ISSN 0798 1015

Vol. 40 (Number 22) Year 2019. Page 21

Ukrainian national strategy for Corporate Social and Environmental Responsibility as a framework of responsible business conduct

Estratégia nacional da Ucrânia para a Responsabilidade Socioambiental Corporativa como uma estrutura de conduta empresarial responsável

MAKARENKO, Inna O. 1; SMOLENNIKOV, Denys O. 2 & MAKARENKO, Serhiy M. 3

Received: 01/04/2019 • Approved: 06/06/2019 • Published 01/07/2019

Contents

1. Introduction

2. Methodology

3. Results

4. Conclusions

Acknowledgments

Bibliographic references

1. Introduction

Comparison of world, European and national experience of dissemination and standardization of the corporate social and environmental responsibility (CSER) shows its exceptional importance as a means of increasing the competitiveness of both individual companies in real, finance and public sector and the state as a whole. The low level of CSER distribution among Ukrainian companies in comparison with European ones does not allow them to increase competitiveness, accountability and transparency, which negatively affects the image and competitiveness of the state.

The analysis of key barriers to the development of the CSER and the calibration of the factors, which are influencing on institutional environment, has made it possible to highlight the social, economic, environmental and legal factors as the most important for its dissemination. The institutional environment and its impact on national specificity of CSR was investigated by Halkos, G. & Skouloudis, A. (2016).

Among the legal factors, the necessity to develop a National Strategy for Corporate Social and Environmental Responsibility (NSCSER) is crucial, which would allow setting benchmarks for the development of CSER in Ukraine and identify the main tasks of the state policy of promoting its dissemination.

The confirmation of the above mentioned thesis is not only the results of our own analysis, but also the results of the survey of 400 Ukrainian companies of different sizes (large, medium, small, micro) from 24 regions of Ukraine, conducted by the Centre for CSR Development in 2018, which cover the main trends, the barriers and prospects for CSER development in the state.

According to (Melendez, J. R. & Gracia, G.E., 2019), there are three scenarios of competitive strategies: social, economic and environmental.

The imperfection of the regulatory framework that would contribute to the development of CSER is one of the three main reasons for its low distribution in Ukraine according to the opinion of enterprises (Figure 1).

As a result of the CSR Development Centre’s Transparency Index of companies in Ukraine in 2017, only half of companies in Ukraine have a clear strategy for CSER, 21.7% disclose information about CSER (Zinchenko, A. & Saprykina, M., 2017). This shows that Ukrainian companies do not perceive CSER as a policy that integrates into the business strategy of the company and that it is the basis of the company's competitiveness on the market.

However, according to the same survey (Zinchenko, A. & Saprykina, M., 2017), the very external stimulus (clearly defined state strategy) would be a strong impetus for the development of CSER for Ukrainian companies (52% of the 400 responding companies in the area of social responsibility development to be made in the coming years called the adoption of the National CSER Strategy).

Figure 1
Distribution of answers of respondents to the question "What obstacles are the most
serious during implementation of programs/actions on social responsibility of your company?"
(in %)

Adopted from Zinchenko, A. & Saprykina, M. (2017)

So, NSCSER development in Ukraine is the most relevant and urgent issue for further spreading of CSER in financial, real and public sector of the economy.

Basic methodology for NSCSER development was published by different international organizations. In this regard, a number of requirements (basic principles) for the development of national CSER and sustainable development strategies (Table 1), developed by the leading supranational (UN, OECD) and European organizations (CSR Europe), were investigated. Most of the above mentioned requirements overlap, indicating their importance and unambiguousness.

Table 1
Requirements for the elaboration of national strategies for CSER and
sustainable development and their incorporation into NSCSER of Ukraine

Adopted from Zinchenko, A., Reznik, N. & Saprykina, M. (2018);
OECD (2001); OECD (2006); UN DESA (2002);

Based on these requirements and (Migliorato, M., 2015) a structural and logical scheme for the formation and implementation of NSCSER in Ukraine was proposed. Among main methodology aspects we should mention the following:

- focusing on stakeholders needs;

- balancing social and environmental trends;

- defining short, medium and long-term periods in the Strategy and its Implementation Plan;

- considering limits of existing legal framework;

- provide monitoring, evaluation, implementation and strategy review;

- public authority obligations and coordination of their activities;

- ensuring financial and economic, organizational-institutional and informational and communication support for the strategy.

- ensuring transparency for all stakeholders;

- cross-sectoral nature of stakeholder’s partnerships.

Starting with the creation of the National Network of the UN Global Compact and the publication of the first social reports by Kyivstar, in 2005 the process of developing the institutional environment of the CSER in Ukraine (Table 2) continues, and attempts to develop NSCSER are being made.

Table 2
Chronology of the development of the institutional
environment of the CSER in Ukraine

Following the results of the thirteen-year extension of the CSER in Ukraine and its regulation, the regulatory measures of European integration are the most influential. The implementation of two forms of non-financial reporting (management report and Statement of Payments for the benefit of the state) were the first steps towards the full implementation of non-financial reporting by companies in Ukraine.

However, as the chronology shows, none of the initiatives for the development of NSCSER in Ukraine, such as the National Concept for the Development of Corporate Social Responsibility in Ukraine (UN Global Compact, CSR Development Centre, USPP, 50 Organizations) or the National CSR Strategy in Ukraine (Project of Coordination Council for the Promotion of Civil Society Development under the Administration of the President of Ukraine) was not completed and implemented.

Consideration of these projects made it possible to conclude on their importance in advancing of CSER in Ukraine, the thoroughness of coverage of key tasks and guidelines of state policy in this area, the commonality of the key objectives of the strategy and the state policy with CSER, in particular:

- regarding the consideration of the CSER in the context of ensuring the country's competitiveness;

- working out common approaches to the understanding of the CSER and disclosing information about it in non-financial reporting;

- development of new forms of public-private partnership and social dialogue;

- ensuring respect for human rights, increasing resource efficiency by Ukrainian enterprises.

At the same time, in our opinion, the key disadvantages of the considered projects are as following:

- low level of consistency of defined tasks and priorities in terms of time, executors, resources, guidelines in realization in accordance with the needs of stakeholders of companies from different sectors of the economy: state, financial, and real sector;

- insufficient consideration of information requests and expectations of target groups of stakeholders of companies from different sectors of economy, which determine the main directions of the CSER for companies through the mechanisms of engagement and cross-sectoral partnership;

- lack of a holistic vision of the role of the CSER and its national strategy as the basis for progress towards the achievement of the goals of sustainable development;

- insufficient development of various types of resource provision of the strategy and its implementation plan.

The key aspects of NSCSER were defined based on these requirements of OECD, UN Department of Economic and Social Affairs, CSR Europe and taking into consideration the advantages and disadvantages of existing projects of national strategies and concepts for the development of CSER.

The key aspects that need to be reflected in the NSCSER are as following:

- Focusing on universal values and stakeholder target groups strategy, balancing of social and environmental policies, allocating short, medium and long-term periods, and specifying measures for these periods in the Implementation Plan (as general directions for building strategies for CSER and sustainable development within the framework of leading approaches international organizations: OECD, UN Department of Economic and Social Affairs, CSR Europe). The basis for determining the list of tasks of the NSCSER served as the key barriers to its dissemination in Ukraine.

- Taking into consideration the limits of the existing legal framework in the field of CSER and sustainable development and mechanisms for its provision. As the European experience shows, the development of a coherent sustainable development strategy is preceded by a separate strategy for CSER. This confirms the thesis that the CSER strategy is a micro level of the country's sustainable development strategy. Existing heterogeneous system of national strategies (Ukraine-2020 Sustainable Development Strategy, National Strategy for Promoting Civil Society in Ukraine for 2016-2020, Strategy for the Information Society Development in Ukraine, State Strategy for Regional Development for the period up to 2020, Strategy for Elimination of Poverty, The Strategy for the Development of Small and Medium-Sized Enterprise in Ukraine), as well as a number of program documents specific to specific sectors, has no such micro-level, and also does not have contain regulatory provisions on the promotion of the CSER. In particular, within the framework of the Strategy for Sustainable Development "Ukraine – 2020" (Decree by President of Ukraine, 2015), the most urgent need for the dissemination of CSER falls under two main vectors:

1) the vector of development - the direction of implementation is deregulation and entrepreneurship development, creating a favorable environment for doing business, developing small and medium enterprises, attracting investments, etc.;

2) the vector of pride - the direction of realization is popularization of Ukraine in the world and advancement of Ukraine's interests in the world of information space (building confidence in Ukraine, directing its positioning in the world in favor of the political and economic interests of our state, forming a positive image of Ukraine).

However, in the existing Strategy for Sustainable Development, Ukraine – 2020, there is no understanding of CSER as an effective driving force on the way of society, companies of various sectors of the economy and the state to progress in the SDG, as a means of increasing the competitiveness of companies and the value of the brand "Ukraine".

- Ensuring monitoring, evaluation and implementation of the strategy within the framework of the developed NSCSER are assigned as separate functions to the Ministry of Economic Development and Trade, which organizes annual monitoring of the effectiveness of its implementation, develops a system of indicators of such effectiveness, conducts evaluations of the work of central executive authorities, local executive bodies authorities, local authorities, entrepreneurship support infrastructure (associations, business associations, scientific and educational institutions, NGOs) in the implementation of measures to promote CSER.

- Determination of the powers of state authorities to implement the strategy and ensure coordination of their activities. Coordination of efforts to promote CSER's regulators in various sectors of the economy; the coordination of their actions is foreseen within the framework of the draft NSCSER on an advisory basis, while the task of adopting, reviewing, implementing, monitoring NSCSER within the framework of the implementation of the state policy on sustainable development should be assigned to the Ministry of Economic Development and Trade. In our opinion, the National Contact Point established after the signing of the Agreement between the Government of Ukraine and the Organization for Economic Cooperation and Development (OECD) on joining the Declaration on International Investments and Multinational Enterprises, Guidance Recommendations for multinational companies and procedural decisions of the OECD Council. An important role should also be played by the revitalization of the sectoral regulation of the mechanisms of the CSER, which should be carried out with the constitutionality of the context of the sustainable development of regulators of certain sectors and industries: extractive industry - taking into consideration the Extractive Industries Transparency Initiative, the Transparency Initiative in the construction industry, etc.

- Formation of a holistic financial and economic, organizational-institutional and informational and communication support for the implementation of the strategy. Existing projects of national strategies and concepts need to be specified in terms of resource-efficiency ratios and in-scope analysis. The draft NSCSER synthesizes financial and economic, organizational and institutional, information and communication levers and tools aimed at creating an environment for responsible business conduct in Ukraine with a clear link to the authority responsible for their application, within the framework of the defined Action Plan for its implementation. Among them, there are the definition of sources to finance measures for dissemination of CSER and promotion of the mechanisms development, regulatory instruments, financial products and responsible investment markets by regulators of the financial sector of Ukraine (the National Bank of Ukraine, the National Commission for the regulation of financial services markets, the National Commission for Securities and the stock market, as well as financial institutions acting as donors).

- Taking into consideration interests, inquiries and expectations of stakeholders in various sectors of the economy, ensuring transparency. Unlike existing documents and projects based on the dissemination and regulation of CSER practices in Ukraine, the elaborated draft strategy places the most significant demands of numerous groups of stakeholders (external and internal) of different sectors of the economy to determine the role of the state, financial intermediaries and regulators, business entities, the public, representatives of the scientific and educational spheres to achieve the most relevant SDG.

- The cross-sectoral nature of the interaction between regulators of different levels and the partnership of stakeholders was added to the developed NSCSER, taking into consideration that in the existing Strategy for Sustainable Development Ukraine – 2020 only delimited areas of responsibility of companies, society and authorities:

• responsibility of the authorities is to carry out reforms, to provide balance interests between civil society, the state and business, to work transparently and qualitatively on new approaches, to guarantee the observance of human rights;

• the responsibility of business is to maintain and develop and the state, the business environment and civil society, to diligently pay taxes, invest efficiently in the state economy, adhere to the principles of honest work and competition;

• the responsibility of civil society is to control power, live up to the principles of dignity and strictly adhere to the Constitution of Ukraine and the laws of Ukraine.

But they did not take into consideration the important role of cross-sectoral partnerships and multi stakeholder approach in reaching the SDG by means of CSER. In our opinion, the building of effective partnerships (cross-sectoral, multi stakeholder, panel) is a key aspect to effective social transformation and spread of values of a responsible business.

Taking into consideration the all the mentioned aspects of the structural and logical scheme of the NSCSER, a draft of NSCSER and its Implementation Plan were developed. The documents were developed on the basis of comparative analysis of mechanisms of implementing national strategies on CSER in the leading countries of the world, as well as analysis of key barriers to spread of CSER in Ukraine, and requirements for development of national strategies for Sustainable Development and CSER of International Organizations (UN Department of Economic and Social Affairs, CSR Europe, OECD).

 These barriers include key indicators (time, executors, resources), types of provision (institutional, financial, and informational) and allow to outline the vectors, problems and prospects for their implementation on a national basis, taking into consideration the needs of stakeholders in the state, financial and real sectors of the economy.

This study was supported by the Ministry of Education and Science of Ukraine (Project No. 0117U003933 «Corporate social and environmental responsibility for sustainable development: stakeholders’ partnership in the real, financial and public sectors of the economy»).

Decree by President of Ukraine (2015). On the Strategy for Sustainable Development "Ukraine – 2020. Retrieved from: http://zakon.rada.gov.ua/laws/show/5/2015

Halkos, G. & Skouloudis, A. (2016). National CSR and institutional conditions: An exploratory study. Journal of Cleaner Production. DOI: 10.1016/j.jclepro.2016.07.047

Melendez, J. R. & Gracia, G.E. (2019). Theoretical perspective of Corporate Social Responsibility in the managerial scenario: Shared implications between the company-stakeholders. Revista Espacios. Vol 40, year 2019, number 10, page 1. Retrieved from: http://www.revistaespacios.com/a19v40n10/19401001.html

Migliorato, M.  (2015). EU CSR Strategy 2020 and the work of CSR Europe. Retrieved from: http://sodalitas.it/public/allegati/EUCSRStrategy2020_2015213121453416.pdf

OECD (2001). The DAC Guidelines: Strategies for Sustainable Development: Guidance for Development Cooperation. Development Assistance Committee. Retrieved from: http://oecd.org/dataoecd/34/10/2669958.pdf

OECD (2006). Good Practices in the National Sustainable Development Strategies of OECD Countries. Retrieved from: http://oecd.org/greengrowth/36655769.pdf

UN Department of Economic and Social Affairs (UN DESA) (2002). Guidance in Preparing a National Sustainable Development Strategy: Managing Sustainable Development in the New Millennium. Retrieved from: http://un.org/esa/sustdev/publications/nsds_guidance.pdf

Zinchenko, A., Reznik, N., Saprykina, M. (2018). The index of transparency of Ukrainian companies sites – 2017. Kyiv: Yuston, 28 p.

Zinchenko, A., Saprykina, M. (2017). CSR development in Ukraine: 2010-2018. Kyiv: Yuston, 52 p.

1. Department of Accounting and Tax, Sumy State University, Ukraine. Doctor of Economics, Associate Professor. i.makarenko@uabs.sumdu.edu.ua

2. Department of Management, Sumy State University, Ukraine. PhD in Economics, Senior Lecturer. dos@management.sumdu.edu.ua

3. АF LLC «Sumycoop-audit». Chief Auditor. sumy@koopaudit.sumy.ua