UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX
LBC 65.050.2 I-54 Ukrainian Companies’ Transparency and Reporting Index. – K.: Farbovany Lyst LLC, 2011 – 31 p.
This publication provides the results of assessment of Ukrainian largest companies’ websites according to the Transparency and Reporting Index criteria, which was conducted by the Centre for CSR Development in August 2011. It analyzes and describes in detail the level of corporate social responsibility information disclosure among companies from various sectors. Moreover, the publication presents a comparison of Ukraine’s leading companies and the results of the world’s companies, as well as the largest companies of Russia and Israel. LBC 65.050.2 © Centre for CSR Development, 2011 This publication has been prepared by the Centre for Corporate Social Responsibility Development under the Ukraine National Initiatives to Enhance Reforms project (UNITER) that is funded by the US Agency for International Development (USAID) and implemented by Pact Inc. This publication preparation was possible thanks to sincere support of the American people offered by the US Agency for International Development (USAID). The contents of this publication are the sole responsibility of the Centre for CSR Development and do not necessarily reflect the opinions of the USAID, Pact Inc, and the American Government. No part of this publication can be reproduced and used, whether in graphical, electronic, or other format, and no photocopying or other use of the same is allowed without proper reference to the original source.
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UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX
TABLE OF CONTENTS Introduction .................................................................................................................................... 5 1. About the Transparency and Reporting Index ........................................................................... 6 2. Participants’ assessment and selection methodology ................................................................. 7 3. Results of the Companies’ Transparency and Reporting Index in Ukraine in 2011................. 10 4. Ukrainian companies in the rankings of the world’s companies in terms of the Transparency and Reporting Index .................................................................................................................... 16 5. Various sector companies’ openness level in Ukraine ............................................................. 20 6. Specifics of the CSR interpretations on the companies’ websites. The most “open” CSR areas ........................................................................................................ 23 7. About the Centre for Corporate Social Responsibility Development ....................................... 28 Conclusions .................................................................................................................................. 29
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UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX
DEAL COLLEAGUES, The Centre for CSR Development has the honour to present to you the first company Transparency and Reporting Index in Ukraine 2011. This Index was launched by the Centre for CSR Development under the Ukraine National Initiatives to Enhance Reforms project (UNITER) that is implemented by Pact and financed by the US Agency for International Development (USAID). The Index is based on the methodology of Beyond Business. On this occasion, I would like to thank Elaine Cohen, Manager of Beyond Business, for her free offer of the methodology proven by her threeyear working experience. As you may be aware, assessing 143 companies of Ukraine, Russia, and the world is not an easy task. In our opinion, the results derived are quite interesting despite the fact that they have substantiated again the theses which the CSR experts have stated since long ago: there are no many nonfinancial reports in Ukraine, so companies have to improve the non-financial reporting level in Ukraine. But today the Index permits us to both state and argue why non-financial reporting is so important. I am grateful to the Centre for CSR Development team for the Index they have created. I would like to emphasize once again: we have made the Index and all of its data may be checked by simply visiting the site of any company and this is how our Index is different from other rankings existing in Ukraine. Another specific feature of the Index is that it includes a wide variety of Ukrainian companies from different sectors, enabling us to assess the overall CSR situation and its coverage in Ukraine. Moreover, our readers will be able to identify the position of Ukrainian companies among other leading international companies in terms of the Transparency and Reporting Index. Hopefully, the results of Ukrainian companies will be even better next year. Best regards, Maryna Saprykina, Head of the Centre for CSR Development 4
UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX
INTRODUCTION nformation disclosure is an important aspect of operations of a socially responsible company sticking to the openness and transparency principles. Information can be disclosed through several sources (non-financial and financial reports, articles in the media, holding of special events); however, a company’s website is the most important and most informative source of information about its performance. From the technical perspective, the Internet is the simplest and the most influential, taking into account the social media, channel of communication with the target audiences as compared to other means (radio, television, press, etc). In the event where a company needs to present itself on the market, the Internet resource is the most efficient tool in building a corporate style as it offers unlimited resources for forming relations with partners, investors, and consumers. A website may be called a company’s visit card as this source of communication permits a company to fully present its own activities to its stakeholders, in particular in the corporate social responsibility area. In Ukraine, websites are the most important methods of disclosing information; according to a study titled “Corporate Social Responsibility 2005-2010: Status and Development Perspectives”, which was conducted by the Centre for CSR Development under the Ukraine National Initiatives to Enhance Reforms project (UNITER) implemented by Pact and financed by the US Agency for International Development (USAID), 15% of companies have chosen it as their principal method. The same “Corporate Social Responsibility 2005-2010: Status and Development Perspectives” study showed a low level of openness among Ukrainian companies in respect to society: in 59.8% of companies detailed information about their activities is available for the in-house use only. Private and joint-stock companies account for the largest share of entities, which disclose no information about their activities. The study concludes that Ukraine’s companies are far from being aware that access to information about their performance in the CSR area is an important aspect. The results of the aforementioned study encouraged the Centre for Corporate Social Responsibility Development to establish the companies’ Transparency and Reporting Index under the Ukraine National Initiatives to Enhance Reforms project (UNITER) in order to encourage greater transparency among companies, including in the corporate social responsibility area.
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UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX
1. ABOUT THE TRANSPARENCY AND REPORTING INDEX ver the period from July 01, 2011 to August 20, 2011, analysts of the Centre for CSR Development assessed for the first time the websites of companies operating in Ukraine according to the Transparency and Reporting Index. This Index has been developed on the basis of the methodology of Beyond Business (Israel).
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The Index’ difference from other corporate social responsibility ratings consists in the assessment subject, i.e. a company’s website viewed as a main source informing the audiences about its CSR policy and practices. The Index also includes quite clear and understandable assessment criteria and indicators, which excludes any possibility of the website being subjectively assessed. Another advantage of such research is that the subject is easily accessible, because all the necessary information can be obtained from public sources. This saves time for research and has higher credibility as no companies are to be directly engaged in order to provide information necessary for the research purposes. The Index of companies’ transparency and reporting has been developed by the Centre for CSR Development under the Ukraine National Initiatives to Enhance Reforms project (UNITER) implemented by Pact and financed by the US Agency for International Development (USAID). ESG is the Index communication partner. General television partner – UBR.
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UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX
2. PARTICIPANTS’ ASSESSMENT AND SELECTION METHODOLOGY he Transparency and Reporting Index assessed companies included in the list of Ukraine’s top 100 largest companies, which is drawn up by calculating the net income and net profit, according to the Investgazeta weekly’s version for 2009-2010, and companies whose shares are listed on the international stock exchange. Companies from 12 economic sectors of various ownership forms (both public and private) were assessed. Each company was notified of being assessed according to the Transparency Index criteria by sending a letter to the company’s manager (Appendix 1). The companies’ websites were assessed in accordance with four criteria:
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• reporting (50% of the total result): existence of a report about the company’s social and environmental activities; • transparency (30% of the total result): level of information disclosure according to the CSR key areas; 7
UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX
• navigation (10% of the total result): easy access to any information about the company’s social and environmental responsibility; • accessibility (10% of the total result): potential website accessibility from the perspective of various aspects (language, contact information availability, adaptability for the disabled). Table 1. Assessment Criteria According to the Transparency and Reporting Index Criterion
Index criteria and points
Policy and
Indicators
procedures Subject
1. Reporting
Points
GRI A level report
100
GRI B level report
80
GRI C level report
60
Non-GRI report
50
Other partial report
40
Business profile and strategy
2
CR management
2
Management
4
Ethics and human rights
4
Dialogue with stakeholders
2
2. Transparency Material issues
2
Impact on jobs
12
Consumers, products,
6
marketing
8
Suppliers and supply network
6
Community involvement
8
Environment
12
50%
Total points
50%
100%
100
60
UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX Number of clicks on the first
5 (1 click), 3 (about), 0 (3 clicks and more)
CR contents Search
5
Topic accumulation on the
2
website 3. Navigation
Menu
2
Site map
4
Links to other information
2
Language
20
4 – Ukrainian, 1 – English., 1 – Russian, 2 – other (max. 10)
Accessibility for the disabled Contact information Blogs and other interactive or 4. Accessibility TOTAL
3 4 – name and details, 2 – information 3 20
video materials 200
200
In order to determine the place of companies operating in Ukraine among other companies of the world, in our study we analyzed the websites of the top 20 global companies according to the Global 500 rating in 2011 that was published by Fortune. This rating is based on income the companies earned in 2010. Furthermore, we analyzed the websites of Russia’s top largest 10 companies in terms of capitalization, whose shares are listed on the MICEX and the RTS. In addition, in order to compare the assessment results, we decided to include the results of Israel’s top best companies where companies have been assessed according to the Transparency Index by Beyond Business for three years.
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UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX
3. RESULTS OF THE COMPANIES’ TRANSPARENCY AND REPORTING INDEX IN UKRAINE IN 2011 Table 2. Results of Assessment of the Top Twenty Companies According to the Transparency and Reporting Index Position
Company
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
DTEK Metinvest* Obolon ArcelorMittal Kryvy Rih System Capital Management Kyivstar Interpipe Ernst & Young Ukraine METRO Cash & Carry Ukraine Galnaftogaz Industrialny Soyuz Donbasu Astarta-Kyiv British American Tobacco Ukraine Ferrexpo BDO Ukraine TNK-ВР Commerce PWC Ukraine Kyivenergo MTS Ukraine Myronivsky Hliboproduct Zaporizhstal Henkel Ukraine Slavutych Smart Group Energoatom Nibulon
10
Points (maximum: 200) 160 146 140 122 119 117 106 105 104 103 102 92 91 84 81 79 78 67 59 55 51 49 48 45 44 43
Percentage 80 73 70 61 59.5 58.5 53 52.5 52 51.5 51 46 45.5 42 40.5 39.5 39 33.5 29.5 27.5 25.5 24.5 24 23.5 23 22.5
UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX 27 28 28 30 31 31 31 31 31 36 36 36 36 36 41 41 43 43 43 43 47 47 47 47 47 52 53 53 53 53 53 53 59 59 59 59
Lukoil Ukraine Lemtrans Procter & Gamble Ukraine Ukrtransgaz Kraft Foods Ukraine PUMB Zoria-Mashproekt Motor Sich JSC Ukrtransnafta Omega IJSC Zaporizhkoks Kyivmiskbud Ukrgazvydobuvannia SC OTP Bank Boryspil Airport Deloitte Ukraine Lviv Railway Naftokhimik Prykarpattia Oshchadbank LG Ukraine Kyiv Paper Mill Naftogaz Ukrainy NJSC Ukrtatnafta Yuzhny Port KPMG Ukraine Poltava Gas and Oil Company Alchevsk Steelworks Illichivsk Seaport Donetskstal South-West Railway Bogdan Corporation Pryvatbank Zaporizhtransformator Nikopol Ferro-Alloy Plant Turboatom Ukrtelecom
42 41 41 40 39 39 39 39 39 37 37 37 37 37 36 36 35 35 35 35 33 33 33 33 33 32 31 31 31 31 31 31 30 30 30 30
22 21.5 21.5 21 19.5 19.5 19.5 19.5 19.5 18.5 18.5 18.5 18.5 18.5 18 18 17.5 17.5 17.5 17.5 16.5 16.5 16.5 16.5 16.5 16 15.5 15.5 15.5 15.5 15.5 15.5 15 15 15 15
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UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX 63 63 65 65 67 67 67 70 70 70 73 73 75 76 77 77 77 77 81 82 82 82 82 86 86 86 89 89 91 92 92 92 92 92
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Asnova Holding Ukrainian Insurance Group Ukrnafta Ukrenergo Zaporizhiaoblenergo Dniper Railway SUN InBev Ukraine ING Bank Zakhidenergo Odesa Seaport Dniproenergo Roshen TAS Insurance Group Ukrposhta ATB-Market Novokramatorsky Mechanical Engineering Plant Odesa Railway Zasiadko Mine Company «Technological Agricultural Company United» AvtoKrAZ Alchevskkoks BaDM Donetsk Railway Donetskoblenergo Kernel Holding S.A. Continent Nafto Trade (ТМ WOG) PJSC Rise Tsentrenergo Creative-Group Delta Lotsman Konti Epicenter K Milkiland Ukraine Mariupol Trade Port
29 29 28 28 27 27 27 26 26 26 25 25 24 23 22 22
14.5 14.5 14 14 13.5 13.5 13.5 13 13 13 12.5 12.5 12 11.5 11 11
22 22 21
11 11 10.5
20 20 20 20 19 19 19 18 18 17 16 16 16 16 16
10 10 10 10 9.5 9.5 9.5 9 9 8.5 8 8 8 8 8
UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX 92 98 99 100 101 101 101 101 101 106 107 107 109
Farmak Agrosvit Rubizhansk Cardboard Mill Yuzhnyprogaz Institute Dniprooblenergo Optima Pharm South Railway Fozzy Group JSC Kryukov railway car building works OJSC Stakhanov Wagon Works Pivdenny GZK Ukrhydroenergo A.T.K.
16 15 13 12 11 11 11 11 11 9 8 8 7
8 7.5 6.5 6 5.5 5.5 5.5 5.5 5.5 4.5 4 4 3.5
*Companies such as Azovstal, Khartsyzk Pipe Plant, Avdiyivka Coking Plant, Mariupol Illich Iron and Steel Works, Ingulets Ore-Dressing and Processing Plant were not assessed as these companies are part of Metinvest Group and have no their own websites.
EXPLANATION he assessment results show that DTEK’s website, which was assigned 160 points (80% of information disclosure), is the most informative and transparent website among those making available corporate social responsibility information, according to the companies’ Transparency and Reporting Index in 2011 in Ukraine. Metinvest holds the second position according to the Index: 146 points (73% of information disclosure). Obolon ranks third according to the Index: 140 points and 63% of information disclosure.
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The average results of assessment of Ukrainian companies that ran their own websites and, accordingly, were assigned some points (109 companies) totaled 20.5%. This indicator is critically low and shows that the companies’ websites supply no enough information, including corporate social responsibility information, to their stakeholders. Such low results can be explained by low corporate social responsibility activity of companies. Another reason is a small percentage of companies, which prepare non-financial reporting as this criterion has the largest weight in the Index. However, as our study shows, it had the lowest percentage of coverage by companies: 9%. 13
UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX
It should be noted that the financial reports of Myronivsky Hliboproduct and Ferrexpo contain CSR-related information (Myronivsky Hliboproduct: 2 pages, Ferrexpo: 9 pages); but they are presented only in English, which is an obvious signal to investors regarding the companies’ corporate social responsibility that can be considered the key stakeholders of these two companies. Hopefully, this Index will help attract the companies’ attention to Ukrainian stakeholders as well, as their CSR efforts are currently unavailable for all the groups of stakeholders. It is symptomatic that the first 25 companies in the rating are primarily represented by entities operating in the heavy industry and metallurgy sector (4 companies); they include 0ne state-owned company. All in all, the websites of Ukraine’s companies cover their corporate social responsibility activities, but the information level of these websites is low. Most companies fail to inform about all the CSR areas focusing on just one or two of them. The companies’ websites make it possible to find information sought for by visitors through the Menu and Sitemap options. Importantly, most companies run their websites in several languages. It should be emphasized that 23 more companies that were studied had no their own websites at all (Appendix 2): these are mainly representative offices of international companies; brief information about their operations is posted on the global website.
TOP TEN COMPANIES ASSESSED BY THE TRANSPARENCY AND REPORTING INDEX he average Index indicator for the top ten assessed companies is 61.1%. All the companies included in the top ten list issue non-financial reports prepared according to the GRI (Global Reporting Initiative) standards: DTEK, Obolon, SCM, Metinvest, Ernst & Young, and according to other non-financial reporting standards (UN Global Compact).
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UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX Table 3. Top ten companies assessed by the transparency and reporting index Position
Company
1 2 3 4 5 6 7 8 9 10
DTEK Metinvest Obolon ArcelorMittal Kryvy Rih SCM Kyivstar Interpipe Ernst & Young Ukraine METRO Cash & Carry Ukraine Galnaftogaz
Points (maximum: 200) 160 146 140 122 119 117 106 105 104 103
Percentage 80 73 70 61 59.5 58.5 53 52.5 52 51.5
In general, 11 companies achieved (10.3% of the total) the result of 50% of openness; according to Beyond Business, the Index expert initiators, this is a “sufficient” level of openness and transparency. Apart from non-financial reporting, the Index top ten companies have good indicators in terms of other assessment criteria. In particular, their websites present a detailed description of social and environmental projects implementation. Naturally, the websites include a full description of the companies’ products or services. However, even the Index leading companies fail to fully cover all the CSR areas: some companies do not describe their policies of human rights and dialogue with stakeholders. The websites of the said companies are user friendly as they include the Search and Sitemap options permitting visitors to find promptly any necessary information.
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UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX
4. UKRAINIAN COMPANIES IN THE RANKINGS OF THE WORLD’S COMPANIES IN TERMS OF THE TRANSPARENCY AND REPORTING INDEX ithin the framework of our study, we also analyzed the websites of the world’s top 20 companies according to the Global 500 rating in 2011 published by Fortune. This rating is based on income earned by companies in 2010. The best result was shown by General Electric: 93.5% of openness (187 points according to the Index). Having analyzed the world’s top 10 companies, the average indicator of corporate social responsibility information disclosure on their websites is 78.9%, which is higher (by 17.8%) than the indicator of Ukrainian companies to a considerable extent.
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Table 4. Results of Assessment of the Top Ten Companies According to the Global 500 Rating by the Transparency and Reporting Index No. 1 2 3 4 5 6 7 8 9 10
Company General Electric British Petroleum ING Group Volkswagen Royal Dutch Shell AXA China National Petroleum Toyota Motor ConocoPhillips Exxon Mobil
Points (maximum: 200) 187 181 178 177 171 142 140 136 134 132
Percentage 93.5 90.5 89 88.5 85.5 71 70 68 67 66
Furthermore, we analyzed ten largest companies of Russia in terms of capitalization, whose shares are listed on the MICEX and the RTS. The highest percentage of website transparency regarding CSR information disclosure was assigned to Rosneft (82%). The study revealed that the average indicator of the Russian companies’ website openness (top ten) is also higher than the indicators of Ukrainian companies and totals 61.3%. 16
UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX Table 5. Results of Assessment of Russia’s Ten Largest Companies According to the Transparency and Reporting Index Position 1 2 3 4 5 6 7 8 9 10
Company Rosneft Norilsk Nickel Gazprom NOVATEK Lukoil Novolipetsk Steel and Iron Works VTB Sberbank Rossii Surgutneftegaz TNK-ВР
Points (maximum: 200) 164 142 140 135 127 123 111 104 93 87
Percentage 82 71 70 67.5 63.5 61.5 55.5 52 46.5 43.5
For the assessment result comparison purposes, we decided to include the results of Israel’s ten best companies where assessment according to the Transparency Index has been conducted by Beyond Business for three years. Israel’s ten best companies have a high indicator according to the website Transparency Index: 73.1%. This shows that the websites of companies in this country are more informative and provide access to corporate social responsibility information as compared to the companies’ websites in Ukraine and Russia. But this can be explained by the three-year experience in assessing Israeli companies by the Transparency Index. Figure 1. Comparison of Website Transparency in Terms of CSR Information Disclosure among the Top Ten Companies
Openness Percentage 90 80 70 60 50 40
78,9
30
73,1
61,3
61,1
Russia
Ukraine
20 10 0 World Companies
Israel
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UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX Table 6. Comparison of Companies No. Company
Country
1 2 3 4 5 6 7 8 9 10 11 12 13 13 13 16 16 16 19 20 21 22 23 24 25 26
Israel Israel USA/Global companies UK/Global companies Netherlands/Global companies Germany/Global companies Israel Netherlands/Global companies Russia Ukraine Israel Israel Ukraine Russia France/Global companies Israel Russia Ukraine China/Global companies Japan/Global companies Russia USA/Global companies USA/Global companies Russia Russia Ukraine
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Bank Hapoalim Bank Leumi LeIsrael General Electric British Petroleum ING Group Volkswagen Strauss Group Royal Dutch Shell Rosneft DTEK Machteshim Agan Partner Communications Metinvest Norilsk Nickel AXA Bank Discount Gazprom Obolon China National Petroleum Toyota Motor NOVATEK ConocoPhilips Exxon Mobil Lukoil Novolipetsk Steel and Iron Works ArcelorMittal Kryvy Rih
Openness percentage 99 95 93.5 90.5 89 88.5 88 85.5 82 80 78.5 73.5 73 71 71 71 70 70 70 68 67.5 67 66 63.5 61.5 61
UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX 27 27 29 30 31 32 33 34 35 35 35 38 39 40
Cellcom Israel Teva Pharmaceuticals System Capital Management Kyivstar VTB Israel Chemicals Interpipe Ernst & Young Ukraine METRO Ukraine Sberbank Rossii Gazit Globe Galnaftogaz Surgutneftegaz TNK-ВР
Israel Israel Ukraine Ukraine Russia Israel Ukraine Ukraine Ukraine Russia Israel Ukraine Russia Russia
60 60 59.5 58.5 55.5 54 53 52.5 52 52 52 51.5 46.5 43.5
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UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX
5. OPENNESS LEVEL OF UKRAINIAN COMPANIES FROM VARIOUS SECTORS t should be noted that we assessed companies from various economic sectors; all the companies belonged to big business. The largest numbers of companies were from the heavy industry sector: 21 company.
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Table 7. Openness Indicators of Ukraine’s Companies by Sectors Sector
Holding companies Communications Food industry/FMCG sector Financial sector Oil and gas Electric power Heavy industry Retail Agriculture Transport Audit and consulting Pharmaceutical sector Other sectors Total
Number of companies 3 4 9 7 12 11 21 4 10 14 5 3 6 109
Average level (%)
Maximum (%)
44.6 28.6 26.5 16 21.7 19.7 21.3 19 15.2 13.4 33.3 7.8 12.6 20.5
59.5 58.5 70 19.5 51.5 80 73 52 46 21.5 52.5 10 18.5 80
Minimum (%) 23.5 11.5 8 12 9.5 4 4 5.5 3.5 5.5 16.5 5.5 6 3.5
Holding companies represent the most transparent sector in terms of corporate social responsibility information disclosure; their average result is 44.6%, which is higher by 13.2% as compared to communication companies achieving 28.6% and holding the second position. The least “transparent” companies in terms of CSR information coverage are those operating in the pharmaceutical sector (7.8%). Interestingly, the holding company with the lowest result (Smart Group) was assigned more points than leaders among pharmaceutical companies (BaDM), financial companies (PUMB), and transport companies (Lemtrans). The largest gap between the results is in the electric power sector (76%) being the Index leader and the company gaining the lowest number of points. 20
UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX Figure 2. Information Disclosure Indicators among Electric Power Companies
Openness percentage 90 80 70 60 50 40
80
30 20 10
33,5
23
0
14
13
12,5
9,5
9
5,5
4
LEADERS BY SECTORS: Sector Holding companies Communications Food industry/FMCG sector Financial sector Oil and gas Electric power Heavy industry Retail Agriculture Transport Pharmaceutical sector
Company System Capital Management Kyivstar Obolon PUMB Galnaftogaz DTEK Metinvest METRO Cash & Carry Ukraine Astarta-Kyiv Lemtrans BaDM
Percentage (%) 59.5% 58.5% 70% 19.5% 51.5% 80% 63% 52% 46% 21.5% 10%
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UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX Figure 3. Average Transparency Indicator of Ukraine’s Companies by Sectors
Average Transparency Indicator of Ukraine's 44,60% Companies by Sectors 45,00% 40,00% 35,00% 30,00% 25,00% 20,00% 15,00% 10,00%
33,30% 28,60%
26,50% 21,70% 21,30%
19,70% 19,00% 16,00% 15,20%
13,40% 7,80%
5,00% 0,00%
Note: The results are provided only for companies that gained points during assessment.
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UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX
6. SPECIFICS OF CSR INTERPRETATION ON THE COMPANIES’ WEBSITES nalyzing the Index criteria, it should be noted that Ukraine’s companies highlight the concept of corporate social responsibility on their websites in various ways. Few companies had the Corporate social responsibility section on their websites. Among these are the leaders of the Index. These companies have a separate section on their websites dedicated to corporate social responsibility, which contains all the information about their activities in this area, as well as nonfinancial reports of the company.
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DTEK’s website can be called the most informative website in terms of CSR among Ukrainian companies; it provides detailed information about the company’s activities in all the CSR areas with indicators and the cost of such activities. The CSR section also has the company’s nonfinancial reports and a schedule of CSR activities (this type of information can rarely be found on the websites of Ukrainian companies). In addition, the contact information of the manager in charge of sustainable development is available, which is rare as well, because, firstly, few companies in Ukraine employ such specialists, and, secondly, most companies provide contact information of persons or departments responsible for public relations or relations with the media, and the “leader” among contact e-mails is the general e-mail starting with info@. Galnaftogaz has quite an original title of the CSR section, namely “We and Society”. It should be noted that none of the assessed companies had a similar title for the section dedicated to social responsibility. Some companies still understand corporate social responsibility only as charity, and, therefore, place CSR-related information in such a section. State-owned companies usually called the CSR section as “Social policy”; however, this title does not meet the definition of corporate social responsibility, because the latter includes other areas as well. “Social policy” sections usually contained only information about the company’s activities dedicated to protection of its employees: safety measures, social infrastructure for personnel, opportunities for personnel training and qualification improvement, etc. Unfortunately, most companies (57 out of 109 companies running their own websites) had no separate section dedicated to CSR, and the company’s policy in this area was described in the 23
UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX
sections below: • activities; • about the company; • press centre.
COVERAGE OF VARIOUS CSR ASPECTS BY COMPANIES IN UKRAINE Based on the results of our study, we could conclude that companies in Ukraine are primarily focused on the navigational aspect (54.5%) of their websites, which attests that companies care about accessibility of materials posted on their websites. Most companies have the Search (73%) and Sitemap (68%) options on their websites, which enables visitors to quickly find any information that interests them. At the same time, Ukraine’s companies practically do not present to their website visitors any international corporate social responsibility standards. Only 8.5% of companies posted on their websites external links to international or national organizations, which promote CSR issues. Figure 4. Openness Level of Ukraine’s Companies According to Various Criteria of the Transparency and Reporting Index
Openness Percentage 60 50 40 30
54,5
20 27,1
10
23,7
9 0 Reporting
Transparency
Navigation
Accessibility
According to the assessment results, we could conclude that on their websites companies from any sector primarily focus on their own products: 55%. All the companies that were assessed and gained some points described their products or services they provide. However, it should be emphasized that most companies (92%) limited themselves to a description of their products and provided no information about their consumers. 24
UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX
Development of non-financial reporting and coverage of such information on the companies’ websites are unsatisfactory. As Figure 3 shows, in Ukraine this criterion is covered on the companies’ websites to the least extent primarily due to the fact that most assessed companies have no such reports. Only 23 out of 109 companies use some form of non-financial reporting. In percentage terms, the number of companies publishing non-financial reporting on their websites is 21%. These 23 companies include: • three companies having non-financial reports according to the GRI G3 standard, level B (DTEK, Obolon, Metinvest); • two companies have non-financial reports according to the GRI G3 standard, level C (Ernst & Young Ukraine, System Capital Management); • eleven companies having non-financial reports according to other reporting standards (METRO, Price Waterhouse Coopers Ukraine, Kyivstar, TNK-BP Commerce, British American Tobacco Ukraine, ArcelorMittal Kryvy Rih, Astarta, Galnaftogaz, Interpipe, Industrialny Soyuz Donbasu, BDO Ukraine); • seven companies partially including non-financial reports in their annual financial reports (Myronivsky Hliboproduct, Motor Sich, Ferrexpo, Boryspil Airport, Kyivenergo, Bohdan Corporation, OTP Bank Ukraine).
PUBLISHING THE COMPANY’S HR POLICY When it comes to issues directly related to social responsibility, companies pay great attention to their personnel. Indeed, this is a pleasant fact as personnel should be the key asset of companies. The level of companies’ openness in this CSR area was 31%. The range of companies’ activities focused on development and support of their personnel is quite diverse. Such activities include: • training and qualification improvement; • providing safe working conditions; • possibility to use social infrastructure items freely. In general, companies introduce and cover most measures to support and develop their personnel. The only personnel development aspect that is insufficiently supported by companies as compared to their foreign counterparts is personnel diversity. It should be pointed out that the world’s largest companies pay great attention to these issues. This situation may be explained by the fact that global companies operate in many countries while Ukrainian companies operate primarily in the domestic market and consider the personnel diversity issue irrelevant. 25
UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX
COVERAGE OF CHARITABLE ACTIVITIES Many companies describe their charitable activities, sometimes realizing that these are a direct synonym of social responsibility. Some companies describe their charitable activities only in general terms, while others post on the websites all the necessary information, including financial costs they incur due to their charitable activities. Apart from charity, companies describe their social projects aimed at community development. The level of disclosure of such information is 25%.
ENVIRONMENTAL PROTECTION As regards coverage of information on the environmental protection activities, most companies that have such information on their websites are representatives of the heavy industry, power, oil and gas sectors, that is, the sectors that have a huge impact on the environment. Sites of these companies often include detailed information about the company’s environmental policy, use of equipment and its effect on the environment. Information about the company’s environmental policy efficiency indicators are provided as well: – water consumption level; – electric power consumption level; – reduction in greenhouse gas emissions, etc. In total, the indicator of disclosure of information about environmental protection efforts is 19.5%. It should be noted that companies whose activities particularly affect the environment, in most cases do not address the issue on their websites. In particular, most companies representing the financial sector that do not directly affect the environment, unlike heavy industry, maintain no sections dedicated to environmental issues on their websites. These categories primarily include financial sector companies, neither of which provide information about their environmental policies on their websites.
SUPPLIERS The supplier information provided on the websites of Ukraine’s companies represents, in most cases, general information about the required documents, distribution, and logistics. The procurement issue, which directly concerns corporate social responsibility (ethical/sustainable 26
UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX
procurement, supplier selection procedure, taking into account ethical criteria and CSR criteria) is not very actively discussed on the sites of companies.
LEAST OPEN ISSUES The least open CSR areas among Ukrainian companies are as follows: • ethics and human rights (disclosure percentage: 6%); • dialogue with stakeholders (disclosure percentage: 5%); • material issues (disclosure percentage: 1.9%). Normally, companies fail to publish on their websites any practices of code of ethics implementation and have no policies, which would ensure human rights protection. Websites of most companies lack information about any advantages of corporate social responsibility introduction that the key lines of a company’s business may gain and determination of material issues. Figure 5. CSR Issues Posted on the Companies’ Websites
Issues Posted on the Companies' Websites 60
54,5
50 40 30 20 10
31
25
23,5
19,5 6
5
1,9
0
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UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX
7. ABOUT THE CENTRE FOR CORPORATE SOCIAL RESPONSIBILITY DEVELOPMENT he Centre for CSR Development is a leading CSR expert organization in Ukraine, a member of the UN Global Compact (2010-2011), GRI Organizing stakeholder, national partner of CSR Europe (Brussels) and the World Business Council for Sustainable Development (WBCSD, Geneva). The organization brings together 21 companies of Ukraine. The Centre consults on the development of CSR strategies, programs and communications, monitoring and assessment of project efficiency, preparation and verification of non-financial reporting.
T
Ten member companies of the Centre for CSR Development participated in assessment according to the criteria of the Index of transparency and reporting of companies and showed very good results.
In average, the percentage of CSR information disclosure among the Centre members is 46,4%. Five companies being members of the Centre for CSR Development were included in the Index top ten companies, including DTEK, the Index leader. The openness indicator of the Centre members is twice as higher as the average indicator of openness among Ukraine’s companies. 28
UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX
CONCLUSIONS ased on the results of the first assessment of companies according to the criteria of the Transparency and Reporting Index in Ukraine in 2011, we can make the following conclusions:
B
1. The level of CSR information disclosure on the websites of companies in Ukraine is very low. This can be explained by a low level of non-financial reporting, which is a key assessment criterion for the Index. 2. Companies in Ukraine still do not have a common vision of social responsibility and do not realize that this is a complex concept. Some companies cover only one of the CSR areas (charity, relations with personnel) and pay no attention to others. Lack of understanding of the CSR complexity is confirmed by the fact that not all companies post information about their activities in this area in one section; such information is often to be found in several sections of the site. Half of the assessed companies have no separate section dedicated to social responsibility. This points out to the fact that most companies use websites to familiarize external audiences with the company and its products, and social responsibility is not a general priority for companies in Ukraine. 3. The websites of Ukrainian companies tend to lack any external links to international organizations engaged in CSR promotion as compared to international companies. Companies give their own interpretation of social responsibility and fail to present global CSR trends to their website audiences. Furthermore, an overwhelming majority of companies do not show how the introduction of CSR affects the efficiency of their core businesses. It should be noted that companies in Ukraine have a wide field of activities to improve the informational aspect of their own websites about corporate social responsibility. However, improvement of the informational aspect of the companies’ websites is impossible without proper activation of the CSR-related activities. Next year, we will see how companies take into account our recommendations, based on the results of the Index of transparency and reporting of companies in 2012.
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UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX
INDEX OF COMPANIES MENTIONED IN THIS PUBLICATION 1. ArcelorMittal Kryvy Rih, p. 25; 2. Astarta, p. 25; 3. BaDM, p. 20; 4. Beyond Business p. 4, 6, 9, 15, 17; 5. Bohdan Corporation, p. 25; 6. Boryspil Airport, p. 25; 7. British American Tobacco Ukraine, p. 25; 8. Centre for CSR Development, p. 4, 5, 6, 28; 9. DTEK, p. 13, 14, 25, 28; 10. Ernst & Young Ukraine, p. 25; 11. ESG, p. 6; 12. Ferrexpo, p. 14, 25; 13. Fortune, p. 9, 16; 14. Galnaftogaz, p. 23, 25; 15. General Electric, p. 16; 16. Industrialny Soyuz Donbasu, p. 25; 17. Interpipe, p. 25; 18. Investgazeta, p. 7; 19. Kyivenergo, p. 25; 20. Kyivstar, p. 25; 21. Lemtrans, p. 20; 22. Metinvest, p. 13, 14, 25; 23. METRO, p. 25; 24. Motor Sich, p. 25; 25. Myronivsky Hliboproduct, p. 14, 25; 26. Obolon, p. 13, 14, 25; 27. OTP Bank Ukraine, p. 25; 28. PriceWaterhouse Coopers, p. 25; 29. PUMB, p. 20; 30. Rosneft, p. 16; 31. Smart Group, p. 20; 32. System Capital Management, p. 14, 25; 33. TNK-ВР Commerce, p. 25; 33. UBR, p. 6; 34. Ukraine National Initiatives to Enhance Reforms project (UNITER), p. 4, 5, 6; 35. US Agency for International Development (USAID), p. 4, 5, 6.
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UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX
APPENDIX 1. LETTER SENT TO COMPANIES BY THE CENTRE FOR CSR DEVELOPMENT Topic: Assessment of companies’ transparency and reporting Dear …! The Corporate Social Responsibility Development Center is hereby honoured to announce that your company has been selected for assessment according to the criteria of the Transparency and Reporting Index. According to the international social responsibility standards and ISO 26000, transparency and reporitng are key principles of social responsibility. That is why the Corporate Social Responsibility Development Center, under the “National CSR Agenda Development” project supported by UNITER, developed the Index of transparency and reporting of companies in Ukraine based on the methods of Beyond Business (Israel). Companies selected and included in the Transparency Index are public companies whose shares are traded on the international (eg., London, Warsaw, Frankfurt) stock exchanges, and the Index included 100 largest companies in Ukraine in terms of net profit. The Index covers companies from various sectors, including the technological sector, communication sector, holding companies, construction, food, pharmaceutical, banking and other sectors. The subject of assessment for creating the Index is the company’s website that will be assessed by the Centre for CSR Development in terms of disclosure of information about the company’s corporate social responsibility activities. The final results for each company and the company’s position in the Index is the total points earned by each company according to the following four criteria: • reporting: availability of a report describing the company’s social and economic activities on the company’s website; • transparency: level of disclosure of information by four key CSR area; • navigation: level of accessibility of any information about the company’s corporate social responsibility and environmental responsibility; • accessibility: potential accessibility of the website in terms of various aspects (languages, available contact information, accessibility for the disabled). You can find out more about the assessment methodology on the website of the Centre for CSR Development: www.csr-ukraine.org. No points will be assigned to companies running no websites at the moment of the Index being created or whose websites are under construction providing no detailed information. Assessment of the companies’ websites will be conducted from August 01, 2011 to August 15, 2011, and the assessment results as well as the Transparency and Reporting Index will be presented in late September 2011. 31
UKRAINIAN COMPANIES’ TRANSPARENCY AND REPORTING INDEX
APPENDIX 2 LIST OF UKRAINIAN COMPANIES RUNNING NO WEBSITES AMONG UKRAINE’S 100 LARGEST COMPANIES (THE 2009 – 2010 LIST WAS MADE ON THE BASIS OF THE NET INCOME AND NET PROFIT CALCULATION, ACCORDING TO INVESTGAZETA) Adidas Ukraine Lysychansk Petroleum Investment Company Dniprovskiy Steel Works Shidenergo Service Invest Poltavskiy GZK Imperial Tobacco Ukraine Food Company “Podilla” CitiBank Ukraine Agricultural enterprise “Lvivske” JSC “Suha Balka” Dovzhenko Agrofirm NPF “Urozhay” Insurance Company “Avante” Nokia Siemens Networks Ukraine Donetskavtotrans L’Oreal Ukraine Druzhkivsky Engineering Works Cargill Ukraine Naftogazvydobyvanna VTB Leasing Ukraine Philip Morris Ukraine
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