely determine the level of incentives, the Directive will identify labelling classes (based on community environmental requirements) under which the Member States would not be allowed to set incentives. These actions will be supported by:  Consistent data and methods on products (to assess the overall environmental performance)  Promote Green Public Procurement  Work with Retailers and Consumers This Communication also sets Action plan to support leaner production which includes the following actions:

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ď ˇ Boosting resource efficiency (by further developing tools for monitoring, ď ˇ ď ˇ

benchmarking and promotion of resource efficiency); Supporting eco-innovation Enhancing the environmental potential of industry (including revision of EMAS regulation, developing industrial policy initiatives for environmental industries and helping SMEs to raise awareness and disseminate know-how).

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IV. CSR POLICY FRAMEWORK IN THE TARGETED COUNTRIES In the recent years, the governments in the Balkan countries have shown increased interest in CSR. Often, this interest was result of the promotional and advocacy efforts of foreign and international organizations (UNDP, USAID etc) in partnership with some of the local stakeholders active in the area of CSR (NGOs, business networks and associations etc). Thus, in some of the targeted countries (such as Macedonia and Serbia), multi-sectoral bodies were formed which then pushed for the development of CSR targeted policy framework. In two of the countries mentioned above, the governments have introduced national CSR agenda or strategy. In all four countries, CSR related issues were incorporated in the development policies. Even though, such efforts are plausible and provide solid base for long-term policies and widespread implementation, it is yet to be seen to what extent the existing policies are being implemented, as well as what their effects on the advancement of CSR within the business sector will be. Bellow is the outline of the CSR related policies in each of the four targeted countries and an analysis of their compatibility with the EU related policies in this area. In analyzing targeted countries‘ readiness for the EU CSR policy framework we looked whether the existing policies include the elements identified in a study from 2010 produced by the UN Global Compact and the Bertelsmann Foundation and outlined in the 2011 study commissioned by the European Commission ―Corporate Social Responsibility: National Public Policies in the European Union‖. These elements include: understanding the country-specific CSR context defining CSR defining a CSR public policy rationale situating CSR in government institutions selecting CSR policies, and monitoring their outcomes28. The analysis looks into the policies that explicitly identify and address the issue of CSR. The level of readiness for the EU CSR policy framework is further analysed from the aspect of whether the existing policies and measures in place in the targeted Balkan countries reflect the principles and measures outlined in the EU CSR Strategies COM (2002) 347 final and COM (2006) 136 final.

BOSNIA AND HERZEGOVINA (BIH) Main policies in Bosnia and Herzegovina related to CSR are: (1) Development Strategy of Bosnia and Herzegovina 2008-2013, (2) Strategy for SME development of BiH 20092011 and, (3) Law on fostering the development of SMEs of Republika Srpska. BiH does not have specific policies related to CSR; nevertheless, the existing documents could provide appropriate guidance related to this area. The Development Strategy of BiH is based on the existing relevant strategies in the country on macro and micro level, the goals of the adopted EU development goals and the development goals that weren‘t achieved with the previous development strategy. In its Executive summary, the strategy points out the triple bottom line as basis for the 28

―Corporate Social Responsibility: National public policies in the European Union‖, European Commission, DirectorateGeneral for Employment, Social Affairs and Equal Opportunities, 2011

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development of the country by equally respecting the economic, environmental and social dimensions of development following the Lisbon Strategy as well as the UNCED Rio Declaration from 1992. The development strategy aims to reach consensus in BiH on the necessity of economically efficient, environmentally sustainable and socially just development in the interest of present and future generations. This creates a solid basis for incorporation of CSR principles and specific measures within the Development Strategy. However, the document in its priorities and measures fails to provide further elaboration on the role of the private sector in the sustainable development and to a large extent does not provide any specific CSR related measures as suggested in the EU policy documents and guidelines. The strategy defines six priority development goals: 1) Macroeconomic stability 2) Competitiveness 3) Employment 4) Sustainable development 5) EU integration 6) Social inclusion Within the goals, some of the measures are addressing issues directly related to CSR and open space for promotion of CSR principles. For example, under Strategic goal 1: microeconomic stability, priority 3: Advancing regulation and reporting standards, Measure 4 encourages improvement of corporate governance standards according to the OECD principles and improving mechanisms for their implementation. They are considered as important segment for improving the overall business environment and protection of investors. In addition, Measure 5 addresses the issue of financial and other reporting of the financial institutions as well as other entities that trade on the stock exchange market. It emphasize the need of various stakeholders (investors, employees, creditors, suppliers, buyers, public administration and general public) to have access to various financial and other data which although not directly stipulated might include the environmental and social reporting, reports of socially responsible investments etc. Strategic goal 2: Competitiveness, does not specifically address promotion of CSR practices within its measures. However, its first priority is continuous improvement of the company‘s productivity and competitiveness. Having in mind that integrating CSR into the business strategies and operations can contribute to improving productivity and enhancing the competitiveness of SMEs (especially if the SME is part of a supply chain) this priority could benefit from integrating more elaborated CSR measures which would be compatible and inter-related to the measures under the Strategic goal 3: Employment, 3.1 Development of SMEs and job creation. Strategic goal 4: Sustainable development is the section that is directly connected to CSR. Discussing the challenges, the Development strategy of BiH acknowledges the need to balance the efforts to increase its growth i.e. GDP with the requests that the environmentally responsible global markets impose. Priority measures are focused on renewable energy, rural development and agriculture as well as transport, communications and IT. In these lines, the strategy incorporates several measures that address the environmental impacts of the business sector and acknowledges their role in the environmental protection. Among others, such measures include adopting of EU policies in the area of environment, introducing energy efficiency funds, creating environmentally responsible market and building partnerships between the institutions, business and academic community, and the citizens in solving environmental problems and integrating the environmental aspect in the development.

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The other important document in this area is the Strategy on SME development of BiH for the period 2009-2011. Following the local needs, the strategy is primarily focused on creating basic favourable infrastructure for development of SMEs. Large segment of the strategy refers to reforms in the basic legal framework for functioning of SMEs in accordance with the EU policies including aligning the definition of SMEs and creating common market within BiH. The strategy also places emphasis on developing support infrastructure in terms of training and creating network of SME consultants, promotion of entrepreneurship, introducing financial instruments for SMEs, developing clusters and partnerships within the business sector and the social partners etc. The document does not explicitly emphasize the development of SMEs on the basis of triple bottom line thus the measures do not address incorporation of CSR principles. Nevertheless, the strategy creates a vision for further development in this area that is based on the Lisbon strategy and EU policies thus creates opportunities for future revisions of the strategy that will address CSR as well. Republika Srpska has also adopted a Law on fostering the development of SMEs. Within the law, the SMEs are identified as important segment of the economy and as such the law introduces specific measures to support their development and growth. Similar with the Strategy on SME development, this law does not refer to CSR as a tool for sustainable development of SMEs. However, with proper awareness raising among the institutions, some of the proposed measures (such as the financial instruments, tax incentives, training and consultations for SMEs etc) could be further elaborated and expanded to include some specific CSR measures as notified in the EU policies. Concluding remarks CSR as a concept is not reflected in the main development documents of Bosnia and Herzegovina thus none of the six elements is incorporated in the public policy documents in the country. Although the government shares the vision and a need for sustainable development, it seems that there is lack of awareness among the institutions about the concept of CSR, its role and development potential. Existing strategic documents do provide a solid basis for opening a broader discussion on this issue and consequently, future revisions and drafts of strategic documents could incorporate specific commitments and measures related to CSR. They are also a solid base for defining the CSR public policy rationale. Local initiatives in the area of CSR such as the UN Global Compact Network in BiH have taken the lead and are encouraging the government to act in this direction. There is an evident need for extensive awareness raising and capacity building of the institutions on CSR as a concept and on CSR related policies. The advocacy efforts could be initially led by international organizations, however broader advocacy stakeholder platform is needed which will include business associations, NGOs and other groups with expressed interest for advancement of CSR in the country. Sharing experiences with the countries from the region can inspire the authorities in BiH to take proactive role in promoting CSR in the country.

CROATIA Croatian institutions are increasingly recognizing the importance of CSR. Croatia has not introduced separate CSR policies yet. Nevertheless, to a certain extent, CSR principles and support actions have been incorporated in the key development strategic documents, the Strategy on Sustainable Development and the Strategic Framework for Development 2006-2013. In the Strategic Framework for Development 2006-2013, the Government states that the main goal of Croatia is ―development and employment in competitive market economy which functions in the European welfare state of the XXI century‖. As such, the Strategic Framework places its focus on areas that increase growth, employment and competitiveness

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but also social cohesion and social justice. In these lines, the document identifies active role of the private sector in the social development in several key aspects:  Theme: People and knowledge; one of the identified goals is to encourage the involvement of the business sector in financing the formal education as well as onthe-job specialization. Specific measures are directed towards opening dialogue and building partnerships with the business sector. The main role envisaged for the business sector is their participation in improving the material conditions and educational infrastructure through public-private partnerships;  Theme: Social cohesion and social justice incorporates specific goal of ―promoting policies of corporate responsibility for the social welfare‖29. The accompanied measures address the issue of philanthropic giving i.e. the donations programs of the companies. It is envisaged that the state would develop indicative guidelines for allocation of funds for social responsibility and will recommend companies to integrate them into their CSR plans. The measures recommend that the companies distribute their donation budgets through open calls or by allocating funds to programs recommended by State bodies. Further, the measures envisage introduction of CSR awards that will receive appropriate media and political attention;  Theme: Space, nature, environment and regional development. Measures call for finding optimal balance between the investment opportunities of the economy with its impact on the environmental protection. In these lines it suggests financing of environmental projects, integrating the environmental protection in the private sector and insisting on environmental quality standards such as ISO 14000 etc;  Theme: Finances and capital incorporates a goal of introducing highest European standards on corporate governance especially among the companies that are present on the stock exchange. The other document, Strategy on Sustainable Development adopted in 2009, incorporates more specific CSR related support measures in several areas. The whole strategy is based on the triple bottom line principles and strives to achieve stable economic development, equitable distribution of social opportunities and environmental protection through cooperation of all relevant stakeholders. As one of the key stakeholders, ―the business community contributes to the sustainable development with job creation, development of new technologies adopting measures for environmental protection and in particular, with socially responsible behaviour‖. In several key areas for sustainable development identified in the Strategy, the document integrates measures to promote and encourage CSR that go in line with the recommendations of the EU CSR policies. In the area of sustainable production and consumption, among others, the document defines the following goals:

 Achieve competitiveness and entering the demanding market by increasing efficiency,

  

while reducing the risk to humans and the environment, and incorporating the principles of socially responsible and transparent business and interaction with stakeholders; Integrate cleaner production programs in the production processes, products and services; Promote and encourage the use of Environmental Label; Introduce incentives to ensure the inclusion of a number of organizations in the EMAS system (Eco-Management and Audit Scheme) to effectively manage the environment and informing the public about the consequences of performing specific activities for the environment; Encourage Corporate Social Responsibility;

29

In this section, two terms for social responsibility are used – ―socijalna odgovornost privatnih kompanija‖ and ―društvena odgovornost‖. What in general this section refers to is the philanthropic giving of the companies for actions that promote social cohesion and welfare.

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 Introduce sustainability in public procurement to encourage environmentally friendly behaviour and best procurement with respect to: the best value for a certain amount (price, quality, availability, and functionality), environmental aspects throughout the product lifecycle and social aspects (the eradication of poverty, working conditions, and respect for human rights). In the context of social cohesion and justice, the Strategy is committed to promote best practices of the companies that respect the human rights of its employees and fight against discrimination. In the field of energy, among others, the country will strive to introduce policies that will define the energy efficiency in the energy facilities, new industrial plants as well as some manufacturing, service and trade companies. It also envisages introducing certification of energy efficiency products for household consumption in buildings and industry. The document does not provide action plan with detailed information on the timeline and the ways those goals and measures will be achieved. However, the Action plan on sustainable production and consumption – 2nd draft version30, recognizes that the number of instruments already existing in the country for promotion of CSR (such as National CSR Network, Regional CSR Network for Small businesses in CEE/SEE and CSR Index) indicates the importance of the concept. It also identifies policy gap related to CSR and acknowledges that the promotion of CSR in the country mostly relies on the measures implemented by NGOs, business associations and international organisations. Furthermore, the segment of the Action plan related to sustainable industry identifies four priority areas: 1) Corporate Social Responsibility; 2) Eco – labelling; 3) Utilization of EU preaccession funds and other co-financing programmes and 4) Green public procurement. Furthermore, the Action plan incorporates specific CSR related measures such as: training programs on the importance of CSR for public authorities and companies; free of charge counselling; promotion of environmental standards; introducing environmental criteria in three identified products that are subjects of public procurement in 2013. In practice, the public institutions provided support to CSR related programs. For example, the Fund on environmental protection and energy efficiency has provided loans in total of 3.5 million Euro in 2010 for SMEs in the field of environmental protection (including CSR). From the total of 16 projects for development of SMEs provided by the Ministry of Economy, Labour and Entrepreneurship in 2011, 4 were directed towards social sustainability while one on indirect environmental sustainability. In 2010, Croatia was awarded with a grant from the European Commission – Enterprise and Industry Directorate – General through the CIP Programme for Support to National Platforms for CSR. The leading partner of the project is Croatian Business Council for Sustainable Development (HRPSOR) and is focused on building National CSR Network in the country. One of the project activities envisages drafting of a National CSR Strategy for Croatia. This provides a good opportunity for the country to further develop and implement some of the measures envisioned in the existing policy documents as well as to introduce new policies in this area. Concluding remarks The key strategic documents related to development in Croatia identify the role of the business sector in achieving sustainable development. CSR is recognized as a concept related to sustainability and goals and measures for its promotion are incorporated in several segments of the documents. Since Croatia doesn‘t have explicit policy on CSR, full comparison with the EU CSR policies is not appropriate. However, it can be concluded that goals and measures related to the environment as important segment of CSR are coherent 30

Nacrt Akciskog plana odrzive proizvodnje i potrosnje Republike Hrvatske – 2 nacrt (2011-2016), Ministarstvo zaštite okoliša, prostornog uređenja i graditeljstva

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with the measures introduced in the EU (increasing the number of companies that comply with international environmental standards, introducing eco-labelling, integrating environmental criteria in the public procurement etc). However, to encourage CSR to a larger extent, the policies could benefit from more targeted and elaborated approach. Such approach should reflect the existing situation with CSR in the country and would properly address the needs of the Croatian companies. Furthermore, the existing policies do not address the specific role and challenges of SMEs related to sustainable development. More targeted policies in this area could integrate this aspect as well. HRPSOR has already expressed their interest to work together with the Ministry of Economy of Croatia in drafting a CSR Strategy.

MACEDONIA The public institutions in the Republic of Macedonia have recognized the importance of CSR and have undertaken concrete initiatives. In order to promote and coordinate stakeholders active in the area of CSR, the Government established Coordinating Body for CSR which functions within the Economic-Social Council. The Coordinating Body is multisectoral, with representatives from almost all relevant stakeholders (Ministries, business associations, trade unions, organizations of employers, consumer organizations, UN Global Compact Network, academia and experts etc). In terms of CSR policies, in October 2008, the Government adopted National Agenda on Corporate Social Responsibility in Republic of Macedonia 2008-2012 which is the key CSR policy document for the country. At the same time, this was the first officially adopted CSR policy in the region of Southeast Europe. The adoption of CSR Agenda was promoted and supported by international organizations such as UNDP and UN Global Compact Network in Macedonia, USAID and GTZ. The Agenda consists of goals and measures that address all stakeholders and represents a basis for further legal framework in the area of CSR. To ensure proper implementation of the Agenda, in the middle of 2010, the Ministry of Economy established separate CSR Unit within the Department for stimulating investments and CSR. The National Agenda on CSR is the initial strategic document on which basis the companies, public institutions and other entities that work in the area of CSR will coordinate and plan their activities. The overall vision of the Agenda is ―promoting sustainable business growth that encourages social inclusion and prevents environmental degradation‖. Government sets its role to create enabling environment for CSR that promotes growth, social inclusion and sustainability and in those lines shall:  Use proactively the contemporary international focus on CSR to attract and promote investment in Macedonia;  Encourage business, civil society and public sector organisations to take account of their economic, social and environmental impact;  Encourage business, civil society and public sector organizations to take complementary actions to address key challenges based on their core competencies – locally, regionally and nationally;  Allocate resources to ensure capacity is built;  Consider legislative changes that would create an enabling environment. The 1) 2) 3)

Agenda sets three mid-term objectives: Raising awareness on CSR Developing the capacities and competences to help mainstream CSR Ensuring an enabling environment for CSR

For each of these objectives, the Agenda includes set of priorities, measures and activities accompanied with timelines and responsible sector/institutions for their implementation.

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Measures and activities within the Objective 1 include: public campaigns on CSR, research, stimulating cooperation and dialogue between the stakeholders, creating databases in the field of CSR and providing CSR training and education; The capacities and competencies to help mainstream CSR under Objective 2 shall be developed with training and exchange of experience, developing CSR performance management and improving corporate governance; The Objective 3 consists of measures and activities related to: creating CSR incentives (tax incentives, introducing environmental and social labels, partial cost reimbursement, inclusion of CSR criteria in public procurement etc), creating legal obligations for CSR (for public companies, obligation for providing annual reports for investment and pension fund managers, including CSR in the sustainable development strategy etc) and CSR disclosure. Next steps in terms of CSR policy in Macedonia is to transfer the CSR principles from the Agenda into relevant laws in the CSR domains (mostly covered with the Agenda) as well as introduction of the indirect regulation mechanisms (through public procurement, financial incentives, CSR reporting etc) and voluntary regulation initiatives (eco and social trademarks etc) envisaged with the Agenda. In these lines, the National Agenda on CSR in Macedonia to a large extend reflects the recommendations and proposed actions of the EU CSR policies such as the COM (2002) 34731 and COM (2006) 136 final32. The Agenda doesn‘t make specific reference on SMEs and their particular needs in terms of CSR as suggested in EU CSR policy documents. This has been somewhat addressed by the stakeholders in the implementation of the Agenda. For example, the CSR project funded by the European Commission – Enterprise and Industry Directorate – General through the CIP Programme for Support to National Platforms for CSR has incorporated specific, targeted actions to increase capacities and raise awareness among SMEs. The project titled ―Mainstreaming the National CSR Agenda‖ is implemented by a consortium with the Ministry of Economy as Lead institution and in partnership with Macedonian Enterprise Development Foundation, Macedonian Chambers of Commerce and Konekt. The National Agenda on CSR is ambitious document and the main challenge for the country is its implementation. In 2010, the National Coordinating CSR Body published a bi-annual report for the period 2007-2009 reflecting on activities implemented in line with the Agenda. Although it is recognized that the Body has been very successful in engaging stakeholders and raising awareness about CSR, it was identified that there is a lack of proper monitoring and evaluation system that will assess the achievement of results and impacts if the implemented activities within the Agenda. Another document related to the CSR policies is the National Strategy for Sustainable Development 2009-2030 of Republic of Macedonia. The Strategy points out that in terms of aligning the national policy with EU policies for sustainable development, the situation is critical especially in the economic and social policies and that the existing policies do not properly reflect the sustainable development dimension. Related to the private sector and the SMEs, among others, the document identifies ―directing of the private sector towards sustainable development‖ as important goal which is envisaged to be achieved in phases. Actions under this goal include: assessment of the capacities for sustainable development of the private sector, identification of weaknesses and challenges in this area, preparing an Action plan for increasing the capacities of the 31

Communication from the Commission concerning CSR: A business contribution to sustainable development, COM (2002) 347 final 32 Communication from the Commission to the European Parliament, The Council and The European Economic and Social Committee Implementing the Partnership for growth and jobs: Making Europe a pole of excellence on Corporate Social Responsibility, COM (2006) 136 final

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private sector for sustainable development and developing cross-sectoral implementation framework for the Action plan. However, specific measures are yet to be developed and implemented. As one of the measures within the CSR Agenda is the inclusion of CSR in the sustainable development strategy, it is expected that some CSR specific measures will be introduced which will go in line with the EU CSR policies. Development of SMEs is one of the priorities of the Macedonian Government and is reflected in the National Strategy for SME development 2002-2013. The Strategy is driven by the vision to increase the employment in the SMEs and to increase their contribution to the National GDP. In these lines, the document identifies several goals: improvement of the policy creation and simplifying the regulatory framework, improving the access to finance, simplifying the taxation, promotion of ICT as well as the science, technology and innovation in function of the SMEs, promoting entrepreneurship in the education and training, internationalization of SMEs, improving the services available to SMEs and strengthening the dialogue between the public and private sector. The Strategy for SME development does not identify the sustainable development as one of the key principles for the development of SMEs and thus does not include any specific measures related to CSR. Confirming its commitment to support and promote CSR, the Ministry of Economy pledged to purchase a license for the newly adopted CSR ISO standard ISO 26000 to translate it in Macedonian and thus making it accessible free of charge for all Macedonian companies. Concluding remarks In terms of public policy, Macedonia took a leading step in the region and developed targeted policy related to CSR i.e. National Agenda on CSR which was adopted by the Government. The document gives appropriate policy framework for CSR on several levels and according to the EU CSR policies. The country also built appropriate infrastructure (cross-sectoral Coordinating Body, separate CSR Unit within the Ministry of Economy and designated staff from the relevant ministries and institutions) to support the implementation of the Agenda and coordinate the efforts in this area. The Ministry of Economy took proactive approach in making CSR more accessible to the companies by purchasing and translating the new CSR standard ISO 26000. The National Agenda is being implemented with cooperation of various stakeholders especially in the areas of capacity building and raising awareness. The implementation of the Agenda should be improved with monitoring that will focus not only on the implemented activities and measures but on the achieved results. This would provide appropriate support in identifying the bottlenecks in the implementation of the Agenda and will facilitate the process of revision of the Agenda. The critical challenge in the policy framework related to CSR in Macedonia is reflecting the CSR concept into the other development policies in the country and developing comprehensive, enabling framework for CSR as envisioned in the Objective 3 of the National Agenda. The existing Strategies on sustainable development, development of SMEs etc do not specifically address the issue of CSR. Achieving this would require more intensive and targeted work with the designated personnel from the ministries and public institutions relevant for the implementation of the measures and the activities under the Agenda. As some of the proposed measures from the Agenda related to the enabling environment for CSR require inter-ministerial cooperation and high political commitment (for ex. inclusion of CSR criteria in public procurement), the Ministry of Economy and the National Coordinating Body should intensify their advocacy efforts to the highest authorities within the Government.

SERBIA As a result of the increased activities of the stakeholders in the area of CSR and consequently raised awareness among the policy makers about the role of CSR, while acknowledging the importance of addressing CSR into the policies as part of the EU accession process, the Government of Republic of Serbia in July 2010 adopted Strategy on CSR i.e. National Agenda of Republic of Serbia on Corporate Social Responsibility

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2010-1015. The preparation of the Agenda was coordinated by the Ministry of Labor and Social Politics and was developed in highly participative manner by a multi-sectoral working group. The drafting of the strategy was supported by the experts who drafted the Macedonian Agenda on CSR. The CSR strategy is comprehensive document that outlines the existing situation in all segments covered with the CSR, all CSR related activities and initiatives already implemented in the country, key stakeholders and their role related to CSR, main challenges and opportunities etc. It emphasizes the importance of harmonization with the EU policies in light of the EU accession especially in terms of policies related to alleviating poverty and social inclusion and it acknowledges the role of CSR in attracting foreign direct investments. The shared vision of the strategy on CSR aims to promote economic development and sustainable business development that encourage social inclusion and prevent environmental degradation. As defined in the document, such ambitious vision requires: Using existing good practices and EU models especially new members and candidate members with a goal to advance CSR; Stimulating higher transparency i.e. encouraging practice of reporting and public disclosure related to CSR; Direct implementation CSR practices where the Government is in a role of an employer; Proactive use of international focus on CSR to attract and promote investments in Serbia; Encouraging organizations from the business sector, civil society and public sector to take into consideration their impact on the economy, society and the environment; Encouraging organizations from the business sector, civil society and public sector to undertake complementary activities to address key challenges based on their competencies – on local, regional and national level. In these lines, the Strategy on CSR in Serbia, similar to the National Agenda on CSR in Macedonia, has identified three main objectives: (1) Promoting the concept of CSR; (2) Developing CSR practices and (3) Creating incentives and legal obligations which will ensure the development of an environment conductive to CSR. The document also includes Action plan for 2010 and 2011 which outlines specific measures and activities with timelines, tentative budget and responsible institutions. The measures include: Under Objective 1 - public campaigns on CSR, CSR research, encouraging cooperation and dialogue, creating databases, providing education and training on CSR; Under Objective 2 - training and exchange of experience, development of CSR management performance, improving corporate governance; Under Objective 3 – creating incentives for CSR (tax incentives, introducing environmental and social labels, partial cost reimbursement inclusion of CSR criteria in public procurement etc), introducing legal obligations for CSR, disclosure of activities related to CSR. For implementation of the Strategy, it is envisioned that the Ministry of Labour and Social Politics and the Ministry of Economy and Regional Development would set up a Centre for promotion and development of CSR which will be responsible for the implementation of Governmental policies related to CSR. The Centre would be supported by advisory and multi-stakeholder coordinating body so called Council for Implementation of CSR Strategy which will be formed with representatives from relevant governmental institutions, business associations, employers‘ organizations, NGOs and trade unions. The document also provides monitoring framework with comprehensive set of indicators.

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As the Strategy on CSR in Serbia is a new document it is yet to be seen how it‘s going to be implemented (the Government has set on producing annual CSR reports) and the results it will achieve. CSR as a concept and its principles have been reflected in other strategic documents of Serbia as well. The National Strategy on Sustainable Development explicitly addresses CSR as policy instrument. One of the key principles of the Strategy is integrating environmental aspects in all sectoral policies. As such, the document stipulates the need for integrating economic, social and environmental approaches and analysis and encouraging social dialogue, corporate social responsibility and public-private partnership. Furthermore, CSR is considered as one of the factors in achieving knowledge-based economy which will not only rely on market value. To achieve sustainable economic development the strategy defines a goal of developing a system of social responsibility in the private sector by encouraging CSR both in terms of environmental protection and in terms of humanizing the work culture. In the comprehensive Action Plan for implementation of the Strategy 20092017, social responsibility is explicitly addressed in the section on the environment, related to the renewable energy (through training and technical standards), and in the mining and energy industry by introduction of ISO 14000 and EMAS although the document contains many measures that go in line with CSR practices. Concluding remarks With the adoption of the CSR Strategy the Government of Serbia has created proper infrastructure for the development and integration of CSR. The political commitment to CSR is reflected in other policies as well such as the Strategy on Sustainable Development and Strategy on reducing poverty (in terms of social inclusion on the labour market). Establishment of the bodies responsible for the implementation of the CSR strategy is under way and it is expected that the policies in this area will be implemented according to the Action plan. Furthermore, the plan for setting up a multi- stakeholder coordinating body is in line with the measures from the EU CSR strategic documents as a mechanism to stimulate dialogue and build coherent understanding on CSR by all stakeholders in the country. Implementation of the adopted policies is still in the beginning face and will require time to evaluate their relevance and impact. Similar with Macedonia, the strategic CSR document does not refer to the specific challenges and needs of the SMEs related to CSR. This aspect could be further addressed in the implementation of the measures and the activities. Analysis of the CSR policy elements and their coherence with EU CSR policies Based on the outline of the CSR related policies in each of the Balkan countries covered by the research we can analyze whether those policies cover the six elements of the CSR policies used for benchmarking in this report and to what extent they are coherent with the EU CSR policy framework. Understanding of country specific CSR context Bosnia and Herzegovina

Existing policies do not provide elaboration on the country specific CSR context

Croatia

Existing policies do not provide elaboration on the country specific CSR context. However, the Action plan on sustainable production and consumption – 2nd draft version identifies policy gap and outlines existing CSR related multistakeholder initiatives in the country.

Macedonia

The National Agenda on Corporate Social Responsibility in Republic of Macedonia 2008-2012 provides detailed analysis of the CSR related context including SWOT analysis.

Serbia

The National Agenda of Republic of Serbia on Corporate Social Responsibility 2010-1015 provides detailed analysis of the CSR related context including

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SWOT and Stakeholder analysis. Defining CSR Bosnia and Herzegovina

Existing policies do not provide definition on CSR. Nevertheless, they provide solid base for future articulation of this aspect as the documents clearly refer to sustainable development and triple-bottom line.

Croatia

Existing policies do not provide definition on CSR even though the documents identify the role of the business sector in the sustainable and social development. Some aspects in the Strategic Framework for Development 2006-2013 related to the social cohesion address CSR from the perspective of charitable giving which is not in line with the EU strategic documents.

Macedonia

The National Agenda on CSR does not provide explicit definition on CSR which would be referred to in the public policy documents. The document makes reference to the definitions provided in the EU CSR strategies. The document also defines the different ways and levels of understanding of CSR in the country. Nevertheless, definition is needed in line with the EU policies to facilitate common understanding of the concept.

Serbia

The National CSR strategic document of Serbia, at the end of the document provides list of definitions of terminology among which CSR is defined as ―concept through which companies integrate social and environmental considerations in their business activities, as well as interaction with their stakeholders on a voluntary basis. Other terms that refer to the same or similar concepts are Corporate citizenship and responsible business‖. In annex I, the document refers to another definition on CSR ―success in the business activities which is achieved not only by complying with laws and regulations but also through an approach which creates balance between the economic, social and environmental goals in a way that brings benefit for the citizens, community and the society‖. The definition is in line with the CSR definition in the COM (2002)347 final. As this is the only and most relevant document on CSR in the public policies in the country it would be beneficial for all stakeholders using the document if the CSR definition is placed in the main body of the strategy rather than at the end of the document in the Definition of terminology as it‘s done in the EU strategies.. Defining CSR public policy rationale

Bosnia and Herzegovina

Since there are no targeted CSR policies and/or measures, existing policy documents do not provide elaboration on the CSR public policy rationale. Nevertheless, they provide solid guidance for future articulation of this aspect.

Croatia

In a lack of explicit CSR policy, the existing policies do not provide specific CSR public policy rationale. However, they address issues which do provide initial rationale for introducing specific CSR related measures within these documents such as: a) CSR policy trends in the EU and in the neighbourhood (specifically referring to the CSR Strategy of Serbia); b) the level of existing CSR initiatives in the country.

Macedonia

The National Agenda on CSR states the government‘s rationale for introducing CSR policy which is mainly focused on: 1) EU Accession process which ―will require embracing EU norms and practices, including recognizing and promoting CSR and its contribution to social cohesion and sustainable competitiveness and development and 2) attracting foreign direct investment. In these lines, the EU CSR policies are positive stimulus.

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Serbia

In the stakeholder analysis, the National Agenda identifies the interest and expectations of the Government to utilize CSR as ―policy instrument for improving competitiveness, social inclusion, attracting foreign investments as well as the EU accession process‖.

Situating CSR in government institutions Bosnia and Herzegovina

No particular Government structure has direct responsibility in the area of CSR.

Croatia

No particular Government structure has direct responsibility in the area of CSR.

Macedonia

Serbia

There is well established structure for stimulating CSR in the country: National Coordinating Body on CSR – Multi Stakeholder Body established by the Government with a mandate to develop multi stakeholder dialogue and identify joint actions for promotion and implementation of CSR. It is the key focal point for promotion of CSR in the country and coordinates the activities of the various stakeholders related to CSR. The Coordinating Body consists of 17 members of various stakeholders such as: relevant ministries (Ministry of Economy, Ministry of Labour and Social Policy and Ministry of Environment and physical planning); 3 representatives of the Labour Unions; 3 representatives of business associations/chambers; 3 representatives of organizations of employers; 2 experts and academia representatives; representatives of the UN Global Compact and the Consumer organization and 1 media representative. The Body is informal entity set up as a permanent working group under the Economic and Social Council. This is first such CSR body established in South East Europe. Ministry of Economy is assigned for coordinating CSR promotion on behalf of the state institutions. The Ministry has established separate CSR Unit within the Department for stimulating investments and CSR with one employee who also serves as a Secretary of the Coordinating Body for CSR. Such structure is fully in line with the recommendations and measures promoted with the EU CSR policies. The Government structure with direct responsibility for implementation of the strategy is not established yet. The National Agenda envisages that the Ministry of Labour and Social Policy and the Ministry of Economy and Regional development will establish a Center for promotion and development of CSR with responsibility of implementation of Government‘s policies in the area of CSR. In addition, Multi Stakeholder Council for implementation of CSR strategy as an advisory and coordinating body. Once established, such structure will be in line with the recommendations and measures promoted with the EU CSR policies.

Selecting CSR policies Bosnia and Herzegovina

Bosnia and Herzegovina doesn‘t have policies that directly address the issue of CSR.

Croatia

Croatia has not developed separate CSR policy framework. Nevertheless, CSR is recognized in the policies related to Sustainable development and sustainable production and consumption. Measures mostly include increasing awareness on CSR through trainings; support in introducing environmentally related standards as well as market stimulus related to the environmental protection such as eco labelling and green public procurement.

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Compared to the EU policy trends, there is an apparent need for more strategic and consistent policies related to CSR that will include all elements discussed in this chapter and will reflect the targeted approaches of the EU CSR policies.

Macedonia

Macedonian Government has in 2008 has adopted the National CSR Agenda for the period 2008-2012. To a large extent, the policy incorporates the principles and objectives of the EU CSR Strategies from 2002 and 2006. The Agenda incorporates mixture of instruments to promote and stimulate CSR in the country as suggested by the EU policies as well. Compared to the measures proposed in the COM (2002) 347final, the Agenda fully addresses the issues of raising awareness and capacity building through various measures such as: research; exchange of experience and good practices from the country; region and the EU; peer-learning; building the skills of the managers in the companies as well as other stakeholder groups such as public institutions, media and NGOs; CSR manuals and guidebook for the companies; introducing standards and management systems relevant to CSR; encouraging the development of sector specific codes of conduct etc. The Agenda also includes measures to incense the multi stakeholder dialogue as well as comprehensive CSR incentives measures from tax incentives, to labelling schemes, introduction of social and environmental criteria in the public procurement, subsidies for introduction of CSR related international standards, National CSR Awards scheme etc. There are only few identified gaps in relation to the EU CSR policies: 1) no targeted approach towards the SMEs in the document itself. It does not reflect the particular needs of the SMEs and thus the measures are designed equally for all companies regardless of their size; 2) Integration of CSR in the sector related policies. Except for the incorporation into the Sustainable development Strategy there is no reference of the need to further address and integrate CSR in the policies related to enterprise development, employment, energy, social affairs, environment, consumer protection etc. These issue related to the SMEs have been addressed in practice, through EU funded project activities which have incorporated targeted approach towards the SMEs. However, following strategic documents should address these two issues as well. The National CSR Agenda of Republic of Macedonia is ambitious document thus in the established time framework all of the measures were not implemented in full scale. While there was major advancement in the implementation of the measures related to raising awareness and capacity building, the measures related to incentives introduced by the Government are not in place yet.

Serbia

As in Macedonia, in 2010 Serbia has adopted National Agenda on Corporate Social Responsibility for the period of 2010-2015. This document is in line with the EU CSR policies. Again, as in Macedonia, the strategic document incorporates comprehensive set of measures related to raising awareness, capacity building of various stakeholders, support to introduction of codes, international standards as well as CSR incentives. As the objectives and the measures in the CSR Agenda of Serbia are similar to those envisaged in the Agenda of Macedonia, the identified gaps in terms of approaches and measures are the same (see the row above). The National CSR Agenda of Serbia is a new document and is yet to be implemented thus there is no available information on the progress with the implementation.

Monitoring outcomes of CSR policies

49


Bosnia and Herzegovina

As there are no explicit CSR policy measures within the public policies of BiH, there is no established system of monitoring

Croatia

The Action Plan on Sustainable production and consumption – 2nd draft incorporates monitoring indicators including some indicators for the CSR related measures. This however does not provide sufficient monitoring framework for CSR. As more explicit CSR policies are developed in the country, such framework should be developed to review the impacts. As the Action plan is newly adopted document, there is no progress reports issued yet.

Macedonia

The National CSR Agenda does not provide comprehensive monitoring framework. The Ministry of Economy was assigned to develop national CSR indicators and monitor the progress. However, the indicators are not fully developed yet. Every year, the Ministry of Economy prepares annual reports on the implementation of the CSR Agenda which includes information on measures undertaken by all stakeholders towards the implementation of the Agenda. The National CSR Coordinating Body also prepares reports of its activity. Those reports mostly consist of information on the implemented activities and measures while it does not provide sufficient analysis of the impact on the policies in advancement of CSR in the country. As the next CSR Agenda is drafted, comprehensive monitoring framework and CSR indicators should be developed as part of the strategy.

Serbia

The National Agenda of Republic of Serbia on CSR includes monitoring plan with developed key indicators on measuring the progress as well as achievement of specific objectives set in the Agenda. Serbia already has established data base of good CSR practices of companies which through regular updating is intended to be utilized as key source of information. It is also envisaged that the Government will prepare and issue Annual report on CSR which will include information on the progress made in the implementation of all segments of the agenda, creating positive environment and stimulus mechanisms, impact of the policies on increased understanding of CSR among companies and other stakeholders etc. As the strategy is yet to be implemented, there are no reports produced yet which could serve for reviewing the CSR policies in the country.

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V. PRIVATE SECTOR (SMEs) AND CSR IN THE TARGETED COUNTRIES The aim of the survey conducted on the SMEs in the SEE region is to increase knowledge about the level of understanding about the concept of CSR among the SMEs in the Balkan countries, to assess their readiness to implement the CSR principles in their business operations and to identify key drivers and obstacles. The survey was commissioned by UNIDO and can be utilized for programming and advocacy efforts of the Regional CSR Network for Small businesses in CEE/SEE as well as the policy makers in the region in drafting targeted policies to support uptake of CSR by the SMEs. The survey was conducted in the course of two years in all four countries covered with this research: Croatia in 2009, Bosnia and Herzegovina in 2010 and in Serbia and Macedonia in 2011. Methodology The survey was conducted using unified questionnaires for all the countries involved. The questionnaire encompassed 21 questions; three questions were general ones about the company size and performance and two about the willingness of company to work with CSR in the near future. Four questions had an option of multiply answers, 14 single answer questions and 3 descriptive ones. In five questions, companies marked more than one answer in the single answer question. In addition, in Croatia information was partly obtained by telephone conversations with companies in a form of informal, non-led, interview. The lists of companies were obtained from the Chambers of Commerce, national Ministries and Global Compact Networks in the countries. The sample was determined by several features: size, annual turnover, longevity, financial stability, location (geographical distribution). In the sampling, survey teams were very careful to include SMEs in numbers relevant to the economic level of activity in a particular county, number of inhabitants (geographical dispersion) as well as the number of companies registered in the country. The response of the companies was not very high in all four countries, but the sample is statistically relevant. In Croatia 38 companies participated in the survey, in Serbia 18, in Bosnia and Herzegovina 40, and in Macedonia 31. There are several reasons for a low response: Most frequently companies reported that the questionnaire was too long and that it takes a lot of time to complete it; Questionnaire consisted of repeating questions and was difficult to understand from the surveyed SMEs; The number of e-mails that have never been read and those that had bounced back indicates low level of everyday usage of the information technologies especially amongst the small enterprises. General info on surveyed SMEs a) Industrial origin According to industry sectors, the majority of surveyed companies by countries come from:

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-

Food and consumer packaged goods (30 %) in Bosnia and Herzegovina Construction and building materials (27.77%) in Serbia. Industrial Manufacturing (40%) in Croatia; and Whole sale (31%) in Macedonia.

a. Employment rate According to the employment rate the highest percentage of surveyed companies have 1050 employees: 32.5% in Bosnia and Herzegovina and around 55% in Croatia. In these two countries, the companies with less than 10 employees were represented with the second highest percentage: 25% in Bosnia and Herzegovina and 21% in Croatia. In Macedonia the highest percentage of 61.29% of surveyed companies are companies with less than 10 employees, and second highest percentage among the companies with 10-50 employees, 35.48%. b. Stability assessment The financial stability of the surveyed small and medium companies varies by country. In Croatia, most of the surveyed companies show a good level of financial stability. Over 50% have been financially viable for the period of over 5 years; however, the number of companies that experienced some financial difficulties is also quite high - 32%. Frequent financial difficulties experience 8% of the surveyed companies. In Bosnia, little over half of surveyed companies have experienced some financial difficulties (52.5%), while 7.5% of them have experienced frequent financial obstacles. This reflects the actual economic situation in the country. Around 40% of surveyed firms have experienced financial stability for more than one year period and no significant changes have been noticed in relation to company size or industry sector. In Macedonia, more than 80% of the surveyed companies stated financial stability for the period of over 5 years, almost 10% of the companies stated that have financial stability for period of 1-3 years, and only one company stated they are facing some financial difficulties. CSR perception among SMEs in the Balkan countries a)

Dissemination of Information

Main trends In the Balkan countries the dissemination of information goes through different channels depending on the CSR infrastructure in the country: existing NGOs, media awareness about CSR, adopted CSR policies, CSR structures in the public institutions etc. In all four countries, media is one of the key sources of information on CSR. The other channels of communication vary depending on the country. In addition to the media, in Macedonia, Croatia and Serbia some companies first encountered CSR through other companies. NGOs are sources of information for the companies in Macedonia and Bosnia and Herzegovina, while in Croatia significant number of companies get information on CSR from other sources (mostly informal and personal). Only in Bosnia and Herzegovina, Global Compact initiative was the initial source of information for around third of the surveyed companies. In Macedonia the Chambers of Commerce has been source of information for a number of surveyed companies.

Detailed country information In Macedonia, the corporate social responsibility is mostly promoted by the media according to 30% of surveyed companies. Besides that, the information on CSR is disseminated by other companies (according to 23% of the surveyed companies), by local NGO‘s (such as

52


Konekt) according to 16% and Chambers of Commerce also 16%. Smaller percentage of surveyed companies (5% of them) recognized the UN Global Compact and the National Coordinating CSR Body as information disseminator on CSR (5% and 7% respectively). In Bosnia and Herzegovina, CSR is promoted mostly by nongovernmental organizations, international organizations and large companies. However, most of the CSR initiatives and programmes in the country target medium and large companies, while small firms are rarely included in these initiatives33. As demonstrated by the survey, above half of the small firms first learned about CSR concept through the media (55%), while others learned about the concept through the Global Compact initiative (35%) or local NGO (35%). This could also be seen as one of the reasons for differences in understanding of the CSR concept among companies of different size, which is demonstrated by this report 34. In Croatia there are no nongovernmental organisations working on CSR issues registered so far.35 There are many NGOs working on specific CSR related issues such as environmental issues, consumers‘ rights, social rights, human rights, workers rights, etc.; however, none of them has comprehensive programmes for CSR or disseminate information on CSR. On the other hand, the CSR labelling is still not rooted into Croatian business. There are CSR awards awarded by business associations as well as CSR index that benchmarks companies. However, the wider public is not yet concerned or even acquainted with CSR issues, no CSR labelling exists, and NGOs are neither educated on the issue nor concerned with it. 36 In addition, NGOs in Croatia rarely cooperate with businesses or take constructive and proactive role in such issues. As high as 34.1% of information comes for ―other‖ sources that is most often informal or personal sources of information37. In Croatia, 29.3% companies first learned about CSR through media and 14.6% from other businesses. In Serbia, the CSR information is mostly disseminated through the media according to the survey findings. Around 55% of the surveyed companies heard for the first time about CSR through media, 22% from Trainings and Inter-Consulting, 16% of them through other companies, 11% from the Chamber of Commerce. b)

Perception of CSR practices by SMEs

Definition of CSR Surveyed companies were asked to select two issues they think are closest to their understanding of CSR. Following the results, it can be concluded that majority of the surveyed SMEs in the region have overall understanding about the concept of CSR. The list covered following definitions:

a) b) c) d)

CSR is a set of philanthropic activities a company carries out voluntarily on a sporadic basis in the local community CSR is the commitment of a company to strictly abide to national labour and environmental laws CSR is about promoting corporate fairness, transparency and accountability through a set of internal rules or processes by which businesses are operated, regulated and controlled CSR is a collection of occasional philanthropic practices, gestures or initiatives motivated by public relations or marketing considerations

33

Survey Report: CSR Survey among small and medium enterprises in Bosnia and Herzegovina, Vanja Jankovic, Sarajevo 2010 34 Ibid 35 CSR Uptake amongst small and medium enterprises in Croatia, Hrvatski Centar za Cistiju Proizvodnju, Zagreb 2009 36 Ibid 37 Ibid

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e) f) g) h) i)

CSR is a comprehensive set of policies, practices and programs that are strategically integrated throughout business operations and decision-making processes to minimize the negative impact on the company's social and natural environment CSR is a formal process of relationship management through which companies engage with their stakeholders to align their mutual interests CSR is a concept aimed at achieving commercial success in a way that does not compromise the well being of its employees or the local community CSR describes a decision-making process based on ethical values and compliance with legal requirements CSR describes the way in which a company manages its economic, social and environmental relationships, and the way it engages with its stakeholders (including shareholders, employees, customers, business partners, governments and communities)

Main trends In Macedonia, Croatia and Bosnia and Herzegovina, majority of the companies identify CSR as ―a comprehensive set of policies, practices and programs that are strategically integrated throughout business operations and decision-making processes to minimize the negative impact on the company's social and natural environment‖ which is in relation to the triple bottom line. In Serbia, most of the companies identified CSR through their relations with the stakeholders. These trends might be due to the fact that the survey was completed by companies who already to a certain extent engage in CSR activities thus are more aware of the concept. In all four countries there is still number of companies that identify CSR through the compliance with national legislation as well as through the philanthropic activities. The newest Communication from the Commission COM (2011) 681final provides guidance in this direction as it defines the compliance with the legal requirement as prerequisite to CSR. The most frequent answers provided by the companies are summarized in the Table 1.

Table 1: Definition of CSR in all four countries CSR is a comprehensive set of policies, practices and programs that are strategically integrated throughout business operations and decision-making processes to minimize the negative impact on the company's social and natural environment

CSR is the commitment of a company to strictly abide to national labour and environmental laws

Macedonia

45%

39%

32%

Serbia

25%

12%

63%

Croatia

50%

24%

21%

BiH

67,50%

57.50%

35%

CSR describes the way in which a company manages its economic, social and environmental relationships, and the way it engages with its stakeholders

Detailed country information In Macedonia, 45% of the surveyed companies stated that: ―CSR is a comprehensive set of

policies, practices and programs that are strategically integrated throughout business operations and decision-making processes to minimize the negative impact on the company's social and natural environment‖ which shows understanding of the concept of CSR in relation to the triple bottom-line. In addition, SMEs in the survey recognize the importance

54


of cooperation with the stakeholders and corporate fairness, transparency and accountability of the companies. Furthermore, 87% of the companies covered by the survey agreed that ―Responsible businesses go beyond what is required by law to make a positive impact on society and the environment‖. Also, 30 out of 31 surveyed companies connect CSR with actions related to protecting the environment. This understanding of CSR by the SMEs might be due to undertaken concrete initiatives from civil society organizations and the public institutions in the country. It might also be due to the type of companies that were most likely to respond to the questionnaire i.e. mostly SMEs that have already certain awareness about CSR and consider it at least somewhat important for their business. In Bosnia and Herzegovina, two thirds of the companies identified CSR as ―a comprehensive

set of policies, practices and programs that are strategically integrated throughout business operations and decision-making processes to minimize the negative impact on the company's social and natural environment‖. The survey shows that 88% of the medium and large companies view CSR as definition above. The reason for this response can be found in the fact that these companies are mostly involved in most of the CSR activities and initiatives in the country. Also, for significant number of companies, the definition of CSR is connected to the legal obligations of the company, therefore 57.5% of surveyed companies when asked to choose definition that best describes the CSR stated: ―CSR is the commitment of a company to

strictly abide to national labour and environmental laws‖. In Croatia, the survey results showed that the general understanding of CSR is increased and it is not exclusively connected with philanthropic activities (only 11% of the think that CSR is about philanthropy). One half of the companies consider CSR to be ―a comprehensive

set of policies, practices and programs that are strategically integrated throughout business operations and decision-making processes to minimize the negative impact on the company's social and natural environment‖. Also, there is still high percentage (24%) of the companies that define the CSR through abiding to the national labour and environmental laws. In Serbia, the highest percentage of the surveyed companies defined CSR through the relations with stakeholders (employees, costumers, business partners, governments and communities). One quarter of the companies stated that CSR is: ―a comprehensive set of

policies, practices and programs that are strategically integrated throughout business operations and decision-making processes to minimize the negative impact on the company's social and natural environment‖. These two groups of companies show quite satisfying percentage of SMEs that understand the concept of CSR. Similar to other countries in the region, some percentage defined CSR through obedience to national laws. CSR Activities The survey shows that companies in the region recognize the CSR activities but in every country the companies relate to different aspect of CSR. In the survey the list of activities was offered: 1

Waste separation

20

2

21

3 4

Involvement of employees in decision making processes Introduction of codes of conduct Offering free lunch to employees

5

Providing job possibilities to handicapped

24

22 23

Introducing proper storing and inventory management practices Providing anonymous complaint mechanisms/platforms for staff Keeping workplaces and machines clean Developing non-financial reports for stakeholders Provide part time and home work

55


6 7

people Offering training possibilities for employees Installing air condition and heating systems at workplace Sponsoring the local soccer team

25

28

10 11

Improving data collection, measurement and filing systems Utilizing energy saving light pulps Introducing anti-corruption policies

12

Prohibiting smoking at workplace

31

13

Improving ergonomics of workers

32

14 15

Measures to enhance employee motivation Reducing air pollution caused by company cars Employing women in management positions

33 34

17

Enhancing the quality of products or services

36

18

Installations to improve the isolation of office buildings Building play grounds or sport yards for the local community

37

Entering into cooperation agreements with universities Investigating CSR commitment of potential business partners Cleaning procedures with reduced water consumption Introducing electronic filing systems Granting free days to employees for community work or blood donations Measures to reduce the level of noise and dust at workplace Developing incentive structures for best performing employees Reducing working hours to a minimum Reducing the need for artificial light at workplace Collecting sold products from customers after the product life span for recycling Providing small occasional gifts to officials dealing with company matters such as registration or permits Proper labeling of products

38

Making regular donations to charities

8 9

16

19

26

arrangements for mothers Hiring staff belonging to ethnic minorities

27

29 30

35

Main trends Most of the companies in Macedonia and Croatia easily connect CSR with environmentally related activities. Some aspects of employee relations are also recognized by large number of surveyed companies such as providing training opportunities for the employees or employing people with disabilities. In Serbia and Bosnia and Herzegovina predominantly recognized activities relate to the employee relations especially in terms of their social dimension such as employee social benefits and motivation. In Bosnia significant number of companies identifies the charitable contributions as CSR. Sponsoring the local soccer team is not identified as CSR by the majority of companies in all four countries. However, also the issue of involving the employees is one of the least identified CSR activities by the companies in Macedonia, Croatia and Bosnia and Herzegovina. Unlike in the other three countries, in Serbia, certain percentage of companies considers activities linked to corruption as part of CSR (Providing small occasional gifts to officials dealing with company matters such as registration or permits).

Detailed country information The list of identified activities by the SMEs in Macedonia shows that companies easily connect environmental activities with CSR, but it is also notable that they emphasize the relations with the employees. Asked about the CSR activities, most of the companies in Macedonia identified: Reducing air pollution caused by company cars (96,77%), Utilizing energy saving light pulps (93,55%), Offering training possibilities for employees (93,55%), Introduction of codes of conduct (90,32%), Providing job possibilities to handicapped people (90,32%), Keeping workplaces and machines clean (90,32%), Cleaning procedures with reduced water consumption (90,32%), Waste separation (87,10%), Reducing the need for artificial light at workplace (87,10%). The least recognized activities are CSR issues related to equal opportunities and diversity management (promoting women in managerial positions, employment of ethnic minorities etc).

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Graph 1: CSR Activities in Macedonia 100% 90% 80% 70% 60% 50%

NO

40%

YES

30% 20% 10% 0% 1

3

5

7

9 11 13 15 17 19 21 23 25 27 29 31 33 35 37

In Bosnia and Herzegovina the companies often identify the CSR activities as: ―investment in local communities‖, ―social donations‖ and ―investments in employees‖ as predominant responsible activities of their firm. Among other previously mentioned reasons, this is obviously due to specific situation and socially related challenges BiH is facing with, but also due to heritage from social system where these kinds of activities were practiced to a large extent. It should be notified that this is in collision with the answers related to the definition of CSR where almost none of the surveyed companies identified the concept with the philanthropic activities. This might indicate that although companies theoretically understand the concept of CSR, when it comes to practice they might be influenced by the public pressure which is probably highest in requests for donations or the companies might consider donations as a ―quick fix‖ that improves their public image.

Graph 2: CSR Activities in Bosnia and Herzegovina 100% 90% 80% 70% 60%

50%

NO

40%

YES

30% 20%

10% 0% 1

3

5

7

9 11 13 15 17 19 21 23 25 27 29 31 33 35 37

CSR activities in Croatia are connected more to the benefits to the environment than labour issues or safety which is reflected in the fact that 92% of responders agree that ―CSR includes actions that protect the environment‖ and that environmental issue is addressed in statements of top four statements: ―CSR includes actions that protect the environment‖ (92%), ―Responsible businesses beyond what is required by law to make a positive impact on society and the environment― (90%), „CSR needs to be strongly promoted by government

57


authorities― (82%), „A responsible company is a firm that strictly abides to labour and environmental laws― (63%).

Graph 3: CSR Activities in Croatia 100% 90% 80% 70% 60% 50%

NO

40%

YES

30% 20% 10% 0% 1

3

5

7

9

11 13 15 17 19 21 23 25 27 29 31 33 35 37

The companies in Serbia (94,45%) recognized the following activities as part of CSR: Offering free lunch to employees, Providing job possibilities to handicapped people, Utilizing energy saving light pulps, Measures to enhance employee motivation, Installations to improve the isolation of office buildings, Investigating CSR commitment of potential business partners, Providing small occasional gifts to officials dealing with company matters such as registration or permits and 88,89% of the companies identified: Improving data collection, measurement and filing systems, Reducing air pollution caused by company cars, Provide part time and home work arrangements for mothers, Granting free days to employees for community work or blood donations38. It is obvious that companies in Serbia connect the CSR activities with environmental issues and with relations with employees. Unlike in the other three countries, certain percentage of companies considers activities linked to corruption as part of CSR (Providing small occasional gifts to officials dealing with company matters such as registration or permits). This might indicate either lack of full understanding about CSR among those companies or wide social acceptance of corruptive behaviour.

Graph 4: CSR Activities in Serbia 20 15 10 5

0

38

No Yes 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38

Survey Report: CSR Survey among small and medium enterprises in Serbia, InterConsulting, Kragujevac 2011

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c) Obstacles to integrate CSR in the SMEs

Main trends There are number of obstacles and barriers for CSR implementation identified by the surveyed small and medium enterprises in the Balkan countries. Lack of funds and lack of know-how are identified as important obstacles in all four countries. Lack of human resources and lack of time are also quite relevant for the surveyed companies in all four countries.

Graph 5: Obstacles to integrate CSR in all four countries 60,00% 50,00% 40,00% 30,00% 20,00%

MK

10,00%

BiH

0,00%

CRO SRB

Detailed country information In Macedonia, the main identified obstacles are almost equally spread between ―lack of time‖ (29%) followed by ―lack of funds‖ (26%) and ―lack of know-how‖ (26%) and ―lack of human resources‖ (23%). For the companies covered in the survey in Bosnia and Herzegovina most frequently mentioned obstacles are: ―lack of time‖ (50%), ―lack of funds‖ (42.5%), ―lack of knowhow‖ (27.5%) and ―lack of human resources‖ (15%). In Croatia the companies identified the ―lack of funds‖ (53%) and ―lack of time‖ (42%) as key obstacles in implementing CSR practices in their companies. Also, high percentage of the companies identified that the ―lack of know-how‖ (37%) is also an obstacle. That could be considered as indicator that companies might implement the CSR if they had the knowledge or support. In Serbia, ―the lack of know-how‖ (55,56%), ―lack of human resources‖ (38,89%) and ―lack of funds‖ (33,34%) are identified as main obstacles by surveyed companies, followed by ―lack of time‖ and ―lack of employee motivation‖. It can be concluded that in all four countries the companies have identified similar obstacles. This creates opportunities for efficient regional programs and share of experience especially related to public policies.

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d) Expected results of CSR implementation

Main trends SME‘s expect various results from the investment in CSR implementation into their business strategies and operations. Nevertheless, it is noticeable that in Macedonia, Serbia and Bosnia and Herzegovina, the most positive impact is expected in the areas connected to PR (brand awareness, company‘s reputation and media presence) as well as customer satisfaction. In Croatia, Serbia and Macedonia majority of companies also expect positive impact on the quality which shows proper understanding of CSR as integral part of the business. The most negative impact is expected on the absenteeism rates as well as the operational costs which show lack of awareness of the benefits that CSR can bring for the immediate financial performance of the company. Promotion of REAP case studies can contribute to increased understanding of full benefits from integrating CSR into the business operation of the SMEs.

Table 2: Huge positive impact expected by the SMEs in all four countries Huge positive impact reputation of the firm

brand awareness

quality

customer satisfaction

MK

73,34%

70%

70%

63,34%

SRB

76,47%

76,47%

66,67%

66,67%

CRO

18,42%

13,16%

75%

26,32%

10,53%

13,16%

BiH

77,5%

22,5%

35%

52,5%

10

35%

sales

media presence

70,58%

Detailed country information According to the survey findings, 73,34% of SMEs from Macedonia identified that CSR has a huge positive influence on the reputation of the firm, 70% on brand awareness and quality and 63,34% on customer satisfaction. 60% of surveyed companies identified the medium positive impact on investor relations, 53,34% on employee turnover, value added per employee and credit and landing arrangements. According to the survey in Macedonia, 16,67% of the surveyed SMEs stated medium negative impact on pricing, 13,34% on operational costs, 10% on absenteeism rate. 6,67% think that CSR can have huge negative impact on absenteeism rate.

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Graph 6: The impact of CSR in Macedonia

No impact medium negative impact huge negative impact Operational costs Productivity Sales Revenues Customer satisfaction Quality Exports Employee turnover Absenteeism rate Value added per… Pricing Market access Market share Innovation Competitiveness Risk management Reputation of the firm Brand awareness Media presence Government relations Investor relations Credit and lending …

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

medium plosive impact huge positive impact

In Bosnia and Herzegovina businesses consider that CSR has most negative influence on operational costs. Again, in relation to total number of surveyed companies, medium and large companies are more likely to consider that CSR can have positive impact on company‘s operational costs (60%), while most managers of small firms think that CSR implementation would have ‗negative impact‘ on their operational costs. This survey also shows that small SMEs find that CSR has huge positive impact on following issues: Media presence,

Reputation of the firm and Market access. Graph 7: The impact of CSR in Bosnia and Herzegovina

In Croatia amongst micro companies (1-10 employees) the expectance towards benefits from CSR are connected to relationship with the government bodies (50% high positive impact) and other authorities. In addition, micro companies expect to have highly positive influence the reputation of the firm (50%), brand awareness (38%), sales (50%) while the highest positive impact is expected on quality (75%). Small companies (10-50 employees) share the similar expectation from CSR towards quality enhancement (48% high positive impact – the highest) however. Altogether, small companies are less enthusiastic about positive impact of CSR and assigned it rather medium positive impact than high positive impact. Medium sized companies (50+ employees) find the high positive impact on business even less possible and

61


assigned as much as 11 categories (out of 22) as zero expectance of high positive impact amongst which are sales, exports, absenteeism rate, value added per employee, pricing, market access competitiveness and brand awareness. Medium sized companies expect some improved relationships with government (11% high and 67% medium positive impact) while the highest positive impact is expected in quality (33%) though majority of companies (56%) expect no impact on quality whatsoever.

Graph 8: The impact of CSR in Croatia 40

No impact

35 30

medium negative impact

25 20 15

huge negative impact

10

0

Operational costs Productivity Sales Revenues Customer… Quality Exports Employee… Absenteeism rate Value added per… Pricing Market access Market share Innovation Competitiveness Risk management Reputation of… Brand awareness Media presence Government… Investor relations Credit and…

5

medium plosive impact huge positive impact

In Serbia the huge positive impact according to the surveyed companies is seen in: brand awareness (76.47%), reputation of the firm (76.47%), media presence (70.58%), customer satisfaction (66.67%) and quality (66.67%). They also identified innovation (52.94%), revenues (44.45%) and sales (44.45%) to have medium positive impact from CSR. CSR might have huge negative impact on absenteeism rate according to 11.76% of surveyed companies and can have medium negative impact on operational costs (33.34%), pricing (17.64%) and revenues (16.67%).

Graph 9: The impact of CSR in Serbia

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e) The role of Trade Unions and Collective Contracts

Main trends Existence of trade unions in the surveyed SMEs in all four countries is rare. Collective bargaining is also not wide spread practice in the surveyed SMEs. This is probably one of the weakest aspects of CSR within the SMEs in the region.

Detailed country information In Macedonia only 3 out of 31 surveyed companies have trade unions. Almost 71% of all the surveyed companies think trade unions are important. All of them stated that the responsibility of the trade unions should be improving labour standards and social protection for employees. Also, 82,6% of the surveyed companies think that trade unions should be dealing with the issues of signing collective bargaining and legal protection of employees. In Macedonia, 70% of the surveyed companies don‘t have collecting bargaining.

Graph 10: The role of trade unions in Macedonia 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

No Yes

In Bosnia and Herzegovina only 3 out of 40 surveyed companies confirmed existence of trade unions or other form of employee association. Only one out of the 3 companies thinks that listed issues are important for the trade unions. Also, only 3 companies in BiH stated they have collaborative bargaining. The survey in Croatia showed only 11% of companies to have collective contracts. None of the surveyed micro companies have trade unions active, they also do not expect unions to sign collective contracts, but expect to take care of legal and social protection of workers, communication improvement, trainings and increasing salary. Medium companies however, showed different expectations from the unions; though most of them does still not expect unions to take part of signing the collective bargaining (27% only) all surveyed companies expect from unions to improve labour standards, create conditions for good corporate standards, and spread information on corporate policy. Most expect unions to assist workers in protecting legal rights of workers, but not social ones. Role in signing collective bargaining increases with the size of company, which is only logical – 73% of surveyed large companies expect unions to facilitate that process. All other categories also scored better than in smaller companies. 78% think improving labour standards is a responsibility of unions as well as social and legal protection, communication improvement, salary increase and free days for blood donations (all 72%).

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Graph 11: The role of trade unions in Croatia 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

No Yes

In Serbia 72% of surveyed companies don‘t have trade unions. The companies that stated they don‘t have trade unions gave mostly same explanations (Graph 17b). The companies that stated they have trade unions described their answers as below (Graph 17c). In Serbia 73,23% of the surveyed companies don‘t have collective bargaining.

Graph 12a:

Graph 12b:

yes 28%

"there are no needs for union"; 2

"lack of employee iniviative"; 4

"small organization"; 5

no 72%

Graph 12c:

Legal assistance for employees Inform employees about … Reduction of working hours to…

No

Complaints

Yes

Wage increase Signing of collective agreement 0

1

2

3

4

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f) The importance of incentives Main trends Government financial incentives are important for the surveyed companies in Serbia, Croatia and Bosnia and Herzegovina but not in Macedonia where companies would prefer linkages with larger firms and facilitated participation in business networks (which is important incentive for the small companies in Croatia as well). In all four countries, free/subsidized counselling is one of the key incentives notified by the companies. For the companies in Bosnia and Herzegovina, credits and matching grant schemes are also important incentive. Except in Bosnia and Herzegovina, the award schemes are not considered as significant incentive for the SMEs.

Table 3: Importance of incentives in all four countries MK

SRB

CRO micro

BiH small

Government financial incentives

23%

78%

100%

62%

70%

Free/subsidized counselling

52%

67%

87%

67%

47%

Concessional credit/matching grant schemes

29%

17%

12%

14%

72%

Award schemes

10%

6%

12%

10%

45%

Sponsored participation in fairs

19%

2%

12%

24%

37%

Linkages with larger firms

45%

28%

37%

43%

10%

Facilitated participation in business networks

32%

17%

12%

0%

30%

6.45%

5.56%

0%

9.52 %

2,50 %

Others (please specify in the box below):

Detailed country information In Macedonia the majority of the surveyed companies as best incentive consider the free or subsidized counselling (52%), followed by linkages with large companies (45%), facilitated participation on business networks (32%) and concessional credit/matching grant schemes (29%). As demonstrated by the survey in Bosnia and Herzegovina, most of the companies see Government as important driver of CSR practices in the country, (70%) of them stated that government financial incentives could be strong vehicle towards greater CSR engagement. Very important incentives for encouraging SMEs to get involved in CSR activities also include concessional credit / matching grant schemes (72.50%), free/subsidized counselling (47.50%) and award schemes (45%). In Croatia micro companies think the best assistance should be found in government subsidies (100%), free or subsidized counselling (88%), and linkages with larger firms (38%). Small companies surveyed found the best incentives to be coming from government subsidies (62%), free or subsidized counselling (67%), and linkages with larger firms (43%) while the large also chose government subsidies (67%), free or subsidized counselling (56%), and linkages with larger firms (56%).

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In Serbia, 77.78% of the surveyed companies think that the government financial incentives are the most important for implementing CSR in their company. In addition, 66.67% of the companies stated free/subsidized counselling as important incentive for implementation of CSR. Influence by large companies on supply chain partners In Macedonia 58% of the surveyed companies are suppliers to large national or international companies. Almost 28% of them stated that they were asked for/to: - Respect national laws, environment, employees relations, and financial sustainability, - Certificates for quality of the products, - Certificate for ISO standards, - Relations with the employees, environment and the community. In Bosnia and Herzegovina, 20% of surveyed firms provide goods to other companies. 50% of those who are suppliers to large companies have been requested for information on responsible business practices, although, in most cases without demanding any particular evidences of CSR. In most cases companies are requesting for general information on firm‘s CSR practices and activities. In Croatia more than 42% of surveyed companies are suppliers to large companies. They were asked for/to: - Certify their products, - Fulfilling their duties towards the state, - To incorporate waste management, - To implement CSR practices as precondition for cooperation. Readiness of SME‘s to invest in CSR activities

Main trends In all four countries, companies would agree to hire professional CSR consultancy if it is free of charge. Majority of the companies would not hire such services at market based fees. Companies in Croatia are most open to hiring paid services.

Table 4: Readiness to invest in CSR activities in all four countries If the service was offered free of charge?

If the service was offered for a marketbased fee?

Specific working hours of staff on CSR activities

Macedonia

90%

14%

74%

Serbia

74%

10%

89%

Croatia

76.3%

42.1%

55.3%

90%

30%

60%

Bosnia and Herzegovina

Detailed country information In Macedonia more than 90% of the companies stated they would hire professional consultancy to deal with CSR strategically if it is free of charge, the other stated that their management is well trained for CSR and external professional assistance is not needed. The percentage is almost inversely with 86.2% of the companies covered by the survey declaring they would not accept professional consultant if it is offered by marketbased fee because of the financial situation in their company, as they stated in the survey.

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In Bosnia and Herzegovina 90% of surveyed companies confirmed that they would hire a professional consultant or advisor if service was offered free of charge, 25% of them would accept to pay market-based fee for these services. Majority of them, however are medium and large companies. In Croatia, the surveyed companies revealed that they would hire a professional assistance to help company to deal with CSR in a strategic way if it was free of charge (76.3%) and market based fee (42.1%). While 55.3% of the surveyed companies would designate specific hours of their staff for CSR activities in average 5 hours a week, only 44.7% would be interesting in participating in UNIDO-sponsored enterprise counselling programme. In Serbia, it is similar situation with 74% of the surveyed companies confirming they would hire professional consultant if it is free of charge and more than 90% of surveyed companies would not hire service if it is offered for a market-based fee.

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VI. MAIN CONCLUSIONS AND RECOMMENDATIONS The analysis from the previous chapters shows that the level of development of CSR related policies and practices differ among the four Balkan countries covered with the research. This is result of different levels of awareness of the institutions about the importance of CSR as well as the level of pressure and engagement of the various stakeholder groups such as NGOs, business associations etc. In the countries that have developed targeted CSR policies, those stakeholders initiated discussions on the need for introduction of such policies and proactively worked on raising the awareness of the institutions about the concept and the importance of CSR. International organizations such as UNDP, USAID and such also played important role in promoting the establishment of multi stakeholder platforms and supported the drafting of the CSR policies. Regarding the readiness of the SMEs to uptake CSR, there are some general trends common to the SMEs in all four countries which can make exchange of regional experience regarding CSR policies and practices more relevant and effective. The conclusions and recommendations are structured in two parts: 1) existing policies and readiness of the public sector to uptake the EU CSR policies and 2) readiness of the private sector to uptake CSR and policies that can support that process.

1) Existing policies and readiness of the public sector to uptake the EU CSR policies Two of the countries, Macedonia and Serbia have introduced explicit national policies related to CSR. Both countries, Macedonia in 2008 and Serbia in 2010 have adopted National CSR Agenda as the main strategic document. Both documents provide appropriate policy framework for CSR which is in line with the EU CSR policies. The documents are based on analysis of the specific CSR context in the country and they approach the CSR issue in line with the definitions used in the EU policies. Both strategies provide comprehensive set of measures with mixture of instruments which is also outlined in the EU CSR policies. Macedonian Government has been already issuing annual reports on the implementation of the Agenda even though there is a need for developing more comprehensive monitoring framework with CSR indicators which would serve to measure the impacts of the policy. Serbian Agenda does contain monitoring framework, however the Agenda has just started being implemented thus its effectiveness can only be assessed in a follow up research. The National CSR Agenda in both countries was developed in highly participative process by all relevant stakeholders. The documents also acknowledge the need for coordinated approach by all stakeholders in the implementation. Macedonia took a leading step in this regard since the Government formally established a Multi-stakeholder platform i.e. National Coordinating Body for CSR even before the Agenda was adopted. It furthermore developed appropriate CSR governance structure within the Ministry of Economy by establishing CSR Unit as well as appointing designated staff for CSR in other relevant ministries and institutions. The Agenda of Republic of Serbia for the following period envisages establishment of multi stakeholder Council as well as setting up appropriate government structure for the implementation of the Agenda. Furthermore, the National CSR Agendas of Macedonia and Serbia clearly make a link between the importance of the CSR policy and EU accession process. This is in line with the

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commitments of the EU Commission in the newest CSR Strategy COM (2011) 681 final. It also ensures that the follow-up policies in both countries will take into consideration the new EU CSR strategy and the evolving trends related to CSR within the EU. From the above, it can be concluded that in general, the public sector in Macedonia and Serbia is ready to embrace the EU CSR policies. Nevertheless, there are challenges as well as opportunities for improvement in the existing policies. The biggest challenge is the full implementation of the Agendas. They are very ambitious documents with comprehensive measures which require large capacities and resources from the public administration as well as other stakeholders. Thus, in Republic of Macedonia, the implementation of the Agenda showed that the bottleneck is the creation of enabling environment especially in relation to creating CSR incentives which are not in place yet. As some of the proposed measures from the Agenda related to the enabling environment for CSR require inter-ministerial cooperation and high political commitment (for ex. inclusion of CSR criteria in public procurement), the Ministry of Economy and the National Coordinating Body for CSR should intensify their advocacy efforts to the highest authorities within the Government. This challenge has to be taken into consideration in the drafting of the follow-up strategy. Namely, having in mind the existing context as well as the capacities of the administration it is recommended that the Action plan for the implementation of the Agenda prioritizes the CSR incentives and that they are introduced gradually, in phases. The priorities should be determined based on the local context regarding: 1) estimated impact of the incentive on the readiness of the companies to uptake CSR (the survey bellow can be used as one of the guiding tools); 2) complexity of the incentive relative to the administrative burden and capacity; 3) initial Regulatory Impact Assessment (cost-benefit analysis of the particular incentive) and 4) readiness of the other stakeholders to support the process of creation and implementation of the mechanism. Experiences and impacts of the various incentives in the EU countries can be useful in the process. The same recommendation is applicable for the CSR policy in Serbia as well as they will probably face the same challenge as the strategy strats being implemented. The aspects which need further improvement in the existing CSR policies of Macedonia and Serbia are: 1) Targeted approach to the CSR uptake by the SMEs, and 2) Integration of the CSR concept in the relevant sector specific policies. Both documents do not recognize explicitly the different perspectives, needs and challenges towards integrating CSR between the large companies and the SMEs. The EU policies clearly advise such approach. CSR policies in both countries could benefit from context analysis on the situation with the SMEs and CSR in the country (this study can be utilized as well) which would then be reflected in targeted and specific objectives and measures related to the SMEs. This should be done in a process of targeted consultations with SMEs and their associations. Some specific policy recommendations related to the SMEs are provided in the next section. Although the existing CSR strategic documents envisage incorporation of CSR in the sustainable development strategies and public procurement policies, in line with the proposed measures in the EU CSR Strategies CSR should be reflected in other public policies such as: Employment and social affairs policy, Enterprise policy, Environmental policy, Consumer Policy, External relations policies, including development policy and trade, and Public administration. Such integrated approach would properly address the cross-sectoral nature of CSR and would enable more effective and efficient implementation of the CSR policies. CSR as a concept is not reflected in the main development documents of Bosnia and Herzegovina thus none of the CSR elements is incorporated in the public policy documents

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in the country. Although the government shares the vision and a need for sustainable development, it seems that there is lack of awareness among the public institutions about the concept of CSR, its role and development potential. There is an evident need for extensive awareness raising and capacity building of the institutions on CSR as a concept and on CSR related policies. Existing strategic documents do provide a solid basis for opening a broader discussion on this issue and consequently, for developing CSR related policy in line with the EU policies. Other stakeholders (NGOs, business associations, international organizations etc) should take more proactive approach and engage in joint advocacy and raising awareness activities. Since it seems that CSR is unfamiliar concept in the public policy discourse in the country, there will be a need for extensive technical support to the public authorities. This can be provided through EU Programmes such as TAIEX, Cross-border Cooperation etc. Sharing experiences with the countries from the region can inspire the authorities in Bosnia and Herzegovina to take proactive role in promoting CSR in the country. The public authorities in Croatia are familiar with the concept of CSR as it is reflected in the strategic documents related to sustainable development and sustainable production and consumption. Some measures for promoting CSR in the country are incorporated and those are in line with the EU CSR policies. However, their scope is limited mostly to some environmental aspect and they don‘t reflect the complexity of the concept of CSR as well as the full spectrum of policies and measures that can promote its uptake by the Croatian companies (large as well as SMEs). Furthermore, those documents identify a need for capacity building of public administration on national and local level which is addressed in some of the measures in the Action plan on sustainable production and consumption. In these lines, the Croatian public policies could benefit from more targeted and elaborated approach on CSR. Such approach should reflect the existing situation with CSR in the country and would properly address the needs of the Croatian companies. Lately there has been increased public debate among the stakeholders about CSR and the need for targeted CSR policies. Recently established National CSR Network in Croatia can advocate and facilitate the process of developing CSR agenda. Similar as in Bosnia and Herzegovina, exchange of experience with the EU countries as well as the Balkan countries can be beneficial in raising awareness among the policy makers in Croatia on the EU CSR policy trends and would further strengthen the capacities of the public institutions and other stakeholders to uptake CSR. Overall, the public institutions in all Balkan countries would benefit from engaging in regional on-going stakeholder debate about CSR, EU CSR policies and their importance in the Balkan context. This process could be facilitated within the Regional CSR Network for Small Businesses in CEE/SEE. This would contribute towards increased awareness among the public authorities and improved CSR policies but will also encourage other stakeholders (including SMEs) to take more proactive approach in addressing CSR in their work.

2) Readiness of the private sector to uptake CSR and policies that can support that process The small and medium sized enterprises in all four Balkan countries are increasingly familiar with the concept of CSR as majority of the surveyed companies were able to identify CSR in relation with the triple bottom line and engagement with stakeholders. There is still number of companies that identify CSR through the compliance with national legislation as well as through the philanthropic activities which is only normal as the concept is still relatively new in the Balkans. The newest Communication from the Commission COM (2011) 681final provides guidance in this direction as it defines the compliance with the legal requirement as prerequisite to CSR. Proper communication on the concept of CSR from the aspect of an SME can improve the way SMEs understand CSR.

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The survey showed that in the Balkan countries, the media is one of the key sources of information on CSR for the SMEs. The other channels of communication vary depending on the country and they include peer companies, NGOs, business associations etc. This indicates that it is not sufficient that the CSR public policies provide appropriate definitions of CSR. What is needed is appropriate, practical explanation of CSR in the everyday public discourse (through the media, business networking events etc) and how it‘s relevant to the SMEs. Furthermore, in countries such as Macedonia and Croatia most of the companies easily connect CSR with environmentally related activities. In Serbia and Bosnia and Herzegovina companies predominantly recognized activities related to the employee relations. In Bosnia significant number of companies identifies the charitable contributions as CSR. Taking into consideration the predominant channels of communication on CSR, this most likely depends on the predominant emphasis of the respective aspects in the CSR public debates and by the key stakeholders. Public policies should incorporate more balanced approach in raising awareness activities and equally address all aspects of CSR relevant for the SMEs. This should be conducted in a simplified way to avoid overwhelming the SMEs which struggle with lack of funds, know-how, human resources and time (as reported in the survey). Furthermore, the CSR public policies have to include measures to alleviate the obstacles identified by the SMEs and to increase their readiness to uptake CSR in their business operations. At the moment, none of the existing CSR policy measures takes into consideration the specific needs and challenges of the SMEs. The survey clearly indicates that in order for the CSR policies to properly address the SMEs they should include mix of targeted instruments such as: Free of charge direct consultations and mentoring. This would alleviate the obstacles of lack of funds and know-how. This also goes in line with the willingness of the SMEs to hire professional CSR consultancy if it is free of charge; Government financial incentives (tax incentives, subsidies for incorporating CSR related standards, certifying products, green public procurement etc).However, it is important that such policies don‘t put too much additional administrative burden to the SMEs due to their lack of human resources and lack of time; Measures that will create linkages with larger firms and facilitated participation in business networks. Such measures can include stimulus for large companies to develop responsible supply chain approaches; support and facilitation of networking events around the issue of social responsibility; targeted promotion of socially responsible SMEs in various sectors among the foreign companies and investors etc. Some of the abovementioned financial stimulus (subsidies for incorporating CSR related standards and certifying products) can also facilitate linkages with larger firms as the surveyed SMEs reported that increasingly the large and international companies are requiring those standards and certifications. Although in Croatia, Serbia and Macedonia majority of companies expect positive impact on the quality, SME‘s still mostly see positive impacts from the investment in CSR implementation in the areas connected to PR (brand awareness, company‘s reputation and media presence) as well as customer satisfaction. The most negative impact is expected on the absenteeism rates as well as the operational costs. This shows that although SMEs understand that there are benefits related to uptake of CSR, they don‘t necessarily see benefits to their bottom-line such as increased productivity, operational cost savings etc. CSR public policies have to be more assertive in promoting the CSR business case for the SMEs in a targeted way (not in the overall outline of the business benefits from CSR). Promotion of REAP case studies from the SMEs in the region should be promoted as they show how CSR in the SMEs works in practice which will contribute to increased understanding of full benefits from integrating CSR into the business operation of the SMEs. Furthermore, policy measures can support targeted events for exchange of CSR

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experience among the managers from the SMEs in the region (grouped by targeted sectors as well as across sectors). This will provide direct networking opportunities for the companies but at the same time will encourage them to sustain in their efforts to integrate CSR into their business operations. Other stakeholders should take more proactive approach as well. Especially the business associations can play important role in communicating the CSR business case in the SMEs. The survey indicates that they are not fully playing this role that is also emphasized in the CSR EU policies. In this regard, CSR policy measures in the Balkan countries should include targeted capacity building and raising awareness activities among the business associations so that they can undertake more effective role in promoting CSR among the SMEs. The Regional Network for Small Business in the CEE/SEE can also play important role in promoting CSR among the SMEs. This is already done by exchange of best practices and case studies. However, more proactive approach can be undertaken in creating direct networking opportunities for the SMEs in the region that have already incorporated or are interested to uptake CSR into their business.

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Readiness of the region's private and public sectors for the EU CSR Policy Framework