Current Status of Corporate Social

Responsibility in El Salvador

March 2004

Business Foundation for Social Action (FUNDEMAS)

A publication by the Salvadoran Program for CorporateSocial Responsibility (EMPRESAL)

Presentation

FUNDEMAS, the Business Foundation for Social Action,developed a study with the all round desire to promote anddeploy CSR practices in El Salvador, build awareness on theimportance and benefits of CSR, and contribute to theeconomic and social development of the country.

FUNDEMAS fostered the development of this study to fulfillits goal to uphold and promulgate corporate social responsibilitypractices among Salvadoran entrepreneurs, mainly throughthe domestic and international exchange and disseminationof experiences on CSR, and networks linked to institutionssimilar to FUNDEMAS.

It is important to highlight that these goals are in full harmonywith those of the W. K. Kellogg Foundation and the WorldBank, reason why, FUNDEMAS has received financial supportfrom the W.K. Kellogg Foundation and technical assistancefrom the World Bank. Following is the study “Current Statusof Corporate Social Responsibility in El Salvador”.

Acknowledgements

FUNDEMAS, the Business Foundation for Social Action,profoundly appreciates the support of the followingorganizations and individuals:

1. W. K. Kellogg Foundation, for their financial support.

2. World Bank, for their technical assistance.

3. National Private Sector Association (ANEP), through Ing.Waldo Jiménez, its Technical Manager, for the technicalcontributions to this study.

4. Lic. Italo Cardona, member of the InternationalProgramme for the Eradication of Child Labor (IPEC),of the International Labor Organization (ILO), for hisobservations.

• Ing. Francisco Escobar Thompson, coordinator

• Ing. César Catani Papini

• Lic. Jorge Zablah Touché

• Lic. Juan Valiente

• Dr. Roberto Rivera Campos

for their follow up, comments and observations to the finaldraft of this study.

• Our special gratefulness to Lic. Roberto H. MurrayMeza, for his invaluable support, comments andrecommendations.

Executive Summary 6

Introduction 9

Background 10

Chapter I 12Concept of Corporate Social Responsibility

1. CSR History 122. CSR Approaches 133. CSR Concepts 134. CSR Benefits 145. CSR in El Salvador 15

Chapter IIResearch Analysis 17

1. Principles, Ethical Values and Governance 172. Workplace and Human Rights 233. Market 344. Environment 385. The Community 446. Public Policy 57

Chapter III 60Research Conclusions

Chapter IV 63Ranking according to the International FinanceCorporation (IFC) (World Bank)

1. Business Sustainability Assessment 632. Sustainability Indicators 633. IFC ranking of surveyed businesses 654. Importance of IFC ranking 65

FUNDEMAS Information 66

Table of Contents

This study was executed by the BusinessFoundation for Social Action (FUNDEMAS), atthe initiative of the Salvadoran private sector, toshed light on the status of CSR activities in thecountry and, from this point of reference, urgethe private sector to become more proactive instreamlining those practices that meet the currentand future needs of the Salvadoran population.The FUSADES Team was hired to develop thedata gathering task, based on a broad surveycovering the nine CSR areas: Mission and vision,ethical values, workplace, human rights, theenvironment, marketing, community, public policyand governance. A total of 463 businesses,ranging from large to small, and covering thewhole gamut of economic activities were surveyednationwide, in order to determine their currentlevel of development with respect to CSR andits applicability in the country.

The research tool was based on the one used byThe Instituto Ethos de Brasil, the Braziliancounterpart of FUNDEMAS, which has ampleexperience on this topic and particularly on CSRindicators. This tool was tailored to the Salvadoraneconomic, social and cultural reality.

Purpose and Scope of the StudyDetermine the current level of deployment andapplication of the CSR concept among the privatesector companies of the country. Build on thecurrent status of CSR data to promote a wideradoption and disseminate CSR in El Salvador.

To this end, FUNDEMAS, with the financialSupport of the W.K. Kellogg Foundation,

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Executive Summary

developed this base line research, part of a muchmore ambitious endeavor.

Besides, and with the technical assistance providedby the World Bank, respondent Salvadorancompanies were ranked using the IFCsustainability framework indicators, which ratethe global performance of businesses.

Main Findings

Findings were grouped into six areas. The firstarea grouped ethical principles, values andgovernance. Outcomes showed that 75% of thesurveyed companies have a Code of Ethics thatgoverns their activities and which is reviewed atleast once a year. It also revealed that the Codeis drafted with the participation of owners,shareholders, management and members of theBoard of Directors. Principles and Ethical valuesare disseminated among staff, customers andsuppliers.

The second area covers the workplace and humanrights. The average work shift among the surveyedcompanies is 44.6 hours a week, slightly higherthan the 44 hours prescribed in our current law,and overtime wages. The surveyed companiesenter into contracts with their employees andcommunicate staff their rights and duties.

A striking feauture is that the majority of thebusinesses surveyed provide social security andother benefits beyond the regulatory requirementsof the country, offering workers additional benefitssuch as bonds, life insurance, individual health

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insurance, education scholarships, among others. Companies also assist their employees in theirretirement proceedings, offer job opportunitiesto the physically impaired, evaluate theperformance of their staff members, invest inprofessional and technical training programs, andcomply with legal provisions respect tooccupational hazards, occupational health andworking conditions.

The third area covers marketing. Respondentcompanies have policies and standards in placeto screen and source domestic and internationalsuppliers based on quality, price and deadlines.They also have ongoing programs to enhancetheir products, services and processes.Additionally to this, they also have a CustomerService Unit, and formal communications andadvertising policies.

The fourth area relates to the environment. Halfof the surveyed companies stated that they donot impact the environment with their economicactivities, while the other half is aware of thesignificant bearing that their processes have onthe enivornment, and consequently have institutedan emergency plan, developed research,contributed with solutions and invested in projectsto enhance the environment. To a lesser extent,the surveyed companies participate inenvironmental seminars, sponsor environmentalprojects, and carry out recycling projects.

The fifth area relates to the community. Sixtypercent of the surveyed companies collaboratein social projects, with either private, community,municipal or governmental institutions. Thesecontributions range from cash, goods or servicesto equipment, material resources and skilled staff.

At the community level, businesses mainly support programs on education, the environment, health,technical training, and housing. Companies offerstudents internships to provide them with handson working experience, and in turn they reap thebenefits of an enhanced image and reputation, aswell as positive publicity for the company andthe promotion of solidarity.Public policy is the next in line.

In this area, a predominant 95% of the surveyedcompanies affirmed they do not support anypolitical candidate, or any political party; onethird stated that they have enforced anti corruptionand anti bribery policies respect to any public orprivate authority. Almost half of the surveyedcompanies participate in business guilds andforums and contribute in the making of social,economic and political proposals.

On the other hand, a salient 72% of the surveyedbusinesses meet the minimum internationalperformance standards in accordance with themethodology provided by the InternationalFinance Corporation (IFC), of the World Bank;40% add value to their environmental, corporativegovernance, and community economic activities;11% have undertaken a leadership role in bestpractices.

These outcomes reflect the fact that Salvadorancompanies satisfactorily comply with internationalstandards and that one out of every ten sustainleadership practices. All of the above allows tostate that there is a platform from which topromote the adoption of CSR practices amongSalvadoran businesses.

As a result of increased economic globalization,business transactions are continuously happeningamong companies of divergent sizes, sectors,continents and regions, to provide the goods andservices demanded by markets outside theirnational borders; consequently, many enterprisesdie around the globe while others emerge everyday, and only the fittest survive.

El Salvador has learned the lesson taught by itshistory: economic growth cannot be separatedfrom social growth in this country. Also, thatgrowth can be pursued through the creation orpreservation of sustainable sources of employment,and the protection of the environment. Theprivate sector of El Salvador, cognizant of this,responded to the appeal to strategically incorporatea set of business practices that encourage theadvancement of their employees, the communityand the environment by means of a Code ofConduct and ethical values that contribute to theeconomic and social welfare of the company andsociety as a whole.

In this context, the strategy to face these challengesderives, in part, from corporate socialresponsibility practices.

Salvadoran businesses have incorporated CSRpolicies, positioning the entrepreneurial sector atthe forefront of corporate social responsibilityin the country.

This document analyzes the concept of corporatesocial responsibility, its background, its variousapproaches, benefits, and the quantitative andqualitative analysis of the current status of CSRin El Salvador. It is based on a comprehensivesurvey, followed by the conclusions of the studyand finally, the ranking of Salvadoran enterprisesin accordance with the sustainability frameworkof the IFC (International Finance Corporation)of the World Bank.

The findings of this endeavor will be translatedinto an outline portraying the position of ourcountry with respect to corporate socialresponsibility initiatives. The free tradenegotiations and foreign investment attractionare just two of the many opportunities where theSalvadoran business sector will be able todemonstrate, or test its competitiveness. CSRequates competitiveness, and businesses thatadopt CSR practices will position their companiesat an international level.

Introduction

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In late 2002, FUNDEMAS, carried out a researchbased on the nine CSR areas: Mission and vision,ethical values, workplace, Human rights,environment, marketing, community, public policyand governance. The purpose of this researchwas to determine the current level of developmentof the CSR concept and its application in thecountry.

The research tool was based on the one used byThe Instituto Ethos de Brasil, the Braziliancounterpart of FUNDEMAS, which has ampleexperience on this topic and particularly on CSRindicators. This tool was adapted to the Salvadoraneconomic, social and cultural reality.

The survey was completed parallel to the quarterlySurvey on Business Dynamics developed in late2002, by the Economic and Social StudiesDepartment of the Salvadoran Foundation forEconomic and Social Development (FUSADES).

A total of 463 businesses were surveyed, coveringa wide range of sizes and sectors, with theexception of agriculture. The methodology usedby FUSADES was followed to monitor theSalvadoran entrepreneurial drivers. The companiessurveyed were selected from amongst the 24,500companies from the data base of FUSADES,located in the metropolitan area of San Salvadorand the cities of Santa Ana, San Miguel, Sonsonate

Background

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and Usulutan. Firms were distributed by sectorand size; sectors were distributed in accordancewith the Uniform International Industrial Rating(UIIR), based on a double digit figure, while sizewas distributed based on a series of parameterssuch as the number of employees, sales volume,and asset price. The following table shows thedetailed distribution of the sample:

TOTAL 463 242 69 65 87

INDUSTRY 183 131 18 19 21Food, beverages and tobacco 43 22 6 7 8Textiles, apparel and leather 67 46 6 6 9Wood products 7 4 1 0 2Paper and printed products 13 10 1 1 1Chemical products 33 30 1 2 0Non metal minerals 10 5 2 2 1Metal minerals 4 4 0 0 0Metal products, machinery and equipment 1 1 9 1 0Other industries 1 1 0 0 0

CONSTRUCTION 27 21 5 1 0

COMMERCE 129 46 21 31 31Retailers 20 17 3 0 0Wholesalers 76 23 14 21 18Restaurants and hotels 33 6 4 10 13

SERVICES 118 44 25 14 35Transportation, storage and communications 28 8 4 6 10Financial services and Insurances 16 14 2 0 0Real estate and services rendered to firms 16 2 3 0 11Personal services 58 20 16 8 14

Distribution of Companies in theeffective sample

SECTOR/SIZE Total Large. Med. Small.Micro

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Thirty five university students with over threeyears of study were selected from the FUSADESsurveyors’ data base. Surveyors were givenadditional training on the mechanics of dataapplication by FUSADES and on CorporativeSocial Responsibility by FUNDEMAS.

The technical considerations of the research aredetailed as follows:

1. Survey Universe:

24,500 businesses

2. Valid Surveys:

Nationwide: 463 surveys (out of the universe ofthe survey).

3. Sampling:

A distribution pattern based on sector and size;Sectors were distributed according to a double

Digit Uniform International IndustrialRanking.

4. Sample Error:

Nationwide: 5% (for a significance levelof 95%).

5. Methodology:

Personal interviews. Thirty five universitystudents selected from the FUSADESdata base of normally used surveyors, visited thevarious businesses to conduct the surveys afterreceiving training, as mentioned before.Distribution by size was based on the combinationof the number of employees, sales volume andasset value.

6. Period of execution:

From September 23 to November 8, 2002.

 

1. CSR Background1

The exact origin of the CSR concept cannot betraced back into history. Some believe it wasfirst enacted in Germany where social laws suchas health care and maternity insurance,occupational hazards, occupational health,retirement benefits and death were included intheir labor provisions. Notwithstanding, theconcept was being mentioned in other parts ofthe European Continent under a paternalisticvision, stating the moral obligation voluntarilyundertaken by businesses as an institution, towardssociety as a whole.

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Within the American continent, CSR was mainlymanifested as the individual right to life, freedomand the pursuit of happiness. The businessworld faced enormous pressure during theaftermath of the great depression in the UnitedStates of America, and the economicconsequences at the end of World War II, dueto the changes in the world´s economic, socialand political systems.

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CSR has reached a preponderant role in theEuropean continent, and is seen under a differentperspective. Contrary to the US society,Europeans demand their rights effectively; theircivil society is well organized and the role of theState and its responsibilities are clearly outlined,whereby the fine line that separates the valid role

of the business sector and the State is well definedand the latter is able to work effectively. Thebasic functions of the State are the same in allregions, but in Latin America, it is of outmostimportance to build a more solid and efficientstate.

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The need to reach better economic andenvironmental conditions for our societies drovethe business sector to apply corporateresponsibility policies. Under this context, agroup of entrepreneurs representing differentgeographical areas of the Latin American regionmet to share ideas and debate on CSR relatedtopics; This effort resulted in the alliance oforganizations that share a common vision, andpromote the practice of CSR initiatives throughoutthe American continent, by disseminatinginformation and creating opportunities for theexchange of ideas related to this topic. EMPRESA(The Forum of Private Businesses and SocialResponsibility in the Americas), which todaygroups twelve organizations highly committedto CSR in the American Continent, constitutesthe natural delivery of these highly committedorganizations that work towards disseminatingthe benefits of CSR by preaching with theirexample as they conduct their businesses with asocially oriented agenda and in a responsiblemanner.

Chapter I:Concept of Corporate Social Responsibility

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1 Thesis “Proposal for the implementation of corporate social responsibility in 3, 4, and 5 fork restaurants in the municipality of San Salvador”2 www.chile-hoy.de/opinion-ensayo/280202_estadobienestar.html. www.pnud.cl/pnud/pdf/mesas%20.pdf3 http://usinfo.state.gov/journals/itsv/0197/ijss/ijss0197.htm4 Interview with Maria Emilia Correa, vice president of social responsability and enviroment of Grupo Nueva, Instituto Deres, Uruguay, July/2003.

2. Different CSR Approaches5

CSR has gone through several stages along itshistory, characterized by various approachesdepending on the time of their development.Following are some:

2.1 The Liberating approach which expressesthat businesses have one sole social responsibilitywhich is to use their resources and get involvedin activities that render increased profits.6

2.2 Self-interest is another approach that statesthat society responds to the socially responsibleactivities undertaken by businesses; and that socialresponsibility can be seen as a strategy in thequest for business success or maximum profits.7

2.3 Theorists use the personal morality approachto determine corporate social responsibility. Thisapproach analyzes both the structure and natureof the corporation itself. If it is assumed that abusiness is capable of acting and that its actionscan be compared to those of a natural person. Itcan be concluded that corporations can be morallyliable in a fashion similar to individuals.8

2.4 The stakeholders approach states that theduty of a corporation is not limited to itsshareholders but to a larger group of stakeholders,comprised of the latter but also by every personwithout whom the company could not survive

and that is also affected by the actions of thecompany.

Stakeholders are all those persons andorganizations affected by the corporation or whocan positively or negatively affect the corporation.

3. Diverse CSR Concepts

There are various concepts of CSR as there areseveral approaches that cover every area of actioninvolving CSR in its holistic concept. Followingare some:

3.1 According to the Centro Mexicano para laFilantropía (CEMEFI), CSR consists in fullycomplying with the business´ economic, socialand environmental goals both internally andexternally. CSR means to be committed to one’scountry, work towards social development, investtime, talent and resources to build a future withbetter opportunities for all. It means to invest inhuman resources for them to become the agentsof change by means of their integration andlinkage with the community. A socially responsiblebusiness is one that besides offering quality goodsand services also generates profits and jobs, paysits taxes, becomes creative in identifying theproblems of the community and strives to findalternatives for their solution. Why? Because itis a win win situation. The money the businessinvests in development will improve the living

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5 Thesis “Proposal for the implementation of corporate social responsibility in 3, 4, and 5 fork restaurants in the municipality of San Salvador”Universidad Dr. José Matías Delgado, School of Economy

6 Friedman, Milton, “Social Responsibility. A Subversive Doctrine”, The Sunday Times Magazine, September 13, 1970 / The Social Responsibilityof a Business is to increase its Profits”, New York Times Magazine, Sep. 13, 1970.

7 Aram, John D., “The Paradox of Interdependent Relations in the Field of Social Issues in Management”, Academy of Management Review, 14(2),1989, 266-283. Arlow, Peter y Martin Gannon, “Social Responsiveness, Corporate Structure and Economic Performance”, Academy of ManagementReview 7, 1982, 235-241.

8 French, Meter “Corporate Moral Agency”, en W. Michael Hoffman and Jennifer Mills Moore, eds., Business Ethics: Reading and Cases in CorporateMorality (New York: McGraw Hill Editors, 1990), page. 194-292.

status of all the inhabitants of the country. Thebusiness in turn receives a series of benefits thatimpact the relations with its shareholders,employees, suppliers, creditors, and consumers.9

3.2 According to Business for Social Responsibility(BSR), CSR generally refers to business decisionsclosely linked to ethical values and the compliancewith legal requirements and the respect for humanbeings, communities and the environment. Inother words, CSR is equal to managing a businesscomplying or excelling the ethical, legal andcommercial expectations of society.10

3.3 Acción Empresarial of Chile believes thereis not one sole definition for corporate socialresponsibility; but rather a vision of a businessthat incorporates the respect for ethical values,persons, the community and the environment.CSR is seen by leading businesses as somethingmore than a set of concrete practices, occasionalor market driven initiatives, public relations orother business benefits. CSR encompasses a widerange of policies, practices and programsintegrated through business operations backedup by sound decision making and rewarded bymanagement.

3.4 Instituto Ethos of Brazil, states that CorporateSocial Responsibility is a way of conductingbusinesses in which the business becomes co-responsible for social development. A sociallyresponsible business is one that listens to theinterests of several parties (shareholders,employees, suppliers, consumers, community,government and the environment) and

incorporates these interests into its planning torespond to the demands of all, not onlyshareholders and owners.

3.5 Stephan Schmidheimy (a Swiss national) andPresident of the Grupo Nueva, of whichAMANCO is a part), states that CSR is thecapacity of a business to handle the positive andnegative impacts of its operations on itsstakeholders. Each business has to think anddecide who are its stakeholders and action withinsociety, moving from the traditional concept ofphilanthropy to responsibility, understood ascorporative citizenship. The adherence of staffmembers to socially responsible labor is possiblewith the commitment of high management,continuous dialogue with employees, and learningfrom past mistakes.

4. . CSR Benefits

CSR benefits can be measured through qualitativeand quantitative data. Several businesses haveexperienced great tangible benefits both in theiroperations and in some specific CSR issues.

The benefits reaped by a socially responsiblebusiness can be combined with efficiency andeffectiveness. These benefits can be evidencedby measuring the impact of a business uponsociety, the community and returning thesebenefits. It is a win win strategy . A SociallyResponsible business takes into account the costsand benefits of its operations on society and theenvironment. A Socially Responsible businesscomplies with the legal requirements established

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9 Centro Mexicano para la Filantropía - CEMEFI10 Business for Social Responsibility – BSR

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by the country it operates in, excelles in investing“more” in human capital, the environment and inits relations with shareholders, suppliers andcustomers.

The concept of CSR is mainly managed by largeenterprises although socially responsible practicesexist in all types of public and private businesses,including small and medium sized ones (SME)as well as cooperatives. Each decides on theimportance, and especially the priority, of eachone of the nine areas encompassing CSR, inaccordance with the type and size of the business,aimed at strengthening its strategic objectives.CSR works not only to create or make sociallyresponsible businesses. Employees also decidewhere to work based on these criteria and measurethe contributions of a company to society.Employees share the perception that SociallyResponsible businesses offer more stability. Otherbenefits are lower turnover of skilled personnel,and customer long term loyalty.

Employees, customers and the communityinformally grant businesses a license to operateas a way to show that they believe in them,Businesses must communicate with stakeholdersto be granted this license; they must communicatetheir impact on society as a sign of operationalopenness and transparency. A company’s socialreport could become an accountabilitycommunications tool, by which a business candemonstrate which activities are voluntary, thecontributions made to the community, or socialprojects, labor benefits over the legally establishedones, ethical values, the code of conduct, and theimpact of these decisions on the environment,among others.11

The commitment of a socially responsible businessis to contribute to sustainable economic growth,working with its employees, their families, thelocal community and society to improve thequality of life of inhabitants. Business success isachieved by a set of practices aimed at benefitingsociety.

5. CSR in El Salvador

Salvadoran businessmen have grappled with theCSR issue for several years. One of the firstactions was the contribution of FUSADES in1999 with the document “La ResponsabilidadSocial de la Empresa Privada en El Salvador”(Corporate Social Responsibility of PrivateBusinesses in El Salvador) an exploratory studyregarding the social responsibility of privateenterprises in a sustainable development context”,based on a philanthropic vision, which wascommon in those days, and centered exclusivelyon the community.

The need to reach better economic, social andenvironmental conditions, impelled Salvadoranleading businessmen to create a foundation headedby Roberto H. Murray Meza, to address CSRissues.

This is how the Fundación Empresarial para laAcción Social (FUNDEMAS) was born in May2000. It is totally rooted on businesses and seeksto contribute to the economic and socialdevelopment of El Salvador, by strengtheningthe social responsibility of private enterprises,promoting business philanthropy, fosteringentrepreneurial behavior, facilitating thedevelopment of social values and an

11 Promoting a European framework for corporate social responsibility. Green Paper. Industrial relations and industrial change. Employment &Social Affairs. European Commission. July 2001

entrepreneurial culture, to face the modern globalchallenges ahead, through social responsibilitypractices, as engines of wealth that encourage anequal, stable and sustainable society.

FUNDEMAS currently works with privatebusinesses, non governmental and internationalorganizations, higher education institutions,entrepreneurial associations and guilds, toimplement activities leading to social responsibilitypractices and to drive CSR as a strategy to achievesuccess and contribute to sustainable development.This is done by working together with employees,their families, local community, and society toenhance the life standard of inhabitants andbenefit businesses, the development of thecommunity and the country.

FUNDEMAS is a founding member of ForumEMPRESA an international network with eightytwo founding members and fourteen newmembers, comprised of individuals and private

enterprises, foundations, guilds, associations, andhigher education institutions.

FUNDEMAS as a member of the internationalnetwork Forum EMPRESA, can communicatewith members such as BSR (Business for SocialResponsibility) in the USA, CBSR in Canada,AliaRSE in México, CentraRSE in Guatemala,Peru 2021, Instituto Ethos in Brasil, AcciónEmpresarial in Chile, Deres in Uruguay,Fundación del Tucumán in Argentina, CEDISand COMPAS in Panama, and learn about CSRrelated activities carried out in each membercountry, and the achievements reached. Materials,methodologies, tools and data are availablethrough the network, as well as the lessons learnedin each country. The international network handlesthe same CSR concept, which allows standardizingand disseminating the CSR concept in such anample manner that it has become an imperativein the strategy of a company within theinternational arena.

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Chapter II:Research Analysis

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Corporate Social Responsibility has become thestrategic imperative of competitive businesses inEl Salvador. It is viewed as a set of businesspractices aimed at contributing to the harmoniouseconomic and social development of the country.A means to benefit society and the business sector,by rendering businesses more competitive, thusenhancing the competitiveness of El Salvador.

The nine areas in which corporate socialresponsibility is reflected are:

1. Mission and vision

2. Ethical values

3. Workplace

4. Human rights

5. Environment

6. Marketing

7. Community

8. Public policy

9. Governance

Understanding the status of a country’s CSR canbe simplified by grouping these areas into sixsections, correspondingly with their similarityand the questions drafted. These sections are:

1. Principles, ethical values and governance

2. Workplace and human rights

3. Marketing

4. Environment

5. Community

6. Public policy

CSR related topics were analyzed based on thesesections and included in the survey. Outcomesare presented based on three points of view: a)sector (industry, construction, trade and services),b) size (large, medium, small and micro) and c)geographical region (metropolitan area, SantaAna, Sonsonate, San Miguel and Usulután).

1. Principles, ethical values and governance

Principles, ethical values and governance areunderstood as the explicit commitment of businessobjectives towards CSR. Businesses incorporatethis concept in their mission, vision, strategicplan, relevant documents and internal policies.CSR is institutionalized in a business as theseconcepts are incorporated internally.

Values help create a culture that supports anethical behavior. The definition of ethical valueslays the foundation for a code of conduct in theenterprise, and its enforcement in the decisionmaking process, employee training and education.

Besides, it also refers to the creation of managerialsystems that support and reward CSR behaviorsand practices throughout the company, such asindependency and diversity if the executivestructure, and board of directors (measure, reportand audit), the incorporations of CSR in decisionmaking (policies, training and performance) andthe commitment of all stakeholders: public andprivate sectors and international organizations.These are key aspects that should be taken intoaccount when defining the corporate socialresponsibility strategy of a business.

1.1 Code of Ethical Principles and Values

A Code of Ethical Principles and values consistsof a code that guides the activities of a business.

Three out of every four firms surveyed have acode of ethics: 32% of the companies have awritten code, while 41% have a verbal code. Theremaining 27% lacks a code of this nature.

By sector: The proportion of firms with a verbalcode of ethics is similar in the industrial, servicesand construction sectors, around 40% and 52%,similar to the behavior of firms in those samesectors with a written code approximately 22%and 26%. Regarding trade, it was observed that62% of the companies have either a verbal or awritten code and that the remaining 38% lacksa code of ethics.

By size: It was observed that a formal code ofethics prevailed among large enterprises (48% ofthe large firms have this type of code); while aninformal code of ethics prevailed among mediumand small businesses (54% and 52%, respectively).

It is estimated that 59% of the micro businesseslack a code of ethics of any type, being this groupthe one less involved in this practice.

By region: The proportion of firms with a formalcode of ethics is higher in the metropolitan area(40%) than in other areas of the country. Theuse of informal codes of ethics is more commonin firms located in San Miguel (57%) andSonsonate (43%). Regarding the firms that lacka code of ethics, it was shown that the areas ofhighest impact are Usulután (58%) and Sonsonate(51%).

1.2 Participation in the drafting of ethicalprinciples

A total of 336 firms out of the universe ofrespondents affirmed having a code of ethicalprinciples and values, representing a salient 73%of the total sample.

In general terms, business owners or shareholdersare more involved in the drafting of ethicalprinciples, with a 73% participation rate, followedby managers and board members with 62% and51% participation rate respectively. Thiscorroborates the high level of commitment ofthese groups to the formulation of a code ofethics in their firms.

By sector: The survey detected that theparticipation of owners or shareholders in thedrafting of a code of ethics was equal in theindustrial, trade and services sectors with aparticipation rate between 68% and 78%, andthat the construction sector attributes a very highrate to this issue reaching an outstanding rate of

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90%. Regarding the participation of boardmembers, it was evidenced that their participationis higher in the industrial sector.

In general terms, the participation of the variousleadership groups in the industrial sector is higher.Worker participation is equal in the differentsectors with an average rate of 25%.

By Size: The participation of owners andshareholders in the formulation of a code ofethics is greater in small and micro businesses(86% to 97%) than in medium and large firms(63% to 69%). This can be explained by the factthat this task could be concentrated on ownersand shareholders in small firms, while in largerfirms more people could be involved in this task.

Board members and managers participate morein large firms compared to their participation inmedium sized businesses, while the participationof owners and shareholders is the same in bothcategories. Worker participation ranges between22% in the micro business sector and 32% in themedium sized businesses.

By region: Board member participation in theelaboration of ethical principles and values was(60%) and manager participation (75%) was morefrequent in the metropolitan area of San Salvadorand in Santa Ana, (48% and 56% respectively).The participation of owners was high throughoutthe country, over 70%.

Usulután showed the highest level of workerparticipation in the formulation of ethical valuesand principles, with a rate of 57%, while only27% participated in the metropolitan area. Worker

participation dropped in the remainingdepartments of the country.

1.3 Periodical review of Ethical Values andPrinciples

A total of 336 firms out of the universe of firmssurveyed, equal to 73% of the total sample,affirmed having a code of ethical principles andvalues.

Of these only 62% reviewed its ethical principlesand values at least once a year.

By sector: Services, trade and industry show asimilar average regarding the periodical reviewof ethical principles and values, ranging between60% and 66%, compared to the 37% review ratein the construction sector.

By size: The review rate among small, mediumand large businesses ranges between 51%, 67%and 66% respectively, while the micro businessesreview their codes of ethics in 44% of cases.

By region: A high percentage of the firms locatedin Santa Ana (78%), Sonsonate (72%), themetropolitan area (63%) and Usulután (57%)periodically review their ethical principles andvalues. San Miguel is the department with thelowest rate of review of ethical principles andvalues. (42%).

1.4 Participation in the review of ethicalprinciples and values.

A total of 208 firms out of the universe ofsurveyed businesses affirmed having reviewed

their ethical principles and values at least once ayear, representing 62% of the total number offirms with drafted ethical principles and values.

Owners and shareholders are also dominantlyinvolved in the review of these same principlesand values, similarly to the findings regarding thedrafting of the Code of Ethics, followed bymanagers and board members with a participationrate of 70%, 69% and 52% respectively.

By sector: The participation rate of owners andshareholders in the review is 57% in the servicessector, 74% in the industrial and trade sectors,and 86% in the construction sector. Theparticipation of board members is equivalent inthe various sectors, while managers participatemore frequently in the industrial sector with arate of 80%.

By size: The participation of owners andshareholders in the review of ethical principlesand values is 68% in medium and large firms.The size of the sample of small and microbusinesses that review their ethical principles andvalues does not allow to extract any conclusionform these groups; despite the aforementioned,outcomes show a participation of 82% and 81%respectively. Board members and managersparticipate more in large firms.

By region: Board members and managersparticipate more frequently (61% and 68%respectively) in the review of ethical principlesand values in the metropolitan region, comparedto the remaining parts of the country.

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Principles and Ethical Valves

Ongoing periodical reviews Shareholders reviewprinciples

100

90

80

70

60

50

40

30

20

10

0Existance of code Shareholders participation

Industry Construction Commerce Services

%

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1.5 Dissemination and communication ofethical principles and values

A total of 336 firms out of the universe ofsurveyed firms affirmed having a code of ethicalprinciples and values.

The main groups these ethical principles andvalues are addressed to are: administrative staffand workers in 77% of the firms; mid managementin 66% of the firms; customers in 35% of thefirms; and suppliers in 21% of the firms.

By sector: The number of firms that communicatethese ethical principles and values to their midmanagement, workers and administrative staff ismore frequent in the industrial sector with a rateranging between 74% and 80%. Trade rangesbetween 59% and 79%; Services between 57%and 76%; construction in 85%.

Thirty percent of the firms in the trade sectorcommunicate their principles and values to theircustomers, 33% in the industrial sector, 41% inthe services sector and 50% in the constructionsector. Also 23% of the firms in the trade sectorcommunicate these principles and values to theirsuppliers; 21% in the industrial sector, 41% inthe services sector and 13% in the constructionsector.

It is important to highlight that the size of thesample of construction firms with a code of ethicsdoes not allow extracting conclusions regardingthis group.

By size: The communication of ethical principlesto managers, mid management and administrativestaff increases as the size of the firm also increases,while the communication to workers ranges

between 69% to 79%, to customers between23% and 24% and to suppliers between 8% and24%.

By region: Principles and values werecommunicated to customers in a high proportionin the Department of Usulután (100%) and themetropolitan region (79%); while Usulután (64%)and San Miguel (36%) better disseminated theseprinciples and values to their suppliers; and themetropolitan area (23%), Santa Ana (22%) andUsulután (21%) did a better job disseminatingthese principles and values compared to the restof the regions in the country.

1.6 Strategic Planning: policies, strategies,objectives, action plans

A total of 463 firms, that is the total universesurveyed, answered this question.

Outcomes show that owners or shareholders arethe most active groups regarding strategic planning,with a participation rate of 74%. This group isfollowed by managers with 56% and boardmembers with 45%.

By sector: The participation of shareholders inthe construction industry was dramatically higherwith a participation rate of 89%. The participationof board members and managers in strategicplanning is lower in the trade sector comparedto the remaining business sectors, ranging between35% and 40%.

The participation of mid management (between22% and 28%), administrative staff (15% and22%) and workers (6% and 10%) is similar amongthe various sectors.

By size: The participation of owners andshareholders in the strategic planning of medium,small and micro businesses ranges between 78%and 88%. The participation of owners andshareholders in large businesses is limited to 66%.The participation of board members is higher inlarge businesses with a rate of 73%, comparedto other business sizes.

On the other hand, the participation of managersincreases as the size of the business increases,conversely to the participation of workers thatdecreases as the size of the firm increases, withthe exception of the micro business in whichonly 1% of the workers participate in strategicplanning activities.

By region: Owners and shareholders of businesseslocated outside the metropolitan area participatemore frequently in the strategic planning of theirbusinesses, contrary to the businesses located inthe metropolitan area where board members, midmanagement and managers are more involved inthis activity.

1.7 Participation of board members inexecutive positions within the business

A total of 310 firms out of the universe ofsurveyed businesses, affirmed that this conceptwas applicable to their businesses. Board membersof 76% of all businesses participate in executivepositions within the company.

By sector: The industrial and construction sectors(59% and 67% respectively), have a higherparticipation of board members in executivepositions compared to the trade and servicessectors with 42 and 46 percent participation rate.

By size: The participation of board members inexecutive positions is 77% in large businessesand 75% in the micro business sector. It isworthwhile highlighting that this question appliesto the majority of large businesses but that thelevel of applicability drops as the size of thebusiness decreases.

By region: The participation of board membersin executive positions is 78% in the metropolitanregion, 74% in Santa Ana, 65% in San Migueland 67% in Sonsonate. The applicability of thisissue decreases outside the metropolitan area andmain cities.

22

Governance

Board of directors in executive positions

Board of directors strategic planning

Dissemination and comunication to workers

90

80

70

60

50

40

30

20

10

0Services Commerce Construction Industry

%

23

2. Workplace and human rights

Human rights in the workplace are understoodas a fair and equitable working environment,through the involvement of employees as a keyresource, the creation and compliance with humanresource policies, sound labor conditions, jobsecurity, and occupational safety. The respect forthe human rights of internal and externalcustomers of the business are also taken intoaccount, as well as the definition of policies andthe monitoring of a code of conduct, the diversityin the hiring of staff and suppliers, the eradicationof child labor, the hiring of physically challengedpersons and equal opportunities for women andmen, among other. The labor law of El Salvadorwas used as the basis of this analysis.

2.1 Working Hours

The hours of work of the surveyed businessesaverage 44.6 hours per week, slightly over the 44hours established in the legislation in force. It isimportant to highlight that some businesses haveproduction shifts over 44 hours, in 12 hour shifts,to comply with the legal provisions regardinglabor hours. Overtime is dealt with in a followingparagraph.

By sector: There is no evidence that indicates thatone sector in particular has a longer or shorterwork day compared to the other business sectors.

By size: Data reveals that a labor day is equal inhours in large, medium and small businesses,although the number of hours increases slightlyin the micro businesses with a total of 46 hoursa week.

By region: The average working week in Usulutánis 50 hours of work, followed by San Miguel with46 hours, while the businesses in Santa Ana andthe metropolitan area comply with the 44 hoursper week regulatory schedule.

2.2 Overtime compensation

Sixty six percent of the businesses pay overtimecompensation to their workers, and 33% to theiradministrative staff. The businesses that do notpay overtime include professional services andper item contracts, and the ones complying withthe established 44 hours per week regulation. Ingeneral, 96% of the surveyed businesses do notpay overtime compensations to their managerialand executive staff because they are under adifferent scale of benefits, including premiumsand bonds per achieved goals, as well as specialcompensations and privileges.

By sector: Businesses in the industrial andconstruction sectors pay more overtime to theirworkers (83% and 74% respectively), followedby trade (61%) and services (41%).

By size: Overtime compensation increases as thesize of the business becomes larger. For instance: 87% of the large businesses pay overtimecompensation, compared to 54% of the mediumsized businesses and 45% of the small businesses.Only 17% of the micro businesses pay overtimecompensation.

2.3 Proportion between the highest and thelowest wages in the business.

In 66% of the surveyed businesses, the highestwage corresponds to thirteen times the lowest

wage in the company. The remaining businessesdid not answer this question.

By sector: The gap between the highest and thelowest wage is greater in the industrial and theconstruction sectors, with a difference betweenfifteen to sixteen times respectively. In the servicesand trade sectors the ratio is 12 to 1 and 10 to 1.

By size: In the large businesses the gap betweenthe highest and the lowest wage reaches a ratioof 20 to 1, higher than the 7 to 1 indexcorresponding to the mid and small businesses,and the 3 to 1of micro businesses.

By region: The gap between the highest and thelowest workers wage is considerably higher inthe metropolitan area with a ratio of 16 to 1,compared to the 4 to 1 ratio in the remainingparts of the country.

2.4 Worker Contracts

The total sample of businesses surveyed wasasked this question. Findings show that 62% ofthe labor contracts are formal written contracts,while 36% are oral.

By sector: The industrial sector accounts for 73%of the formally established contracts, higher thanin any other business sector.

By size: As the size of the business increases, thenumber of formal contracts also increases. Atotal of 91% of the large businesses enter into aformal contract with their workers, compared to12% of the micro businesses; 54% of the mediumsized businesses and 34% of the small businesses.

By region: The percentage of formal contractsin the metropolitan area is 79%, while the restof the country frequently enters into informalcontracts.

2.5 Code of Conduct, workers rights andduties

The total sample of businesses surveyed wasasked this question. 57% of these businessestransmit workers rights and duties mainly throughthe internal regulations manual of the business.Among the businesses surveyed, 29% of themhave a policy, standards and procedures manual,and 18% of the businesses communicate theseorally.

By sector: The industrial and construction sectorsuse an internal regulations manual more frequentlythan other sectors (67%). The services sectoruses this manual in 55% average of all itsbusinesses while the trade sector only in 42%.On the other hand, the percentage of businessesthat have a policy manual is the same (27%average) in all business sectors.

Workers rights and duties are communicatedorally in 26% of all trade businesses, 17% ofservices firms, 15% of construction enterprisesand 13% of all industries.

By size: Micro businesses (44%) and smallbusinesses (37%) disseminate workers rights andduties in an oral fashion. As the size of thebusiness increases, the number of businesses witha written internal labor regulation increases aswell. Thirty four percent of the large and mediumsized businesses have a policy manual.

24

25

By region: Sixty nine percent of the businesseslocated in the metropolitan area are governed byinternal labor regulations, while only 37% ofthem have a policy and procedures manual. Inthe remaining regions of the country, 39% of thebusinesses communicate workers rights and dutiesorally.

2.6 Labor Benefits

The total sample of surveyed businesses wasasked this question. The chart summarizes thepercentage of businesses and employee benefitsgranted:

Health, maternity and professional hazards at theISSS • 89%

Pension Funds at the AFP or ISSS • 85%

Holidays over the ones set forth in the law•74%

Christmas bonus beyond regulatory standards •73%

Productivity compensations • 42%

Life insurance contracted with private firms• 33%

Use of vehicle • 32%

Health insurance contracted with private providers• 28%

Recreation, culture and sports programs • 23%

Workers health care services in the business •19%

Worker education scholarships • 18%

Purchase of school supplies • 13%

Share in the business’s profits • 12%

Health care for family members in the business• 10%

The sum of these benefits surpasses 100%, sincethey can be provided simultaneously and do notexclude each other.

2.7 Information regarding retirementprocedures

The total sample of surveyed businesses wasasked this question. Out of this universe, 56%of the businesses provide basic informationregarding administrative procedures to enter theretirement program.

By sector: the businesses in the industrial andconstruction sectors provide workers with thisinformation in 65% and 59% of cases, respectively,compared to 46% and 53% of the businesses inthe trade and services sectors.

By size: As the size of a business increases itprovides more information on retirementprocedures to their workers. Consequently, 77%of the large businesses provide this service,compared to only 14% of the micro businesses.The medium sized businesses provide thisinformation in 54% of the cases and the smallbusiness in 39%.

By region: Seventy percent of the businesses inthe metropolitan area provide this informationmore frequently than the businesses in otherregions of the country. The businesses in Usulutan

provide the least information to their workers(12%), followed by Sonsonate (27%).

2.8 Employment of Minors

The total sample of surveyed businesses wasasked this question. Out of the total number ofsurveyed businesses 89% of them do not employminors, while another 10% employs minorsseasonally and 2% permanently but adhering tothe provisions in article 114 and following setforth in the labor code. The seasonal jobsexpressed herein could be, for instance, duringthe Christmas season.

Minors between the ages of 12 and 14 years arehired under the modality of remunerated jobs inthe trade and services sectors. Of these minorsbetween the ages of 14 and15 years, 50% of themare hired as remunerated workers and the rest(43%) as apprentices; of the minors between 16and 18 years, 58% of them are hired asremunerated workers and 33% as apprentices.

Apprenticeship is not considered a workingcontract, since minors are learning a trade oroccupation. The Ministry of Labor authorizesthe hiring of apprentices, provided that they areat least 12 years old, and places them under aspecial regime. The average number of workinghours for minors is 33 hours a week with amaximum of 36 hours a week and a work daybetween 6 to 7 hours a day.

Of the minors between 12 and 14 years, 100%of them work during the day as well as 86% ofthe minors between the ages of 14 and 15 and90% of the minors between 16 and18 years ofage.

By sector: The number of businesses that employminors is similar accross the business spectrum,with 2% of the businesses hiring minorspermanently and 9% seasonally. Please note thatthese figures include apprentices, whose work isnot considered contracted labor.

By size: Workers under the age of 18 years arehired by the large (10%) medium (16%) and smallbusinesses (9%), while only 3% of the microbusinesses hire any.

By region: A high proportion of businesses inSan Miguel (98%) and Usulutan (97%) abstainfrom hiring minors, while in the metropolitanarea youngsters under the age of 18 years arehired seasonally by 13% of the surveyed businesses.

2.9 Groups offered a job opportunity

The percentage of businesses surveyed that offera job to the various population groups is rankedas follows:

Physically challenged persons • 33%

Over forty five years of age • 56%

Young workers lacking experience • 63%

Minors • 11%

Illiterate persons • 25%

This detail does not add to 100%, since thisselection is not excluding.

By sector: Out of the businesses that offer a jobto the physically challenged persons, the industrialsector has proven to be more committed regardingthis issue.

26

27

Besides, the industrial and trade sectors seem tobe more inclined to hire young and inexperiencedworkers, with percentages ranging from 68% and64% respectively. In 70% of the constructionsector, workers´ age surpasses forty years and onthe other hand, 48% of the businesses hire illiterateworkers, contrasting with the 8% of workersunder the age of 18 hired in the services sector.

By size: Large businesses show a higher index ofilliterate (27%), physically challenged (49%) andover forty years of age (68%)persons, as well asa higher number of young inexperienced workers(72%).

Micro businesses hire a lower number of younginexperienced workers (30%) compared to the

other sectors, and also less minors (5%) andilliterate persons (17%).

By region: In general, businesses in themetropolitan area and San Miguel offer jobs tophysically challenged persons with a frequencyfluctuating between 39% and 30% respectively.Besides, businesses in the metropolitan area offerjobs to workers over forty years of age morefrequently (63%) than other regions.

Businesses in the metropolitan area, Santa Anaand San Miguel, share a similar rate ofinexperienced workers, ranging between 68%,64% and 66% respectively, but still higher thanin Usulután (40%) and Sonsonate (32%). Therate of illiterate workers hired follows a similarpattern ranging between 19% and 33%.

Worker Contrating

Industry Construction Commerce Services

Average week shift Worker overtimepayment

Formal writtencontract

Written internal workingregulation

Information regardingretirement procedures

Hiring of physicallychallenged persons

90

80

70

60

50

40

30

20

10

0

%

2.10 Existing Worker Organizations and /orGuilds

Sixty nine percent of the businesses surveyed didnot have any type of worker organization; 20%of them had cooperatives; 14% laborimprovement committees; and 6% workers unions.

By sector: The businesses in the constructionsector outstand for the highest number of unions(22%), while those in the industrial sector havethe most labor improvement committees andcooperatives 21% and 26% respectively. Thenumber of businesses that allow the formationof cooperatives in the trade, services andconstruction sectors is similar with a 15% rate.

By size: Large and medium sized businessesaccount for 10% and 3% of trade unionsrespectively, while unions are absent in the microbusiness sector for obvious reasons. The sametrend can be observed regarding laborimprovement committees and cooperatives with22% in large businesses and 35% in mediumsized businesses.

By region: Unions are more prevalent in themetropolitan area, as well as labor improvementcommittees and cooperatives, with 9%, 18% and25% respectively, while in the other regions thispercentage drops significantly.

2.11 Strikes and shutdowns

Only 0.6% of the surveyed businesses affirmedhaving had any strikes or shutdown events in thelast two years.

By sector: Strikes occurred in 7% of thetransportation service sector, and 1.5% in thetextile, apparel and leather industries, representing2% and 0.5% for their respective sectors.

By size: No actual difference was evident regardingthe size of businesses respect to strikes in thespecified time frame.

By region: No difference was observed amongthe various regions regarding any strike activityin the surveyed businesses.

28

Strike or stoppage activity

4.5

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0

Industry Construction Commerce Services

%

Average % of strikes or stoppages inother companies within your sectorin the last two years

Average % of strikes or stoppages inyour company in the last two years

29

2.12 Worker Performance Assessment

Of the surveyed businesses, 72% affirmed havinginstituted a program to assess worker’sperformance. In 41% of the cases the assessmentprogram is informal, and in 31% of the cases theprogram is formal and in writing.

By sector: The percentage of businesses with aninformal performance assessment program issimilar in both the industry (42%) and trade (43%)sectors. It was also observed that the percentageof businesses with a formal assessment programis lower in the construction sector (22%)compared to the industry and services sector with(34%) and (36%) respectively.

By size: The percentage of large businesses withan informal assessment program amounts to 37%,compared to 46% of the medium and smallbusinesses, and 43% of the micro business group.This trend reverses in the case of formalassessment programs, with 49% of largebusinesses offering this program, and only 29%of the medium businesses, 11% of the small onesand 0% of the micro businesses.

By region: The metropolitan area outstood asthe region with more businesses offeringassessment programs (79%), equally distributedbetween formal and informal. In Santa Ana, SanMiguel and Sonsonate, the informal type ofassessment is more prevalent, with 55%, 46%and 43% respectively.

2.13 Incentives or rewards to workers whoprovide improvement recommendations

Among the surveyed businesses, 35% of themoffer programs that stimulate or reward worker’scontributions to enhance performance.

By sector: The rate of businesses that offerprograms that reward workers who contributewith suggestions to improve performance is quitesimilar across sectors, with percentages between30% and 38%.

By size: The rate of businesses that offer programsthat reward workers who contribute withsuggestions to improve performance is quitesimilar among large, medium and small businesseswith 42%, 45% and 31% respectively.Nevertheless, only 13% of the micro businessesoffer this program.

By region: In the metropolitan area 40% of thebusinesses offer this reward program.

2.14 Internal Technical Training Programs.

Of all the surveyed businesses, 41% of theminvest steadily in education and training; another54%, only when needed.

By sector: The percentage among the industrial,services, trade and construction sectors thatunvaryingly invest in education and training rangesbetween 36% and 47%.

By size: The larger the business, the more it investsin worker´s ongoing education and training.Percentages range from 58% among large

30

businesses, to 38%, in medium businesses; 22%in small businesses and 10%, in micro businesses.

By region: Fifty three percent of the businesseslocated in the metropolitan area provide ongoingeducation and training. This percentage is higherthan in other regions of the country. Thebusinesses in the metropolitan area train theirworkers when a specific need emerges, the sameas the businesses in San Miguel, (60%) ascompared to the other regions.

2.15 Illiteracy and Elementary School

It was estimated that 2.6% of the workforcelaboring in the surveyed businesses is illiterateand that 1.5% of the businesses offer readingand writing programs for their workers. On theother hand, it was established that 12% of theworkforce did not complete elementary school,and that 1% of the businesses offer elementaryeducation to their workers.

By sector: The various business sectors share asimilar illiteracy rate, less than 5%, with theexception of the construction sector where theilliteracy rate reaches 10%, although only a limitednumber of construction businesses answered thisquestion. The average number of workers whohave not finished elementary school in theconstruction sector is 26%, higher than in othersectors.

By size: The illiteracy rate in medium, small, andmicro businesses is 4%; but only 1% in largebusinesses.

The smaller the business the higher the percentageof workers who have not finished elementaryschool, with 9%, 13%, 19% and 15% representingthe large, medium and small businessesrespectively. Elementary school education isoffered exclusively by the larger companies.

By region: The percentage of illiterate workersis higher in the regions of San Miguel andSonsonate, with 6%. The metropolitan area hasthe lowest percentage of workers who have notcompleted elementary school, with 11%,compared to Santa Ana, San Miguel andSonsonate, with 15%, 13% and 17%, respectively.

Internal training programs

Industry Construction

Commerce Services

70

60

50

40

30

20

10

0Training in specific

needSuggestionsprogram

Formal performanceassessment program

%

31

The businesses in Usulután, Sonsonate and themetropolitan area offer literacy programs rangingbetween 3% and 2% respectively. Santa Ana (2%)and the metropolitan area (1%) are the two regionsthat offer elementary education programs.

2.16 Social Education Programs

The businesses surveyed responded to the majorproblems of their workforce by offering in-housealcohol and drug abuse prevention programs. Itis estimated that 4.3% of the businesses offeralcohol and drug abuse prevention programs,while 1.5% of them offer external drug andalcohol recovery programs. Another 6.3% offerdifferent types of programs.

By sector: The participation of the industrial andservices sectors in in-house drug and alcoholabuse programs is 6% and 5% respectively. Theconstruction sector does not participate in thesesprograms.

By size: The participation of large businesses inin-house alcohol and drug abuse rehabilitationprograms ranges between 5% and 7%. Microbusinesses do not offer these programs. Elevenpercent of the large businesses offer otherprograms as well as 3% of the medium sizedbusinesses.

By region: Prevention programs are offered inall the regions, although participation is higherin the metropolitan area with 5% of the businessescompared to the 2% of the businesses in otherregions of the country. Recovery programs are

offered by businesses in the area of Santa Ana(2%) and the metropolitan area (4%), but not inSan Miguel, Sonsonate or Usulután.

Other types of programs are offered mostfrequently in the metropolitan area (8%) andSanta Ana (6%), but not in Sonsonate.

2.17 Investment in Education

Outcomes indicate that the 463 businessessurveyed invested an average amount of 1.5% oftheir total sales in 2000 and 1.8% of their salesin 2001, in the professional development of theirworkforce. A means differential hypotheses testindicated that the level of investment could beconsidered constant between the two periods.

By sector: The average amount of the annual salesinvested in education in the years 2000 and 2001was 2.4% in the service sector, 1.9% in theindustrial sector, 0.9% in the trade sector, and0.8% in the construction sector.

By size: The average amount of the annual salesincome invested in education in the years 2000and 2001 was 1.8% in the large businesses, 3.4%in the medium sized businesses, 1.3% in the smallbusinesses and 0.2% in the micro businesses.

By region: Investments in education are quitesimilar in both years throughout the country,although in the metropolitan area businessesinvest an average of 2% of their annual sales,amount which is higher than in other areas.

32

businesses in the construction sector moderatelycomply with these legal requirements.

Findings indicate that 80% of the businessesaffirm having preventive health and safetyprograms in place. In the construction sector63% of the businesses also have these programs.The percentage for the trade and services sectorsis 57% and 59%, respectively.

By size: Medium and small businesses (61% and63% respectively) are more inclined to moderatelycomply with these standards, while largebusinesses rigorously comply with legal standards,and 12% exceed the provisions set forth in thelaw.

As the size of the business increases morepreventive measures are established regardingpotentially harmful processes for the health andthe safety of the workforce, represented by 29%,54%, 62% y 86%, respectively.

By region: In Usulután 70% of the businessesare more inclined to moderately comply with thehealth and safety requirements in force, while40% of the businesses in the metropolitan area

2.18 Health, Safety and Working Conditions

With regards to labor health requirements inforce (hygiene, cafeterias, restrooms), occupationalsafety, hazard prevention) and working conditions(physical environment, illumination, ventilation),the survey revealed that 88% of the interviewedbusinesses comply with the health provisions;48% of them moderately comply with them; 33%of them rigorously comply with theserequirements, 7% of them comply with theseprovisions beyond the legal requirements in force;the remaining 12% stated that this question wasnot applicable to their case.

On the other hand, 67% of the interviewedbusinesses affirmed having preventive actions inplace for those potentially harmful processes thatcould put the health and safety of their workforceat risk.

By sector: Throughout the spectrum it was evidentthat more businesses moderately comply withthe health and safety standards in force, whilethe industrial sector fully and rigorously complieswith these requirements (37%) and 56% of the

Internal education programs

Literacy program

Primary school teachingprogram

Drug addiction andalcoholism program

Average % of sales foreducation development

7

6

5

4

3

2

1

0Industry Construction Commerce Services

33

construction sector. Among the businesses thatfollow a policy of negotiating cost reductionalternatives with employees, 26% were found inthe industrial sector, 29% in trade, 30 % in servicesand 41% in construction.

By size: It was found that the medium sizedbusinesses try the most to avoid layoffs (52%)followed by the large businesses (50%); and smallbusinesses (43%). The least committed to thiseffort is the micro business sector with 33%. Thelarger the business, the more it tends to limitlayoffs to only those strictly necessary cases, andto negotiate cost reduction alternatives withemployees, with values that range from 57% to15%.

By region: The regions of San Miguel, Usulutánand the metropolitan area avoid dismissals withthe highest frequency ranking between 50%, 49%and 48% respectively. With regards to limitingdismissal to only indispensable cases, themetropolitan area scored the highest with 51%,followed by San Miguel with 39% and Sonsonatewith 35%. As far as negotiating other costreduction alternatives with employees, themetropolitan area follows this procedure in 35%of its businesses, with the highest score amongregions.

comply either rigorously or exceed theseregulations. In Santa Ana only 52% comply withthe standards.

Preventive actions against potentially harmfulprocesses for workers are undertaken morefrequently in the surveyed businesses located inthe metropolitan area, with a rate of 80%.

2.19 Staff Cost Reduction Management

In general terms, 46% of the surveyed businessestry by all means to avoid layoffs in the event ofthe need to reduce personnel costs, while another44% limits this procedure only to extreme cases.On the other hand, 29% of the surveyedbusinesses negotiate other cost reductionalternatives with staff members, 10% offer earlyretirement benefits, and 8% offer support to findanother job.

By sector: Surveyed businesses in the industrialsector try to avoid compulsory dismissals in 51%,as compared to 48% in the trade sector, 42% inthe services sector and 26% in the constructionsector. The percentage of businesses that followa policy of limiting layoffs to only extreme casesin the industrial sector was 48 %, 40% in thetrade sector, 43 % in services and 33% in

Services

Commerce

Construction

Industry

Health, security and working conditions

9080706050403020100

Moderatly comply withlegal requirements(health, security)

Try to avoid layoffsOccupational hazardprevention

Discurssesalternative solutions

to reduce costs

%

Offer voluntaryretirement programs

34

3. Marketing

Marketing activates are understood as theestablishment and maintenance of relationshipswith customers based on integrity, justice, andhonesty. Integrity in the production chain, productreception and packaging; price definition; salespractices, distribution and customer and employeeprivacy, respecting anti dumping and freecompetition practices. To this end it is importantto highlight:

3.1 Supplier selection policies

Seventy six percent of the businesses surveyedaffirmed having policies and standards to assessand select suppliers based on quality, price anddelivery deadline factors. Of these, 46% handletheir policies informally, while 30% have writtenpolicies in force.

By sector: In the industrial sector 85% of thebusinesses follow these policies and standards,and of these, 34% follow formal policies, while51% have informally instituted policies; The figurein the construction sector is 74%, with 22%formal and 52% informal; in trade 76%, of which31% have formal policies and 45% informal;services 58%, with 22% formal and 36% withinformally established polices.

By size: It was found that the highest proportionof formal policies are found in the large businesses(43%), followed by the medium sizedcompanies(32%), small businesses (12%), andthe micro business with 2%. Conversely, small

businesses have informal policies in 60% of theirbusinesses, while the large and medium sizedbusinesses in only 45% of them and the microbusiness in 37% of the cases.

By region: The businesses in the metropolitanregion use formal and informal supplier selectionpolicies with 37% and 49% respectively,amounting to 86%. In the other regions, policiesare mostly informal.

3.2 Types of goods and service providers

Of the total surveyed businesses, 96% of themwork with domestic suppliers and 50%, withinternational suppliers. A total of 6% work withcooperatives and 2% with community associationsor groups.

By sector: The construction sector works in100%of cases with domestic suppliers, followed by theservices sector with 98%; trade with 95%; andindustry with 94%. The opposite trend was evidentregarding the percentage of businesses that workwith international suppliers: industry with 71%,followed by trade, construction and services with43%, 33% and 25% respectively. Seven percentof the construction businesses work with coops.

By size: The small and micro businesses tend towork more (90%) with domestic suppliersfollowed by the large businesses with 93%. Thelarger the business, the more it seeks forinternational suppliers. Regarding coops, only7% of the large and medium sized businesseswork with them.

35

By region: The regions of San Miguel andUsulután, work with domestic suppliers in 100%of cases. The businesses in the metropolitan areacharacterized themselved for getting suppliesfrom international suppliers (67%), and coops(8%).

3.3 Former employees as suppliers

Thirteen percent of the surveyed businessesaffirmed having former employees as suppliers.Of this total, 20% expressed that they preferredto be supplied by their former employees.

By sector: Twenty six percent of former employeesare hired as suppliers by the construction sector;followed by trade (15%); industry (11%); andservices (10%). As far as the preference for hiringformer employees as suppliers, 29% of theindustrial and construction sectors affirmed toshare this preference.

By size: Large (20%) and medium (15%) sizedbusinesses hired more former employees assuppliers. Small businesses only in 1% of casesand micro businesses in zero percent.

By region: Eighteen percent of the businesseslocated in the metropolitan area work with formeremployees as suppliers, followed by Santa Anawith 6%, Usulután and Sonsonate with 3%, andSan Miguel, with 0%. The rate of preference ishigher in the metropolitan region and Santa Ana,with 20% and 33% respectively.

3.4 Review of product expiration dates

Forty percent of the surveyed businessesperiodically review the expiration dates of theirproducts, labels, containers, brochures and othercommunication materials distributed for finalconsumption. Three percent do not follow thispractice and the remaining 50% answered that itwas not applicable to their case.

By sector: Expiration dates are monitored morefrequently in the trade sector (58%), followed byindustries (52%); services (36%); and construction(19%). The two sectors that least apply thisprocess are construction (82%) and services (59%).

By size: The larger the business the moreconcerned about periodically reviewing expirationdates, from 53% to 35%, and vice versa.

By region: This practice is more common inSonsonate and the metropolitan region, with 54%and 51% respectively; followed by Usulután, with46%; Santa Ana, with 40%; and San Miguel, with27%.

3.5 Continuous Enhancement Programs

Sixty six percent of the surveyed businesses havea special program to enhance products, servicesor processes and to replace components,technology and products, as they become obsoleteor deficient.

By sector: The industrial sector participates in78% of cases in this type of program; servicesand construction in 59%; and trade in 57%.

36

By size: This enhancement program is morefrequent in large businesses (81%) followed bythe medium enterprise with 64%. Small and microbusinesses participate in 48% and 40% respectively.

By region: This program is more frequent in themetropolitan area with 75%. Other regions rangeform 53% to 46%.

3.6 Customer Service – Complaints

In 25% of the businesses surveyed there is oneperson or department in charge of respondingto customer complaints; in 41% of cases,complaints are taken care of by managers; in 34%of cases by the owner; and in 27% of cases bythe company executives.

In 90% of the surveyed businesses the staff taskedwith handling customer complaints are

empowered to decide on the best way to solvethe situation.

By sector: The percentage of businesses in theindustrial, services and trade sectors with a groupwith expertise in customer service and complaintsis 26% average, while in the construction sectorthe figure is only 7%.

In the construction sector it is traditionally theowner, manager or company executives who dealwith complaints as opposed to clerks or customerservice personnel. The power delegated to thisstaff ranges from 91% in the trade sector to 84%in the construction sector.

By size: Large businesses (39%) handle customercomplaints through a specialized group ofemployees, while the medium and smallenterprises only in 15% and 14% of cases

Suppliers and product

Industry

Construction

Commerce

Services

120

100

80

60

40

20

0

Written standardsto evaluatesuppliers

Domesticsuppliers

Foreignsuppliers

Former employeessuppliers

Reviewexpiration dateof products

Productenhancement

program

%

37

respectively. On the other hand, the smaller thecompany the more customer complaints aremanaged directly by the owner.

The persons in charge of dealing with customercomplaints have more decision power in themedium, small and micro businesses as comparedto the large ones, with 97%, 96%, 95% and 84%respectively.

By region: In Usulutan the staff in charge ofresponding to customer complaints enjoys 100%decision making power; Santa Ana, San Migueland Sonsonate, follow with 97%; and themetropolitan region with 85%.

3.7 Communication and Advertising Policies

Forty percent of the surveyed businesses haveformal communications and advertising policies.Of these, 89% insures, a priori, that the advertisingcampaign meets the consumer defense lawprovisions.

By sector: In the trade, industry and servicessectors the percentage of businesses withcommunications and advertising policies is similarwith 43% and 41%; with a variance in theconstruction sector with 26%.

In the construction sector, 100% of the businessesverify and publicize their advertisement campaignsinsuring compliance with the consumer defenselaw. This sector is followed by services with 96%;trade, with 91%; and industry, with 83%.

By size: The formal management of these policiesis more frequent in large and medium enterprises,with 56% and 44% respectively, while in the smalland medium businesses it is 20% and 10%respectively. Of the total number of businesses

that verify compliance with the consumer defenselaw before launching an advertisement campaign,the medium business represents 97% compliance,followed by the large and micro business with89%, and the small business with 77% compliancerate.

By region: Businesses in the metropolitan regionand San Miguel accord high importance tocommunications and advertisement, with 48%and 36% respectively. In Santa Ana, Sonsonateand Usulután, compliance with the consumerprotection law is verified in 100% beforelaunching a publicity campaign. The metropolitanregion follows with 88%, and San Miguel, with81%.

Customer service, communicationand advertisement

Industry Construction

Commerce Services

100

80

60

40

20

0Managers deal with

claimsAppointed persondeal with claims

Formalcommunication andadvertisement policy

Advertisement companyoversees compliancewith consumer law

%

38

4. The environment

In order for a business to comply with theenvironmental law in force and reach a sustainablegrowth, it must operate under internal and externalconditions compatible with the environment,incorporating frequent self regulation andenvironmental audits, and using eco efficienttechnologies and cleaner production processeswith regards to product design, production, anddistribution, so as to produce more with lesswaste generation.

4.1 Impact on the Environment and Health

Of the 463 businesses surveyed, 87% of themaffirmed having knowledge of the impact on theenvironment and health caused by the activity oftheir particular business and their products, while12% ignored this data. In 51% of the businessessurveyed it was affirmed that neither the activityof their companies nor their products affectedthe environment nor health, while 36%, that is168, affirmed the opposite.

Seventy seven percent of all the businesses thatacknowledge their effects on the environmentand health have a plan to ameliorate these effects,and 60% have an emergency environmental planrelating all the activities that imply a risk situation.

Seventy nine percent of the businesses with anenvironmental emergency plan train theiremployees to follow it.

By sector: The businesses in the industrial andconstruction sectors have a higher percentage ofcompanies (52% and 48% respectively) thatrecognize the harmful impact of their activities

on the environment and health. In the trade andservices sectors this percentage is lower with 25%and 20% respectively, which is explained by thestatements of the businesses in these sectors(64% and 61%) affirming the innocuity of theirprocesses.

Among the businesses that cause an impact onenvironment and health, the following plan andorganize themselves to ameliorate said impact: 83% services, 80% industry, 69% constructionand trade.

Besides, the following also train employees ontheir emergency environmental plan: 87% in theservices sector, and 75% in the trade sector.

By size: It can be observed that 40% of the largebusinesses claim not to cause an impact on theenvironment or health; this figure is lower thanin the medium (60%) sized businesses, smallbusinesses 57%, and micro business (70%). Theopposite occurs with the percentage of businessesthat acknowledge causing an impact on theenvironment and health with their activities: 50%of the large businesses, 28% of the mediumbusinesses, 23% of the small businesses and 14%of the micro businesses.

Large businesses are committed in 86% of casesto the planning of environmental measures, afigure that is higher than in the medium (58%)small (53% and micro (67%) businesses.

By region: The majority of the businesses thatacknowledge the consequences of their activitieson the environment and health (46%) are locatedin the metropolitan region. In Usulután, 79% ofthe companies in this region affirm that their

39

products do not cause any negative effects onthe environment or health, followed by SantaAna, with 70%, and San Miguel, with 68%.

Usulután and the metropolitan region are theareas that have set up an environmental plan(67% and 63% respectively) that interlocks allthe activities related to any risk situation, followedby Sonsonate, with 55%. In San Miguel, 71% ofthe businesses lack an emergency plan.

4.2 Environmental emergency plans

Of the 168 businesses that affirmed causing animpact on the environment and health, 60% ofthem, which is 100 businesses, have an emergencyplan, and 78% of these develop research on thisissue and contribute with solutions.

By sector: Of the 100 businesses that have anenvironmental emergency plan, the sector thatmost contributes to research and solutions is theindustrial sector reaching 84% of the businesses,followed by the services sector with 80%; andthe construction sector with 60%; and finallytrade with 56%.

By size: Of the 100 businesses that have anenvironmental emergency plan, 85% of thembelong to the large business sector that developsresearch studies and solutions, and 20% to themicro businesses , fact that proves that this factoris directly proportional to the size of a business.

By region: Of the 100 businesses that have anenvironmental emergency plan, the ones locatedin the area of San Miguel and Santa Ana,contribute equally to research studies and solutions(100 %), while in the metropolitan area 80%contribute to research and solutions and inSonsoante only 50% of them do so.

4.3 Information to consumers regarding theeffects on the environment

Of the 100 businesses that have an environmentalemergency plan, 36% of them report theenvironmental damages caused by their productsand their disposal to consumers.

By sector: The service sector provides the mostinformation to consumers with a 60% divulgationrate; the remaining sectors range between 33%and 20%.

By size: The medium and micro businesses arethe ones that most broadly inform their consumersabout the damage to the environment (40%)followed by the large (37%) and small (17%)businesses.

By region: Santa Ana and San Miguel share anequal percentage (50%) regarding the informationon environmental damage to consumers, whilein the metropolitan region and Sonsonate thepercentages range between 36% and 33%respectively.

40

4.4 Environmental forums and seminars

Thirty five percent of the 463 surveyed businessesparticipate in research studies, forums, seminarsor discussions related to the environment, inorder to foster and adopt laws, standards andregulations that will benefit them.

By sector: Participation is more frequent in theindustrial and construction sectors (45% and41% respectively) followed by services (31%)and trade (21%)

By size: The larger the business the more itparticipates in environmental forums and seminars.The participation percentages for the large,medium, small and micro businesses in this activityare 52%, 32%, 12% and 5% respectively.

By region: The businesses located in themetropolitan area (44%) participate morefrequently in environmental forums and seminarscompared to the rest of the regions with anaverage participation rate of 29%, with theexception of Usulutan where the rate is 6%.

4.5 Sponsorship of environmental projects

Fourteen percent, that is 63 of the 463 surveyedbusinesses, sponsor environmental projects.SALVANATURA receives 22% of thissponsorship followed by reforesting projects witha19%, and company own projects with a 16%.

By sector: The construction sector participatedthe most in this area with 26%, followed by theindustrial sector with 15%, and trade and services11%.

By size: Large businesses (23%) sponsor the mostprojects, followed by the medium sized business(9%), small (1%) and micro (0%).

By region: The businesses located in themetropolitan region (18%) sponsor the mostenvironmental projects, followed by San Miguel(9%), Santa Ana, (6%); Sonsonate, (3%); andUsulután (0%).

Environmental impact

9080706050403020100

No environmental impacton company or products

Company plans based onenvironmental impact

Emergencyenvironmental plan

Develop studies onevironmental impact

%

Industry

Commerce

Construction

Services

41

4.6 Recycling Programs

Of the 463 surveyed businesses, 25% of them,equal to 117 businesses, have recycling programs.Of these, 32% recycle solid wastes and paper,followed by businesses that recycle damages(11%), waste waters, (9%), PVC/plastics (7%)and oil (5%).

By sector: Thirty eight percent of the industrialbusinesses have recycling programs, as well as17% of the trade and service enterprises.

By size: The percentage of businesses with arecycling program is directly proportional to thesize of the business: large businesses 41%; mediumand small 15% and 11% respectively; and microbusinesses 2%.

By region: Thirty five percent of the businesseslocated in the metropolitan region have recyclingprograms; 13% in Santa Ana, 7% in San Migueland 3% in Sonsonate and Usulután.

4.7 Environmental certifications

The adoption of the ISO 14000 standards amongSalvadoran businesses is still dawning, reasonwhy only 3%, that is 14 out of the surveyedbusinesses have adopted these standards, and 5%use another type of environmental certificationsystem, among which we can mention thosegranted by the Ministry of the Environment, the

Public Health Council and WRAP (Worldwideresponsible apparel production). This last one isexclusively for the apparel industry with apercentage equal to 32%, 23% and 14%respectively.

Environmental projects

Recycling program Sponsor environmentalprojects

Participate in environmentseminars/forums

Services

Commerce

Construction

Industry

0 10 20 30 40 50%

42

By sector: Out of the 3% of the businesses thathave an ISO 14000 certification, 5% belong tothe industrial sector and 2% to services. Industry,trade and services also use other certificationprograms in 10% 2% and 1% of the casesrespectively. The construction sector lacks anenvironmental certification program.

By size: The large and small businesses are theonly ones with an ISO 14000 certificationprogram, while other types of programs are morefrequent in the large, medium and small businesswith 7%, 4% and 2% respectively.

By region: In the metropolitan area, Santa Anaand San Miguel 2% of the businesses have anISO 14000 certification program. Seven percentof the businesses located in the metropolitan areahave such a program and 3% in Sonsonate.

4.8 Environmental Education

Nineteen percent of the businesses surveyeddevelop some type of environmental educationprogram aimed at their own staff members,owners, board members, and others; 1%addressed to relatives of staff members and 2%to the community. Seventy eight per cent of thebusinesses do not carry out this type of activity.

By sector: Industry (26%) and services (19%) aremore committed to the development of activitieswithin their businesses. The services sectorcontributes more (8%) to education programsaddressed to the surrounding community, andalso to programs aimed at the relatives of staffmembers (3%).

By size: A higher proportion of large (29%) andmedium (19%) enterprises focus educationprograms on their staff. The medium business(10%) is traditionally the one that reaches out tothe community, the same as to staff relatives (4%).

By region: The businesses located in themetropolitan area offer programs for their internalcustomers more frequently than other sectors(25%) as well as for their relatives (2%) and thesurrounding community (1%). In the otherregions this trend is quite similar.

Environmental certifications

Industry Construction

Commerce Services

12

10

8

6

4

2

0Certification ISO 14000 Other environmental

certifications

%

43

4.9 Investment in environmental enhancementprograms and projects

The average percentage of the sales incomeinvested in environmental enhancement programsin the years 2001 and 2002 was 0.8% and 0.9%respectively.

By sector: Investment in this type of activityremained the same for the two years, being theindustrial sector the one with the highestpercentage of investment (1%) of their sales.Construction and trade obtained 3% each forboth years.

By size: Micro and small businesses invest lessthan 0.5%. The medium and large businessinvestments reach 1%, with the medium businessshowing a 1% increase in the year 2001.

By region: The businesses in the metropolitanarea invest more frequently in this type of activity(1%). Sonsonate invests 0.7%; and in theremaining regions 0.3%.

Environmental education

Environmental educationactivity with companyworker relatives

Environmental educationactivity in the community

Environmental educationactivity in the company

30

25

20

15

10

5

0

Industry Construction Commerce Services

%

Average % of sales invested inenvironmental enhancement programs

1.2

0.3 0.3

1.3

Industry Construction

Commerce Services

44

5. The community

Entrepreneurial Philanthropy is the name givento the actions undertaken by a business to planand execute actions that maximize the positiveeffects and minimize negative ones of theirpresence in a given community. These businessesearmark cash and in kind donations, and eventhe time of staff members, to community serviceorganizations, on behalf of both, the communityand the business.

5.1 Social project beneficiary institutions

Fifty nine percent of the surveyed businessesaffirmed collaborating in social projects. Followingis a classification based on the type of institutiontargeted for social welfare and the percentage ofbusinesses that liaison with these institutions:

1. Private institutions • 30%

2. Community institutions • 26%

3. Non governmental organizations • 25%

4. Municipal institutions • 25%

5. Governmental institutions • 21%

This detail does not add to 100% since saidselection is not excluding in nature.

By sector: The industrial sector collaborates themost with private institutions. The constructionsector cooperates more with municipal institutionsand private projects. Trade collaborates morewith private and community institutions, and the

services sector more with private and communityinstitutions.

By size: The larger the business the more itparticipates in social projects. Large businessescollaborates more with private institutions thanwith community ones.

By region: The businesses located in themetropolitan region collaborate more frequentlywith private, municipal and community institutionscompared to other regions.

5.2 Assistance methodologies

In order to carry out social activities, 42% of thebusinesses contribute with cash, 36% withproducts and /or services; 10% with equipmentand material resources (facilities), and 9% withskilled human resources and voluntary personnel.Thirty nine percent of the businesses do not carryout any social action.

By sector: Keeping in mind that the industrialand services sectors attribute a high significanceto social projects, it is also observed that theindustrial sector contributes with cash, productsand/or services in a higher proportion (50% and47% respectively) compared to the services sectorthat contributes with skilled human resources,equipment and materials (15%) and voluntarystaff (19%).

By size: The larger the business the more it tendsto contribute to social projects through differentmeans, but mostly in cash (58%), in the largebusiness sector, followed by products and /orservices, also in the large business (49%).

45

By region: The businesses in the metropolitanarea contribute more with goods and/or services(46%), and cash (50%) as compared with otherregions. Other regions range between 25% and13% in goods and services and between 34% and12% in cash contributions.

5.3 Selection of beneficiaries

Out of the 463 surveyed businesses, 60% of them,equal to 280 businesses, carry out social actions.Seventy five of these select beneficiaries throughrequests, and 32% are closely acquainted withsome of the work programs of these institutionsand invest in specific projects, 14% of themdevelop their own projects to benefit theentrepreneurial group that the business is a partof, since they develop their own projects, andanother 10% of the businesses enter intocooperation agreements with local entities.

By sector: It was observed that the various sectorsseem to select beneficiaries in a similar fashion.All sectors respond to sporadic requests, industryand trade respond in 80% of cases and theconstruction sector in 64%.

By size: Businesses seem to favor projects thatstem from specific requests. The larger thebusiness the more projects it selects.

Larger businesses also participate more incooperation agreements with local entities,compared to other businesses, since percentagesremain quite similar.

By region: The businesses in the metropolitanregion focus their social project selection onsporadic requests (80%) and specific projects(33%). San Miguel and Sonsonate select ownprojects that benefit local communities (26%)and Sonsonate chooses to invest in specificprojects (44%).

Proyectos sociales

Industry Construction Commerce Services

The businesscollaborates with

municipal institutions

The business collaborateswith communityorganizations

Funds forsocial proyects

Volunteers forsocial projects

Products/servicesfor socialprojects

Executes specificprograms in the

community

Responds toeventual petitios

9080706050403020100

%

46

5.4 Specific Community Programs

Out of the 280 businesses that carry out socialactions, 24% of them, that is 67 businesses, executeprograms within their communities. The mostcommonly executed programs in the communitiesare: education (60%); the environment (37%);health (33%); technical training (22%); housingprograms (13%); productive development (9%);and potable water (4%).

It was observed that these businesses tend toinvest an average 4% of their total budget in theseactivities.

By sector: The industrial sector executes programsin education (56%), followed by environmentaland health programs (33%) each. The constructionsector directs its technical training, housing andenvironmental programs in a similar fashion (25%).Trade stresses of educational projects (67%), aswell as services (63%).

By size: Large and small businesses participatemore in educational projects than the mediumsized businesses (64%, 67% and 44% respectively).The large, medium and small business have thesame share in environmental projects with anaverage 35%. The medium and large businessesparticipate in water projects (11%) and (4%)respectively.

By region: Santa Ana, Sonsonate and themetropolitan region execute educational projectsin 100%, 75%, and 61% of the businesses

respectively. Regarding health projects, Usulutan,Sonsonate and San Miguel execute these in 100%,50%, and 40%; and 31%, in the metropolitanregion. Potable water projects are only executedin the metropolitan area in 6% of the businesses.

5.5 Source of funds for social programs

Out of the 280 businesses that carry out socialprograms, 24%of them, equivalent to 67businesses, execute these programs in theircommunities of operation. Ninety three percentof these businesses use own funds to financethese projects, while 8% outsource contributionsfrom other sister businesses, 5% frominternational assistance, 3% from municipal funds,and another 3% from individual contributions.None work with funds from the CentralGovernment.

By sector: The majority of the business sectorsdevelop social programs using own funds: industry96%, construction and trade100%, and services83%.

By size : Small businesses invest in social programsusing own funds (100%), followed by largebusinesses (94%), medium sized business (89%)and micro business (50%).

By region: Santa Ana, San Miguel and Usulutáncarried out social programs using own funds in100% of the businesses; the metropolitan regionin 94%; and Sonsonate in 50%.

47

5.6 Municipal management support programs

Of the 280 businesses that carry out socialprograms, 13% of them, equal to 36 businesses,invest in municipal management projects. Thesebusinesses (53%) partially support park buildingprograms, development of sports fields, andcommunity halls. Other activities include roads(13%); basic services, such as potable water, anddrainages (11%); power and telephone projects(6%).

In the year 2001, these businesses earmarked 6%of their budget to finance these works. Ninetytwo percent (92%) of the businesses used ownfunds, and 11% used contributions from othercompanies of the same business group.

By sector: Participation of the different businesssectors in municipal enhancement projects rangesfrom a ceiling of 27% in the construction sectorto a floor of 10% in the trade sector.

In the year 2001, the trade sector earmarked 12%of its budget to these works, followed by the restof sectors with 4% each.

By size: Large businesses participated the mostin municipal management projects (16%);followed by the medium sized business (11%);none in the small business sector and 6% in themicro business sector.

In the year 2001 the micro business sectorearmarked 10% of its budget to these works,followed by the medium sized business with 9%,and the large business with 5%.

By region: The businesses located in themetropolitan region (14%) participate inmunicipal management projects, followed bySanta Ana and San Miguel, with a 10%participation rate each, and Sonsonate, with 6%.Usulutan does not have any business participatingin municipal management projects.

Projects within the community

Industry Construction Commerce Services

100

90

80

70

60

50

40

30

20

10

0Education

programs executedin the community

Health programsexecuted in the

community

Handicapped projectbeneficiaries

Children projectbeneficiaries

Program rural andurban areas of influence

Own funds natureper program

Company contributeswith skilled human

resources

%

48

5.7 Support to activities executed bygovernmental organizations

Of the 280 businesses that carry out social actions,50% contribute occasionally in specific eventsand activities promoted by governmentalorganizations, while 34% do not participate inthese activities and 15% provide financial supportto these initiatives.

By sector: The percentage contributed to supportthe activities of governmental organizations issimilar in the industrial, trade and services sectors(49%, 54% and 48% respectively); theconstruction sector contributes the least 46%,and the remaining sectors average 34% .

By size: Support to these activities is quite similarin the large, small and micro business (54%, 52%and 50% respectively. Medium businesses provide32% support.

By region: Eighty two percent of the businessesin the city of Usulután provide support togovernmental organizations, followed by themetropolitan region and San Miguel with 52%support, Santa Ana 37% and Sonsonate with25%.

5.8 Total Investment in Social Actions

The 280 businesses that carry out social activities,including community and municipal projects andother donations, earmarked 3.9% of their totalsales to social activities in the year 2001, 2% ofwhich was in cash and 1.9% in kind.

By sector: The services sector invested the most(7%), both in cash and in kind to social activities,

followed by the remaining sectors with 3% each.

By size: Medium sized businesses invested 6%;small business 5%; and the large and microbusinesses 3%.

By region: Usulután is the city that invests themost in social activities (9%), followed by SantaAna, (7%), San Miguel and Sonsonate, (4%), andthe metropolitan region (3%).

5.9 Employee donations

Of the 280 businesses that carry out socialactivities, 17% of them have embeddedmechanisms to stimulate employee donations.

By sector: twenty percent of the businesses in theconstruction sector have donation mechanisms;as well as 20% in the trade enterprises, 18% inthe services sector and 14% in the industrialsector.

By size: Twenty one percent of the mid sizedbusinesses have donation mechanisms, followedby the large business with 19%; the small with11%; and micro none.

By region: The percentage of businesses withembedded donation mechanism is similar accrossthe regions, fluctuating from 21% in San Miguelto 13% in Sonsonate.

5.10 Expected investment level (year 2002)

Of the total number of companies that carry outsocial activities, 61% of them expected to keepthe same level of investment in social activitiesin the year 2002; 20% expected it to be lower,while 16% expected it to increase. Taking a three

49

year term as reference, 57% of the businessesexpected to keep the same level of investment,while 29% expected it to increase and 10%expected it to drop.

By sector: Sixty seven percent of the businessesin the trade sector expected to keep the samelevel of investment in social activities in the year2002, the same as 60% of the industry and tradesectors and 55% of the construction firms. Theservice sector (19%) expected their investmentsin social activities to grow; and the constructionsector (46%) expected it to drop.

By size: Percentages are similar in all businesssizes regarding the amount of investments insocial activities for the year 2002, with an average62%; the average percentage of businesses thatexpect their investments to drop is 21%; and15% expect them to grow.

By region: The same as before: Percentages aresimilar in the majority of regions, with 69 to

61percent of businesses planning to keepinvestments at the same level in the metropolitanregion, Santa Ana, San Miguel and Sonsonate.Usulután is at a variance with 45%. Sonsonate isthe region where businesses (6%) do not expectto increase their investments.

5.11 Internal and external benefits of social actions.

Of the 280 businesses that develop social activities,51% perceived that the main internal benefit wasreflected in the achievement of their own identity

(loyalty, presence and permanency); in 29% ofcases, it was reported that the main benefit wasthe enhancement of the compnay´s organizationalclimate.

On the other hand, 54% of the firms consideredthat the main external benefit received was animproved image and reputation; 19% believedthat benefits are translated into a positive image

Level of investment at community level

Average % of total budgetin community programs

Average % of total budgetin municipal programs

Average % of total salescontributed in cash

Average % of total salescontributed in kind

14

12

10

8

6

4

2

0

Industry Construction Commerce Services

%

50

of the company; and 10% in the promotion ofsolidarity among community members.

By sector: The construction sector believes thatthe main intrinsic benefit is a corporate identity(82%), followed by trade and services (57%) andindustry (43%).

With regards to external benefits, trade businessesbelieve that the main benefit is the enhancementof the corporate image and reputation (60%);followed by industry (55%); services (51%); andconstruction (36%).

By size: Micro businesses also believe that themain internal benefit is a corporate identity (56%),followed by large businesses (53%), small (48%)and medium sized businesses (45%).

Regarding external benefits, micro businessesperceive that the main benefit is the enhancementof their brand image and reputation (72%);followed by small businesses (59%); large (53%);and medium sized businesses (51%).

By region: San Miguel heads the regions thatconsider that the main internal benefit for theirbusinesses is brand identity (68%); followed byUsulután, (55%); Sonsonate and the metropolitanregion (50%); and finally Santa Ana (47%).

Regarding external benefits, businesses inUsulután consider that the main benefit is theenhancement of their image and reputation (82%);followed by Sonsonate, (75%); San Miguel, (68%);Santa Ana, (53%); and the metropolitan region(50%).

Support to municipal management and benefits of social actions

Industry Construction Commerce Services

100

80

60

40

20

0Municipal managementsupport programs

Municipal managementsupport programs inrecreational areas

Municipal managementsupport programs in

drinking water

Cash / in kindcontributions forsocial projects

Employee incentiveprograms /donations

Obtained identitygreater internal benefits

for social actions

Improved imagegreater internal benefitsfor social actions

%

51

5.12 Social related Contests

Out of the 280 businesses committed to socialactivities, 87% of them do not sponsor, or carryout social contests or grant awards.

By sector: The services sector has the highestnumber of businesses committed to socialactivities, granting related awards and sponsoringcontests (24%); followed by industry (11%); andtrade (7%).

By size: The highest percentage of businessesthat carry out these activities is found in the largebusiness sector (15%); followed by the mediumsized firms (13%); micro (6%); and small (4%).

By region: participation in these activities is largerin the metropolitan region, followed by San Miguel,Usulután and Sonsonate, ranking from15% to6%.

5.13 Aspiration to increase participation insocial projects

Of the 463 surveyed businesses, 22% of themwould like to start or increase their occasionalparticipation; 20% of them wished to invest inown projects, and 18% would like to participatein association with another institution. Another40% of them stated that they were not interestedin either starting or increasing their participationin social activities.

By sector: The interest expressed by the varioussectors in increasing their participation in socialactivities is quite similar in general terms.Regarding how they would like to proceed, it was

observed that the sector with the highest interestin own projects was the industrial sector (24%)followed by construction (22%); services (19%);and trade (15%); regarding occasional participation,the industrial sector showed the highest percentage(25%); followed by services and trade (21%); andconstruction (15%). In association with anotherinstitution: the services sector was more attractedto this idea (26%); trade (17%); and industry(15%); the construction sector did not find theidea of working with another institution appealing.

By size: Large and medium businesses are morewilling to increase their participation in socialactivities than the small and micro business. Theway in which they would increase theirparticipation is the same in the three types ofparticipation above explained, ranking from (25%)to (19%) within the large and medium firms, andfrom 17% to 12% in the small and microbusinesses.

By region: Businesses from the different regionsexpressed a similar interest regarding the way inwhich they would increase their participation insocial projects. The participation in own projectsranged from 22% to13%, with the highestpercentage in the metropolitan region, and thelowest in Santa Ana. Regarding occasionalparticipation, interest ranged from 26% to 14%,with the highest percentage in the metropolitanregion, and the lowest in San Miguel andSonsonate. As far as their association with otherinstitutions, the highest percentage was found inSonsonate (32%), and the lowest in San Miguel,(9%).

52

5.14 Employee voluntary social work

Of the 463 surveyed businesses, 18% of thempromote employees voluntary work; 6%contribute in some way and 75% of the businessesexpressed that they did not promote this at all.It was calculated that between the years 2000 and2001, a 7% average of employees developed somekind of voluntary community work.

By sector: The services sector promotes voluntarywork more than other sectors (23%); followedby construction, trade (18%); and industry (16%).Between 2000 and 2001, the employees in theservices sector worked the most in voluntarycommunity social projects (14%). The industrialsector had a 3% increase in the year 2000 andreached 5% in 2001. Construction and traderemained at the same level during these two yearsat 2% and 5% respectively.

By size: The large business sector promotesemployee voluntary work more than others (23%);followed by the medium enterprise (17%); small(15%); and micro (9%). The medium sizedbusiness remained at the same level (19%) in2000 and 2001, regarding the number ofemployees developing voluntary work in thesurrounding communities. Large businessesincreased this contribution in 6% in 2000 and in8% in 2001. The small and micro sectors remainedat the same level during these two years, at 2%and 4% respectively.

By region: Participation in voluntary workpromotion ranges from 21% to 14%, withUsulután at the lead and San Miguel with the

lowest percentage. The percentage in themetropolitan region, Santa Ana and Sonsonateis 9%.

During the period between 2000 and 2001, SantaAna had the largest number of employees involvedin community work (15%) in 2000 and (16%) in2001. Sonsonate remained at 11% during bothyears and Usulután at 2%. San Miguel at 6% in2000 and 7% in 2001. The metropolitan regionexperienced an increase in 5% in 2000 and 6%in 2001.

5.15 Link with educational activities

Of all the businesses surveyed 22% of them havebeen linked to some type of educational activityin the past two years, by either offering internshipsor supporting educational programs.

Of the 102 businesses involved in educationalinitiatives, 70% of them consider that saidinvolvement has been beneficial. Of the total,32% focus on elementary level education, 51%on high school and 48% on university education.

The link between the business and the educationalsector was initiated mainly by: the business itself(40%); the school or educational institution 43%;education alliance building projects 11%; and bythe Ministry of Education 11%.

Of the 102 businesses, 91% of those involved ineducational projects consider that theGovernment could be more involved inpromoting these links.

53

Among the 361 businesses that did not getinvolved in educational projects these two lastyears, 35% of them expressed their wish toparticipate in activities of this kind, while 24%did not, and another 40% said they were not surewith regard to this issue.

By sector: Services and industrial sectors evidencedto be more committed to this liaison with theeducational community (27% and 25%respectively). Trade and construction rangedbetween 15% and 11% respectively.

Eighty four percent of the services businessesaffirmed having received some kind of benefitfrom this tighter relationship with the educationalsector; followed by trade with 70%; and industrywith 68%.

Regarding the question whether the governmentcould foster greater links between the educationaland the business sectors, 100% of the constructionbusinesses agreed, followed by trade (95%);services (91%) and industry (89%)

Of the businesses that have not had any type oflink with the educational system in the last twoyears, the services and industry sectors score thehighest among those that wish to start workingin this area (37%), followed by trade (35%) andconstruction (21%).

By size: The large business sector has proven tohave a greater involvement in some type ofeducational activity (33%). It was also evidentthat the larger the business the more theinvolvement in educational activities. On the

other hand, medium, small and micro businessesparticipated in 20%, 6% and 5% respectively.

The medium sized business reported a higherbenefit from working closely with the educationsector (91%); followed by the small and microbusinesses with (75%); and the large business(65%).

Between 90% and 100% of the businesses of allsizes, admitted that the Government couldstimulate the link in support of the educationalsector.

Regarding the 361 businesses that have not hadany relationship with educational projects in thelast two years, the medium and small firms (46%and 41%) of the total would like to participatein alliances with the educational sector, followedby the large business with 35%, and the microbusiness with 24%.

By region: The relationship of businesses withthe educational sector varies depending on theregion of the country: the metropolitan region(27%); Santa Ana, (17%); Usulután, (12%); SanMiguel, (11%); and Sonsonate, (8%).

San Miguel and Usulután stated having received100% benefits thanks to their closer contact withthe educational sector, followed by Santa Ana,(87%); Sonsonate, (67%); and the metropolitanregion with (65%).

Regarding the 361 businesses that have not hadany relationship with educational projects in the

54

last two years but would like to participate inalliances with the educational sector we foundthat 50% of them are located in Sonsonate, 37%in the metropolitan region, 34% in Usulután, 28%in San Miguel and 20% in Santa Ana.

5.16 Programs linking students to the businesssector

1 • In-service training opportunities

It was calculated that 59% of the businesses offerin service training opportunities to interns, beingthis the most important activity of the Salvadoranbusiness sector to support students.

All groups showed an equal commitment to thisactivity.

2 • Student mentors / advisors

Of the businesses involved in educational activities,9% undertake a mentor/ advisory role withstudents.

The behavior among the various sectors is quitedistinctive in this area, construction plays a majorrole in this area (33%) followed by services (16%);trade (5%); and industry (4%).

3 • Student visits

The activity of students visiting the workplace isparticularly important, since 49% of the firmsoffer this option.

Industry and services share an equal participationin this activity (47%), which is significantly lowerto the participation of the construction sector(67%).

Linkage to education activities

Industry Construction Commerce Services

Student visits to place of work

Support to labor experienceapprenticeships

Education activities addressed tohigher education levels

Education activities addressed tohigh school levels

Linkage to education activities

Promotes the voluntary work ofemployess in social projects

Sponsors awards for social issues

0 10 20 30 40 50 60 70 80

%

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5.17 Support to Educational Projects

1 • Support to educational projects executed bythe Ministry of Education

Of the 102 businesses committed to some typeof educational activity, 28% provides support toprojects executed by the Ministry of Education.The industrial sector outstands with 34%participation; while services showed the lowestparticipation rate with only 22%.

2 • Support to Educational Projects executed byother Institutions

Of the 102 businesses involved in some type ofeducational activity, 38% of them, supportprograms executed by other institutions, whichrenders this activity the most important of all.In opposition to the commitment to the programsof the Ministry of Education, the services sectorshowed greater participation in this area (41%),compared to the industrial sector (38%).

3 • Support to Educational Programs executedby a foundation of their own

Of the 102 businesses that support some type ofeducational activity, 14% support programs withinthis category. Again, the services sector showsgreater commitment towards this category,participating in 16% of the cases, compared toindustry with 11% participation.

4 • Curriculum development support

Of the 102 businesses involved in educationalactivities, 16% of them support curriculadevelopment. Industry and services share a similar

percentage averaging between 17% and 19%respectively.

5 • Support to educational programs on businessor business administration

The support to educational programs on businessor business administration gains importance since17% of the 102 businesses are involved in thisprogram. The industrial sector shows a slightlyhigher percentage of businesses collaborating inthis area (19%), compared to the 16% of theservices sector.

6 • Support to other school assignments

This category is also growing in importance since19% of the 102 businesses involved in some typeof school activity participate in this area. Theservices sector shows a higher commitment tothis area with 31% of the sector’s businessesparticipating, as compared to 13% of the industries.

7 • Participation in School Boards and as teachermentors and advisors

Both the involvement in school boards and theparticipation as teacher mentors or advisors arepretty uncommon activities among the 102businesses related to education activities.Participation ranges between 4% and 5%respectively for industry and services.

8 • Teacher training (financial, technical support,etc.)

Teacher training is an activity in which 10% ofthe 102 businesses engaged in educational activitiesare involved in. This commitment is evidentexclusively in the services sector.

Next, they are shown the most excellent benefits that identify the different sectors, graphicallyon the bond of the company with the educational sector

Support to education programs

60

50

40

30

20

10

0Executed by

Min.Education

Executedby otherinstitutions

Executed byown

foundation

Curriculadevelopment

Business andbusiness

administrationprograms

Other schoolsubjects

Participation ofgovernment in

schools

Mentors andadvisors forstudents

Mentors andadvisors forteachers

Student visits tojob sites

Teachertraining

%

Benefits of linkage to the education sector

Services

Commerce

Construction

Industry

4.54

3.53

2.52

1.51

0.50

Improved reputation of companydue to linkage to education sector

Better labor attitude due tolinkage to education sector

Benefits to community due tolinkage to education sector

%

Benefits of linkage to the education sector

Participation inbusiness - education

sector alliances

Business benefited bylinkage to education

sector

Industry

Commerce

Construction

Services

0 20 40 60 80 100%

56

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6. Public policy

This term is defined as the alignment of businessand public interests, generally beyond the legal,ethical, and transparency requirements, as wellas advocacy in policies that render greater socialleverage for the country in aeas such as health,education and other.

6.1 Funding of political candidates

Sixty six percent of the surveyed businessesaffirmed not supporting any candidate for publicoffice or any political party; another 10% did nothave defined criteria regarding this issue and 5%support candidates or parties based on theircommercial interests or goals. Twenty percentof the businesses did not answer this question.

By sector: Seventy percent of the businesses inthe trade sector affirmed not supporting anycandidate or political party; followed by serviceswith 69%, the industrial businesses 62% and theconstruction sector 59%. With regards to thequestion of providing support in alignment withbusiness interests and goals, 9% of the tradebusinesses answered affirmatively followed by4% of the businesses in the industrial andconstruction sectors and 3% in services.

By size: The percentage of businesses that lacka defined criteria regarding their support topolitical parties or candidates is higher in themedium sized businesses (20%) compared to thelarge business sector (11%). On the other hand,with regards to the issue of providing support inalignment with business interests and goals, thelarge business sector responded in 7% of thecases compared to the small business (5%), andmedium sized business (3%).

While 85% of the micro businesses affirm notsupporting a political candidate or party, theremaining sectors ranged between 68% and 59%.By region: Sonsonate was the region that leastsupported any candidate or political party (82%)followed by Santa Ana (74%).

The metropolitan region was characterized bythe largest number of businesses (12%) withouta clear criteria on this issue compared to the otherregions. Nevertheless, the metropolitan regionand Santa Ana are the only regions that affirmproviding support based on their own interests(2%).

6.2 Internal Policies against Corruption

Of the total number of businesses surveyed, 33%of them have some sort of informal anticorruption and bribery practices established,regarding their relationship with public and privateauthorities. Only 12% have these policies writtendown in a formal format, and 54% of thecompanies do not handle this type of policy.

By sector: It was observed that the constructionsector is the one that handles informal anticorruption policies (41%) contrary to the industrialsector with formally written policies in 14% ofthe firms. The percentage among the varioussectors of businesses with no defined internalpolicies against corruption and bribery rangedbetween 64% in the trade sector and 48% inconstruction.

By size: Large, medium and small businesses allfrequently handle informal internal policies with34%, 35% and 34% respectively. On the otherhand, the larger businesses treat this issue moreformally in 21% of the businesses, compared to

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6% and 1% in the medium and small businessrespectively.

By region: The metropolitan region and Sonsonateare the regions with the highest rate in the useof informal anti corruption policies with 35%and 46% respectively, compared to 27% inUsulután, 26% in Santa Ana and 14% in SanMiguel. The metropolitan region is also the onewhere formal policies are established morefrequently (17%), compared to other regions(5%)

6.3 Proposals through public, private or mixedinstitutions

Of the surveyed businesses 23% of themparticipate in the formulation of social, economicand state policies, through public, private ormixed institutions. Of these businesses 13%participate as a company, while 9% do so throughrelated persons and on their behalf.

By sector: The sector that participated the mostin the formulation of proposals is the constructionsector, both as a company (22%) and individually(11%). Industry and services participate as acompany in 14% of cases and 10% individually.Trade is the sector that least participates in theformulation of proposals (84%).

By size: Large businesses show a highercommitment with the formulation of proposals,both on behalf of the company (19%) andindividually (12%). Micro and small businessesrate higher as sectors that do not participate inthis issue with 92% and 91% respectively.

By region: Businesses in the metropolitan areaparticipate with greater frequency in the

formulation of proposals as compared with otherregions, both on behalf of the company (17%)and individually (10%). Usulután has the highestlevel of individual participation (18%). In SanMiguel 91% of the businesses do not participatein the formulation of proposals.

6.4 Participation in business forums andassociations.

A total of 44% of the surveyed businessesparticipate in business associations or forums.Of these, 36% participate on behalf of thecompany and 8% individually.

With regards to memberships in businessassociations 38% of the businesses are associatedto the Chamber of Commerce and Industry ofEl Salvador, CCIES, and guilds related to theirsectors; 29% of them are associated to theSalvadoran Association of Industrials (ASI); 29%,of them to the National Association of the PrivateBusiness Sector, ANEP; 9%, to non for profitorganizations; 3%, to the Salvadoran Institutionfor Professional Education (INSAFORP); 2%,to the Corporation of Exporters (COEXPORT);and 20%, to other types of associations.

Of the total number of businesses that participatein business associations and forums, 82%participate in commissions and work groupsrelated to the advocacy and promotion of thespecific interests of their sectors or businessbranch; 41% visit public authorities to promotesector related issues; 23% participate incommissions and work groups related to publicinterest and social responsibility issues; 20% inprocesses to elaborate public interest and socialproposals and 12% visit authorities to promotepublic or social interest issues.

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By sector: The industry sector participates morefrequently in business associations and forums,both on behalf of the company (42%) and alsoindividually (10%), collaborating actively in guildssuch as the ASI, CCIES and others, and alsoparticipate in a higher more in commissionsrelated to the defense and promotion of theinterests of their particular sectors. The nextsector is the construction sector that alsoparticipates on behalf of the company (44%) andindividually (7%) collaborating actively in theirsector associations and guilds related to theadvocacy and promotion of their particularinterests.

Participation in the formulation of public interestand social responsibility proposals among thevarious sectors is as follows: services, 37%;construction, 25%; industry, (21%); and trade(14%).

By size: Large businesses participate more inbusiness associations and forums, both on behalfof the business (55%) and individually (10%).The micro business sector does not participateactively in business associations and forums (90%).

The large business sector participates in themajority of associations, particularly in the onesthat defend and promote sectorial interests.The medium sized business participates veryactively in commissions related to public interestand social responsibility issues (35%), and alsovisits authorities to promote issues of sectoralinterest (55%), reaching the highest percentagesin this item.

By region: The businesses located in themetropolitan region participate more actively inassociations and forums (47%), in opposition tothe remaining regions which range between 28%and13% participation. Usulután is the regionwhere a striking 94% of the businesses do notparticipate in business associations or forums.

All the regions share a similar percentage (80%to 87%) regarding their participation incommissions related to the advocacy andpromotion of sectoral issues. Regarding theirparticipation in public interest and socialresponsibility issues, Santa Ana shows the highestpercentage ( 46%), compared to the other regions;the metropolitan region (22%), Sonsonate (20%)and San Miguel (12%).

Public Politics

Industry CommerceConstruction Services

No support toeither candidatesor political parties

Suport based ontrade interests

Internal formalpolicies against

corruption

Board of directorsdraft policies

Company participatesin business forums

Participants inown sector

guilds

Participate in thepromotion of sectorown specific interests

100

80

60

40

20

0

%

Chapter III:Conclusions

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Following are the most relevant conclusionscorresponding to the CSR analysis:

1. In general terms, the larger the business, thehigher its level of compliance with the variousfactors analyzed by this research, particularly, ifit is located in the metropolitan region of SanSalvador. On the other hand, upon consideringthe different economic sectors, it is evident thatbehavior is not systematic.

2. Principles, ethical values and governance

Three out of every four businesses have aCode of Ethics with a high level of participationof owners and shareholders in its drafting; thiscode is disseminated to the administrative staffin 77% of the businesses, to the midmanagement level in 66% of cases and isreviewed at least once a year in 60% of thebusinesses.

3. Work place and human rights 

a • The average number of hours worked perweek is 44.6, slightly over the hours set forthin the law. Overtime is acknowledged for 66%of the workers and 33% of the administrativestaff. This is based on the type of contract inforce and the special compensation benefitsand policies each have. The ratio between thehighest and the lowest salary among thebusinesses surveyed was 13. The larger the

business, the more formalized its labor relationsare.

b • Two out of every four businesses surveyeduse a different way to communicate employeestheir rights and duties, with the internalregulations manual prevailing among them.Nine out of every ten businesses have set fortha labor compensation system, being health careand pension fund contributions the mostimportant. Seven out of every ten businessespay holidays and a Christmas bonus, over thesum established by law. Only one out of everyten businesses employs minors during the dayshift, in accordance with the provisions of law.

c • More than half of the businesses surveyedprovide labor opportunities to inexperiencedyoungsters and to workers over the age offorty, and one out of every three businessesemploy disabled persons. In accordance withthe Equal Opportunities Law, the Ministry ofLabor has classified disabled persons as follows: I) Physically impaired, hemiplegics (loss ofone arm or leg) paraplegics (loss of functionalityand numbness of lower limbs); quadriplegic(loss of function of upper and lower limbs)sequals of polio, flat feet, and amputation oflimbs. ii) Sensorial impairments, deafness,persons with hearing problems, the blind, orwith a weak sight, or those who have totallylost the vision of one eye; and strabismus.

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iii) Mental impairment, lack of understanding,behavior disorder, and retardedness.

d • Four of each ten businesses have ongoingtraining programs, while five out of ten offertraining according to need. Workers literacyrate among the businesses interviewed is high(97%) and 2% of the businesses have in houseliteracy programs. Between the years of 2000and 2001, the businesses interviewed investedan average of 2% of their annual sales in theprofessional upgrading and education of theiremployees. The medium sized businessesoutstand in this area.

e • Nine out of every ten businesses surveyedcomply with the health and safety provisionsand adequate labor conditions for their workers,with the highest rate of compliance among theindustrial businesses (80%) and (86%) of thelarge businesses.

4. Marketing

Eight out of every ten businesses have policiesand standards in place to assess and select theirsuppliers, among which the industrial sector(85%) and large businesses (60%) rated thehighest. Ninety six percent of the businesseswork with domestic suppliers, while 50% workwith international suppliers. Among thebusinesses interviewed, 13% of them useformer employees as suppliers, particularly inthe construction sector. Forty seven percentof the businesses surveyed review the expirationdate of their products, 58% of which belongto the trade sector; whiles 50% of them donot apply this concept. Two out of every threebusinesses have ongoing product, process andservice enhancement programs, with the

industrial sector at the lead in this area. Oneout of every four businesses has a customercomplaint service. Nine out of ten businessesverify publicity campaigns in advance, to insurecompliance with the Consumer Defense Law.

5. Environment

a • Nine out of every ten businesses affirmhaving knowledge of the impact of theiractivities on the environment and health, andevery five of these claim their products do notcause any effect whatsoever. Eight of everyten businesses who accept their products causean impact on the environment and healthdevelop research and seek solutions to theproblem. One third of the businesses participatein environment related studies, forums andseminars, aimed at promoting and adoptingenvironmentally friendly laws, standards andregulations.

b • Three percent of the surveyed businessesadopted ISO 14000 standards and 5% of thetotal workforce is under the certificationprogram required by the domesticenvironmental law. In the period between 2000and 2001, surveyed businesses invested anaverage of 0.8% of their annual sales inenvironment improvement projects, being theindustrial and services sectors the ones thatinvested the most in this area.

6. Community

a • Sixty percent of the total number of surveyedbusinesses carry out some type of social activityor develop projects in coordination withgovernmental, municipal, community, privateorganizations, NGOs, churches and other. Of

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these, 24% execute programs within thecommunity and 60% of these dedicate theirefforts to educational programs. The majorityof the businesses surveyed respond tooccasional requests.

b • Businesses earmark an average of 3.9% oftheir total budget to community serviceprograms, and 93% of this percentageoriginates from own funds while another 8%comes from contributions from otherbusinesses of the same entrepreneurial group. Businesses not only provide cash contributionsto the communities they serve, but also skilledhuman resources, facilities, technology, and toa lesser extent, products and internships.Regarding investments in employee’sprofessional development and education,businesses earmarked 1.5% average of theirtotal annual sales in 2000 and 1.8% in 2001.

c • A total of 22% of the businesses surveyedwere linked to some type of educational activityin the past two years (working experience bymeans of internships, or financial and technicalsupport to schools). In 43% of the cases,contacts were initiated by the school oreducational institutions and in 40%, of thecases by the company itself. The remainingpercentage was initiated through other means.

7. Public Policy

Three out of every ten businesses surveyedhave well defined policies against corruptionand bribery regarding public authorities and23% of the businesses participate in theformulation of social, economic proposals andstate policies. Four out of ten businessesparticipate in business associations or forums,the majority are members of the Chamber ofCommerce and Industry of El Salvador andsectoral guilds.

Chapter IV:Ranking according to the International Finance Corporation

One of the most remarkable outcomes availableto the businesses that daily develop CorporateSocial Responsibility practices, is the internationalranking of their businesses regarding globalperformance. This chapter provides an ampleexplanation of the sustainability assessment ofthe corporations, assessment indicators, and thevarious ranking levels by the International FinanceCorporation (IFC), a World Bank institution,focused on the private sector. The variousactivities included in the survey were analyzed inorder to get concrete results, and then they wereranked following this criterion to obtain adomestic figure.

1. Evaluation of business sustainability

The sustainability framework of the IFC willserve as the basis to define the results of CSRactivities or practices in El Salvador, obtained bythis research. The International FinanceCorporation is the largest multilateral long termfinancial provider of the private sector indeveloping countries. Its mandate is to contributeto the alleviation of poverty in member countriesthrough the increase of private investment.

The IFC framework aims at defining thecomponents of a sustainable performance in atangible and concrete manner, allowing IFCManagement to assess the effects of the variousprojects. It also determines that it is fundamentalto clearly understand the relationship among the

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factors that define a positive impact, in terms ofsustainability and commercial arguments,particularly in emerging markets; one that justifiesthe task of improving performance in those areas.IFC commitment to sustainable development isdecisive due to its capability to distinguish itselffrom other financial institutions and providecustomers with valuable services that will enablethem to face global challenges. IFC deems thatsustainability will become the driver of successof both its activities and profitability in the future.

Generally, private investments contribute todevelopment through the productive use of capital.Additionally, they can contribute to the bettermentof the environment, society and corporativegovernance. As a part of its sustainabledevelopment initiative, IFC seeks to promote astrong yield regarding the environment, societyand corporative governance in the private sectorso as to reach a greater development impact.Entrepreneurial actions in the area of sustainabilitytarget a higher added value, beyond the onecreated by the business with its capital investment.

2. Sustainability Indicators(In accordance with the IFC sustainabilityframework)

The target of reaching a greater impact in theareas of governance, environment and communityis a result of the logical evolution of the IFC role.

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The following levels of indicators were developedbased of IFC experience in securing the financialand economic sustainability of investments,framed within three large areas, and divided intoeight factors:

Management commitment and governance

Environmental management, commitment to

social development and capacity building.

Corporative governance.

Transparency and accountability.

The Environment

Eco efficiency process.

Environmental accountability of products

/servicies.

Economic development

Local economic growth and collaboration relations.

Community development.

Employee health, safety and welfare.

Impact regarding these areas was divided intofour yield levels:

Level 1: mirrors compliance with minimum IFCand country standards. The economic activity ofthe business is in agreement with domestic andinternational standards.

Level 2: indicates the degree of added value fromthe environmental, community or corporativegovernance perspective. The economic activityof a firm creates local and global benefits thatare distributed throughout the ocal community.

Level 3: indicates that the high impact of theproject or the business has largely influencedother businesses when due performance istranslated into higher yields. Economic activitybeyond the business focuses on increasingresources and adding new benefits. It includeslevel 2 elements. Level 4: reflects a leadership position, where theproject or business has a strong impact regardingbest practices. The economic activity, far beyondthe business, focuses on increasing resources andadding new beneficiaries. It includes level 3elements.

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3. IFC ranking of surveyed businesses

Since the content of this methodology targets alarger range of activities, we adapted the fourIFC levels to the specific CSR areas yielded bythis research. By giving each surveyed componenta number figure, it was possible to rank thesebusinesses and provide each of them with apercentage corresponding to the four IFC levels.

The following chart shows the percentage scoredby Salvadoran businesses in each level:

Level Firms IFC%

1 72.1

2 39.6

3 17.9

4 10.6

Seventy two percent of the surveyed businesseswere framed within level 1 regarding compliancewith minimal IFC and World Bank standards,and therefore meet the domestic and internationalstandards to reach a sustainable development.This means that seven out of every ten businessescomply with the above mentioned standards.

Eleven percent of the businesses are in level 4,indicating a strong leadership position and ampleinfluence in best CSR practices management.

4. Importance of IFC ranking

IFC mission is to foster sustainable private sectorinvestments in developing countries, aimed at

reducing poverty and enhancing the livingconditions of the population.

Businesses ranked by the IFC will reap majorbenefits, one of which is the access to a specialline of credit. Nevertheless, the true value of thisqualification lies on the fact that this funding isgranted following a methodology by whichbusiness persons gradually discover that theirfunding can and should yield not only economicgains but also social benefits.

Within the international context, there is a cleartrend to include the responsible competitivenessof a business as a success indicator. IFC rankingof concrete business actions and practices providesthe opportunity to scientifically demonstrate andlearn the social impact of business investments,thus providing incentives for a more dynamicsustainable development.

Additionally, IFC ranking helps businesses buildawareness on the opportunities withinsustainability, and to this end, establishes a seriesof international standards whose complianceproduces more benefits for the business, societyand the country. This ranking lays an objectiveand credible foundation to compute the addedvalue obtained from CSR practices and todetermine how this added value can be adoptedby specific projects.

Summarizing, only IFC ranking enjoysinternational recognition and validity, fosters thefunding of private sector projects for sustainabledevelopment, and supports private enterprises intheir financial transition into international markets.

What is FUNDEMAS?

Corporate Social Responsibility is a strategicimperative that motivates businesses toincorporate policies and practices that contributeto their relationship with shareholders, employees,the community and the environment, by meansof a new paradigm of ethical principles and values,positioning the business sector as the competitivedriver of economic and social development.

With this innovative idea in mind, a group ofSalvadoran visionary entrepreneurs created theBusiness Foundation for Social Action(FUNDEMAS), in May 2000, with the aspirationto contribute to the economic and socialdevelopment of El Salvador, through thestrengthening of corporate responsibility, thepromotion of entrepreneurial philanthropy, thefostering of entrepreneurial practices and conductand the enhancement of education quality in thecountry.

To this date, the Foundation has more than 90members among individuals, businesses, guildsand higher education institutions. It is also amember of the Business for Social Responsibility(BSR) and the Private Sector Forum andCorporate Social Responsibility in the Americas(Forum EMPRESA).

How does FUNDEMAS work?

FUNDEMAS Works through four programs,which attempt to facilitate the development of

66

social values and an entrepreneurial culture inharmony with the demands and challenges ofglobalization. Many activities were developedwith the invaluable support of voluntary workersthat contributed their time, talent and resourcesto the social development of the country.

What programs does FUNDEMAS have?

Following are the three programs of theFoundation:

EMPRESAL (Salvadoran Business Sector forCorporate Responsibility). This program seeksto thrust the economic and social developmentof El Salvador, by promoting and supportingsocially responsible economic practices that willin turn contribute to the welfare of human beings,organizations and society as a whole. The aim ofEMPRESAL is to urge the business sector toincorporate ethical values in their businessstrategies, based on the nine key areas ofCorporate Social Responsibility. To this end, theProgram publishes written material, holdsconferences and forums to which businessmenand women from all the business spectrum, aswell as members of the domestic productionsector are invited.

FUNDE

67

EMPRETEC (Program for the Development ofEntrepreneurs). EMPRETEC is a trainingprogram that fosters the building andstrengthening of entrepreneurial behaviors toenhance the competitiveness of the business,particularly the small and medium businesses.The program is an international franchise whoseexclusive rights were conferred to FUNDEMASin El Salvador by the United Nations Conferencefor Trade and Development (UNCTAD). Thetechnological transfer and implementation ofEMPRETEC in El Salvador were co financedby the Multilateral Fund for Investments andmanaged by the Interamerican DevelopmentBank (IDB/FOMIN). FUNDEMAS, besidesimplementing behavior workshops, as anadditional service, also collaborates with programparticipants interested in a productive credit line.The Foundation schedules interviews of memberswith credit officers of the commercial banks.EMPRETEC provides information in three key

areas of human behavior: achievement, planningand empowerment. To this date, the Programhas worked with more than 1,200 individuals andis ISO 9001:2000, certified.

FIDES (Fund for Education DevelopmentInitiatives of El Salvador), fosters innovativeinitiatives that promise to open educationopportunities and achievements for Salvadorans.The Fund has adopted a corporate socialresponsibility approach that enables the privatesector to promote the economic, social andcultural progress of the country, and also thedevelopment of national strategies leading to theresponsible competitiveness of El Salvador in aworldwide economy, thus contributing to thesocial, economic and cultural development of thecountry.

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Board of Directors 2001-2003

The current Board is comprised of 14 Founding Members: 7 Directors and 7 Alternate Directors.

1. Roberto H. Murray Meza,Chairman

2. Jorge Zablah-Touché,Deputy Chairman

3. Mrs. Miriam Garayzar de Sagrera,Secretary

4. Cesar Catani Papini,Treasurer

5. Juan Carlos Eserski,Deputy Treasurer

6. Federico Colorado,Director

7. Glorybell Silhy de Daboub, Director

8. Mauricio Samayoa,Alternate Director

9. Francisco Escobar Thompson, Alternate Director

10. Ricardo Hill,Alternate Director

11. Rafael Castellanos,Alternate Director

12. José Gustavo Herodier Samayoa, Alternate Director

13. Renata Mendoza,Alternate Director

14. Michelle Gallardo de Gutiérrez, Alternate Director

Observer:Rhina Reyes de Fuentes,Executive Director