GSZT Recommendations on Social Responsibility

8/19/2019 GSZT Recommendations on Social Responsibility

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GSZT Recommendationson Social Responsibility

Foreword

Preliminaries:Pursuant to a governmental decision, the GSZT (Gazdasági és Szociális Tanács – Economic and SocialCouncil) was called upon to draw up a set of recommendations on corporate social responsibility alignedwith European Union priorities. As a part of this effort, at its meeting on 11 September 2006, the GSZTresolved to set up an ad hoc Working Committee consisting of representatives of the different sides, whoare given consultative powers. István Fekete, President of the Joint Venture Association was asked tochair the Working Committee.Working Committee Members:

István Fekete, President of the Joint Venture Association,

Imre Palkovics, President of the Workers’ Councils (representing employees)

Dr. János Rudnay, Chairman of the Association of International Companies in Hungary(representing employers)

András Lukács, President of the Clean Air Action Group (representing civil society) Joined at a later stage: Pál Kapusy, Managing Director of Követ-Inem Hungária (representing

civil society)Professional consultant and coordinator: Braun & Partners Kft. (Róbert Braun associate professor,managing consultant, Zsuzsanna Géring, consultant)

After several months of negotiations, the recommendations were completed in early May, which the

Working Committee then submitted to the GSZT. In these recommendations, taking into accountinternational experience, methods and principles, the drafters have summarised those areas and possibleactions which decision-makers might consider when establishing their corporate responsibility strategy.

On 3 July 2007, the GSZT discussed the document titled “Corporate Social Responsibility” (drawn up bythe Working Committee in accordance with its mandate) and adopted with the proviso that it beforwarded to the government (Economic Cabinet) only after discussion and consideration of thesubstantive proposals voiced at the meeting, together with the amendments adopted.

Among the issues raised at the GSZT meeting on 3 July, which are now incorporated in the current(supplemented) document, we would like to emphasise the following points.

As was set out in the former version of the document, social responsibility can be interpreted in variouscontexts. Besides typically relevant issues (such as environmental protection, respect for human rights,requirement for safety and health at work, voluntariness, fair trade), proposals raised at the meetingplaced particular emphasis on charitable donations, equal opportunities and consumer protection.

Although the elaboration of the individual subtopics (e.g. which areas are worthy of support and howthey should be supported) is beyond the scope of these recommendations, it can be expected – in fact, itis one of the objectives of this document – that the publication of these recommendations will lead theGSZT to mobilise significant communication resources which will in turn create a forum where these ideascan be expressed in more specific forms. (This approach is further supported by the view that theserecommendations should not seek to define practical actions which cannot be implemented by the GSZT.)

Among the objectives, and as a part of raising public awareness, the improvement of the nation’s

cultural, artistic and scientific life was highlighted.


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Besides market players, the state, civil society, media, and local governments have also been included inthe document. They have been incorporated into each relevant section of the recommendations withoutdisrupting the strictly logical structure.

Following a proposal from the employees’ side, a key point is that socially responsible operations andefforts to realise them may not serve to relieve companies from any obligations stipulated by law or byinternational conventions. The observance of the latter is an essential condition for responsible operation.

In addition, companies are free to establish codes of ethics to regulate their own operations.

Lest the scope of these recommendations be considered too broad, new deliberations at the meetingrather questioned the pertinence of narrowing the recommendations, given that the GSZT is precisely theorganisation in Hungary which is in the position to make such a recommendation on social responsibilityaddressing the actors of all the sectors included in the document. The GSZT’s strength lies in itsinvolvement of civil organisations and representatives of academia in the complex conciliation processes,beyond traditional interest reconciliation forums.

In response to well-founded comments about the mapping of future activities, it has been added to therecommendations that the GSZT should set up a permanent mandate CSR Committee within its ownorganisation which would submit annual reports to the GSZT on the results achieved in the CSR field andon the implementation of specific items from these recommendations.


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CORPORATE SOCIAL RESPONSIBILITY

“CSR is a concept whereby companies integrate social and environmental concerns in their business

operations and in their interaction with their stakeholders on a voluntary basis.”(European Commission, 2002)

EXECUTIVE SUMMARY

On of the foremost challenges companies have to face in the 21st century is how to integrate socialvalues into their business operations, that is the idea of assuming social responsibility beyond dailybusiness activities. Corporate stakeholders – employees, customers, owners, government, localcommunity, suppliers, the academic community and international organisations – all increasingly expect,and even frequently demand that the values which are important to them, including ethical operation orenvironmental values, also be present in the day-to-day operations of corporations. At the same time,corporations are still wary of venturing into this field, as the methods which would enable them to answerthese challenges have not yet been incorporated into their strategic and operational practices. Therefore,taking into account international experience, methods and principles, the GSZT summarises in theserecommendations those areas and possible actions which corporate decision-makers might wish toconsider when establishing their responsibility strategies.

The recommendations assist companies in:• finding the means which will enable them to cope effectively with social, economic and

environmental challenges;• incorporating these considerations into their business strategies;• involving their stakeholders into the decision-making processes;• contributing to the dissemination of the notion of social responsibility and its scientific basis; and•

informing the people living around them about their socially responsible activities, in accordancewith uniform principles and standards.

Each recommendation is presented in the same format, with proposed actions grouped under thefollowing sub-headings:

• Stakeholder Involvement;• Governance;• Strategy;• Performance Management;• Publication and• Authentication.

Besides enterprises , the state and local governments are also key economic actors: acting as employers,owners, regulators and opinion leaders, they can significantly influence the actual implementation ofsocially responsible corporate activities in the entire economy. Thus, the GSZT also makesrecommendations following the same structure for the state and local governments. As for economicoperators, key stakeholders include those civil organisations which advocate the values important to thembased on the principle of social representation, often forcing economic operators to support andimplement these values. With a view to fostering cooperation between economic operators andrepresentatives of societal values and interests, we have also formulated recommendations for civilsociety, following again the same structure. Finally, in order to contribute to the presentation of "goodpractices", we have also made recommendations to representatives of the media , since, in the 21st century, this sector can do the most to turn the ideas of social responsibility into functioning, acceptedand authentic practices in all sectors of our society.


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R ECOMMENDATIONS OF THE WORKING COMMITTEE TO THE GSZT: To adopt these recommendations, to endorse them, to forward them to the government, and to raise public awareness about them as well as about the principles and the approaches

included therein.

Furthermore, to develop structures and programmes whereby micro- and macro-level progress in thefield of corporate social responsibility can be measured and evaluated (such as a permanent CRSCommittee, annual reports, accounts).

The GSZT should set up a permanent mandate CSR Committee within its own organisation, chargedwith submitting annual reports to the GSZT on the results achieved in the CSR field, and theimplementation of specific items from these recommendation.

*This recommendation was drawn up for the GSZT’s CSR Working Committee by Braun & Partners, a strategic consultancy firm.Pending its adoption by the Working Committee, the content of this document constitutes the intellectual property of Braun &

Partners, and its use is not permitted unless authorised by the owner.


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TABLE OF CONTENTS

Executive Summary ________________________________________________________ 3

TABLE OF CONTENTS _______________________________________________________ 5

Corporate Social Responsibility – overview and background_________________________ 6

DOMESTIC and European Overview ___________________________________________ 10

THE GSZT’s Recommendations_______________________________________________ 14

1) The Market Sector, Companies _________________________________________ 14 a) Stakeholder Involvement _______________________________________________________14

i) Dialogue ________________________________________________________________14ii) Responsible Lobbying _____________________________________________________14

b) Management _________________________________________________________________14i) Independent Managers and Board Members ___________________________________ 14ii) Institutionalisation of Business Ethics _________________________________________16

c) Strategy _____________________________________________________________________16i) Responsible Marketing_____________________________________________________16ii) Implementing the Recommendations of International Organisations ________________ 16

d) Performance Management ______________________________________________________17i) The Application of Management Systems for Corporate Governance ________________ 17ii) Development of “Social Labelling” Processes ___________________________________17iii) Responsible Development of Supplier Relationships _____________________________ 17

e) Sustainable Corporations, Publication______________________________________________18i) Sustainability Reporting ____________________________________________________18

f) Authentication ________________________________________________________________18

2) The State and Local Governments _______________________________________ 18 a) Stakeholder Involvement and Getting Involved ______________________________________18b) Governance: Role Model (Transparency, Role as Owner and Employer) __________________19c) Strategy _____________________________________________________________________19

i) Providing an Appropriate Legislative and Economic Policy Framework _______________ 19ii) Adoption of International Recommendations, Participation in International Initiatives __ 20

d) Performance Management ______________________________________________________20i) Responsible Public Procurement _____________________________________________20ii) Development of Incentives _________________________________________________20

e) Publication ___________________________________________________________________21i) Sustainability Reports on Public Undertakings __________________________________ 21ii) Targeted Communication __________________________________________________21

f) Authentication; Establishment of Qualification Bodies_________________________________21

3) Civil Society ________________________________________________________ 22 a) Stakeholder Involvement _______________________________________________________22

i) Partnership______________________________________________________________22ii) Publication of Cooperative Principles and Values ________________________________ 22

b) Governance __________________________________________________________________22i) Independent Expert Participation ____________________________________________22ii) Transparent Management __________________________________________________23

c) Strategy: Dissemination of International Standards and Recommendations _______________23d) Performance Management: Trainings for the Market Sector and the Media________________23e) Publication, Public Reports ______________________________________________________23f) Participation in Authentication ___________________________________________________24

4) Media_____________________________________________________________ 24 a) Strategy _____________________________________________________________________24b) Active Stakeholder Partnership ___________________________________________________24c) Publication Channel ____________________________________________________________25d) Tools for Verifying Authenticity ___________________________________________________25

SUMMARY: AN OVERVIEW OF THE GSZT’s RECOMMENDATIONS_____________________ 26

ANNEX _________________________________________________________________ 27


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CORPORATE SOCIAL RESPONSIBILITY – OVERVIEW AND BACKGROUND

The Economic and Social Council (Gazdasági és Szociális Tanács – hereinafter: (GSZT) 1 is a body whichhas been set up by the Hungarian Government, in line with the efforts of the European Union, with aview to promote social dialogue As a part of these efforts, the GSZT has prepared theserecommendations to popularise, disseminate and support both the idea and practice of corporate socialresponsibility.

There are several different definitions of the concept of corporate social responsibility.2

As astarting point, we shall use the definition provided by the European Commission: “CSR is a conceptwhereby companies integrate social and environmental concerns in their business operations and in theirinteraction with their stakeholders on a voluntary basis.” (European Commission, 2002).

Though its history may be traced back to ancient times, the modern approach to CSR originatedin the 1950s.3 A great impetus to the discussion of this issue was given by Milton Friedman’s keynotepaper against the social responsibility of business.4 Friedman took a firm stand on the issue claiming thatthe societal responsibility of corporate entities is to represent business interests and implement businessobjectives, or in other words, profit maximisation, as perfectly as possible within the framework of legalresponsibilities and ethical norms.

Friedman’s standpoint at that time is not in conflict with the current expansion of CSR, since thesocial corporate environment, consumer expectations, individual and community relationships to our builtand natural heritage and also the perception of ethical business operations have all undergone significantchanges since the 1960s. In the two subsequent decades, CSR gradually gained ground and attention, aseries of definitions were established and theories became more and more elaborate and specialised. Inthe last decade of the 20th century, new issues in the CSR context came to the forefront, includingstakeholder involvement into decision-making processes, concerns of modern business ethics,sustainability or the concept of “corporate citizenship”. Now, since the turn of the millennium, an ever-greater emphasis is being put on the greatest possible involvement of stakeholders, as well as onmeasurability, accountability and transparency.

Corporate social responsibility can be interpreted in various contexts, and it has become thefocus of interest in many cases. Typically relevant issues include environmental concerns, the fight forrespect for human rights and against child labour, work health and safety requirements, volunteering,

charitable donations, fair trade, equal opportunities and consumer protection. In the context of businessoperations, the above requirements and principles can be grouped according to three dimensions 5:economic, environmental and social, ethical performance dimensions (Figure 1).

1 Like similar bodies in other EU Member States and developed countries, the GSZT is a consultative forum, i.e. itgives opinions and recommendations and adopts positions. These are not legally binding, but they have impactowing to the participants’ personal reputation and/or the significance of the supportive social interest groups. TheGSZT is independent from the government and from political parties. Its members have a mandate spanning beyondthe current four-year governmental cycle. They are not nominated by the government; selection mechanismsoperate “impersonally” and independently from the government.2 Abbreviated as CSR.3 Howard R. Bowen’s book from 1953 titled Social Responsibilities of the Businessman is considered as the startingpoint of this approach.4 ”The Social Responsibility of Business Is to Increase Its Profits” The New York Times Magazine, 13 September 19705 Such triple grouping is used in the GRI (Global Reporting Initiative).


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Figure 1: Dimensions of Corporate Social Responsibility

The economic dimension of corporate social responsibility reflects on the local and globaleconomic impact of corporate operations, while its environmental dimension is connected withenvironmental impact, pollution and environmental protection. The social dimension investigates issuessuch as labour practices, working environment and labour management, human rights, the localcommunity and society, consumer interests and product liability. These principles andrequirements have been popularised in a series of international initiatives, recommendation andstandards. Some focus on a single dimension (e.g.: ISO 14001 on environmental protection; UN norms:

social and ethical issues; ILO: labour and social affairs), while others cover only a single issue butinterpret it in all three dimensions (e.g.: GRI: reporting; OECD: principles for multinational companies)and there are also instruments which cover several dimensions and several areas (e.g.: AA1000AS)(Figure 2).

Figure 2: Assessment Methods and Standards

•

Today, the two major pillars of corporate social responsibility are the establishment of activedialogue with stakeholders and their involvement, as well as the implementation of accountability andtransparency.

Stakeholder involvement is primarily aimed at the development of strategic trends andoperating principles which ensure sustainable performance and development. In such a process, theknowledge acquired from the stakeholders and resulting innovations allow the company to increase itsperformance in a way that will be sustainable in the long term. This will benefit not only the company,but also the stakeholders themselves and society as a whole.

Stakeholders include all groups that can be considered to affect the operation of theorganisation or that are affected by the operation of the organisation, its products, services andrelated performance.

Main corporate stakeholders:- employees,- clients, consumers,- owners, shareholders, members,

- government, regulatory bodies,- local community,- business partners, suppliers,

- NGOs, trade unions,- media,- competitors,

- academic community,- international organisations.


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The process of stakeholder involvement can be divided into four stages. In the planning stagewe need to identify stakeholders, to determine relevant topics and fields, the purpose and object ofinvolvement, and to lay the foundation for the involvement process. Subsequently, in the preparationand involvement stage, we need to prepare the individual steps of the actual involvement process, toestablish and reinforce the capacities required for the process, to organise the dialogues and to

process the results. In the reaction and measurement stage, the aim is to operationalise theknowledge gained from the process, to incorporate it into the strategy, and to prepare the next roundof stakeholder dialogue based on the measurement and follow-up of the results. This circular processof social dialogue enables the company to react effectively to environmental, economic and socialchallenges and demands.

Accountability comprises transparency, accounting to the stakeholders, responding to theneeds and interests of stakeholder groups, and, naturally, compliance with the law and other ethical,behavioural, industry-specific requirements, codes and principles. Accountability presupposes thatstakeholders have been identified, provided with appropriate information and have been granted anopportunity for bilateral dialogue. One of the most important and most effective means of givingaccounts to stakeholders is the sustainability report (or CSR report), which reveals and presents

company performance and its impact on sustainable development systematically, according to theafore-mentioned three dimensions (environmental protection, economic and societal responsibility)6.On the other hand, reporting also entails the need for authentication: besides exploring the

actual problems, the processes developed in response to them and the data and statements publishedshould be verified and certified by an external auditor.

In addition to providing a role model for followers and consumers alike, the companies whichare in the forefront of social responsibility as defined by these principles gain market advantages,which may lead to substantial economic results in the long run.

Corporate behaviour guided by public awareness brings important business benefits as well.Good stakeholder relationships and the consideration of their opinions is manifested in the form ofpositive feedback, which can significantly improve trust and positive opinion – both major factors inbuilding the company’s brand value. The assumption of social responsibility helps prevent potentiallosses and minimalise current and future costs, in part because more satisfied customers will remainloyal to the company, which, in a context of ever-increasing economic competition, means substantialcompetitive advantages. Furthermore, more satisfied employees are more committed to the company,which in turn reduces fluctuation costs. Public awareness can become a major source of corporatelearning and innovation, which may open up new market opportunities and a more efficient course ofbusiness for the company, thereby maintaining its competitiveness. Responsible corporate behaviourmay result in better access to capital investments, since investors are becoming increasingly aware ofthese aspects when making their investment decisions. Current and future cost reductions also have apositive impact on the company’s financial results, thereby promoting its competitiveness andstrengthening its market position and profitability.

In addition, the assumption of social responsibility contributes to the development of a moreconscious and better-educated society, which ensures a secure background for the company’s

operations in the long run.However, such efforts will only gain ground if they do not remain isolated examples. If there

is no support from the market, market processes will not follow the forerunners, which willcompromise sustainability. For that reason, economic and social incentives are required which supportand recognise publicly aware corporate activity.

This largely depends on the state, since it holds such tools, namely those connected withsupportive economic policy on the one hand, and with regulatory schemes on the other hand, whichenable it to create a positive environment that supports economic operators in assuming socialresponsibility.

6 According to the most common definition: “Sustainable development is development that meets the needs of

the present generation without compromising the chance for future generations to meet their own needs.” Theconcept interprets sustainable economic, ecological and social development as a whole (Our Common Future,published by the Brundtland Committee).


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Society also has a role to play in acknowledging the assumption of social responsibility: thekey actors and developers of a social environment which is supportive of publicly conscious economicactivity are more conscious consumers, willing and able to make choices, as well as NGOs and mediafighting for and supporting social responsibility.

If the state, corporations, civil society, the media and, not least of all, citizens all manage tocooperate in this way, a framework for socially responsible corporate operations will be created, which

will bring social results extending well beyond business culture, leading to sustainable economic, socialand environmental performance not only locally, but – in the long term – also at the national or eveninternational level.


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DOMESTIC AND EUROPEAN OVERVIEW

Corporate social responsibility is not an unknown concept in Hungary. We have numerous awards andsurveys recognising and examining corporate social responsibility or performance in certain specificsubfields. The primary fields covered are working conditions, employment7 and environmentalprotection8, but we can also find initiatives in the field of charitable donations and philanthropy9.

Although still in a small number but there are some (more) comprehensive awards and qualifications,which recognise corporate responsibility as a whole, instead of concentrating only on certain specificsubfields.10

Studies show that the majority of leaders of the largest domestic companies11 have recognisedthe importance and long-term business gains of social responsibility (Figure 3); nearly two thirds ofthem are certain that companies which put greater emphasis on social responsibility will, in the longrun, achieve better financial results than the ones which ignore such values.

Figure 3 Do you believe that companies which put greater emphasis on social responsibility will, inthe long run, achieve better financial results than the ones which ignore such values?

63% 33%

4%

yes no unsure

Source: Braun & Partners – Gfk Hungária: CSR in the management’s view,

2006

A major pillar of corporate social responsibility is active stakeholder dialogue and theinvolvement of stakeholder groups. Responses to the question as to which stakeholder groups areconsidered by Hungarian company managers to be the most important produced the result thatemployees, consumers and shareholders are regarded as the top three stakeholder groups (Figure 4).This means that primarily the interests of these three groups will be taken into account by managerswhen making strategic decisions.

Consequently, company managers claim that the major driving force for the promotion ofcorporate social responsibility in Hungary will originate from greater attention on the part of theowners and increased sensitivity on the part of consumers (Figure 5). These opinions and dataunderline the crucial significance of stakeholder dialogue and the importance of involving stakeholdergroups.

7 Inclusive Workplace Award (Equal Opportunities Methodology Award, Budapest); Family Friendly Workplace Award (Ministry of Social Affairs and Labour), Best Workplace (Hewitt), Cycle Friendly Workplace Award (Ministryof Economy and Transport), Healthy Workplace Award (AmCham).8 EMAS AWARD (EU), Environmental Saving Award (Követ), Central European Environmental Reporting Award(Deloitte), Business World for the Environment (HBLF).9 Individual and Corporate Donor of the Year (NIOK), TOP Corporate Philanthropist (Hungarian Donors Forum).10 Business Ethics Award (Budapest Club, Market and Profit), Progressive Professional Awards – SocialResponsibility Awards (Progressive Magazine).11 The list of research participants is divided into two parts. The first part contains twenty-five companies, whichwere selected based on the Top 200 ranking of the economic magazin Figyelő. This price revenue-based list wascorrected based on the lists of the largest employers and of the companies having the highest net results. Thus,the scope of interviewed companies includes those with high net revenues, many employees and high net results

in the 2004 business year.The second list comprises companies which are either members of the Club of Companies with

Negotiable Shares or have demonstrated both nationally and internationally outstanding performance.


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The media has a decisive role in the assumption of social responsibility, however, theHungarian situation clearly shows that respondent company managers do not perceive significantmedia attention in this field.

Figure 4. Who do you think are your company’s most important stakeholders?

3,7%

7,4%

14,8%

14,8%

18,5%

25,9%

25,9%

37,0%

77,8%

81,5%

0% 20% 40% 60% 80% 100%

Local governments

Our institutional investors

Our suppliers, business partners

Our top managers

General public opinion

Local communities

Government, regulatory authorities

Our shareholders, creditors

Our consumers

Our employees

Source: Braun & Partners – Gfk Hungaria: CSR in the management’s view – Company managers onCorporate Social Responsibility, 2006

Figure 5. What factors will promote the significance and role of CSR?

14,8%

29,6%

33,3%

37,0%

37,0%

37,0%

40,7%

44,4%

55,6%

59,3%

0% 20% 40% 60% 80% 100%

Globalisation

Company scandals, crises

More pressure from the government andauthorities

CSR brings proven competitive advantage

Increased consumer sensitivity to CSR-related

issues

Source: Braun & Partners – Gfk Hungária: CSR in the management’s view – Company managers on

Corporate Social Responsibility, 2006

However, surveys on the role and significance of corporate social responsibility are not only

relevant to companies but also to consumers. Firstly, because consumers constitute a majorstakeholder group (as indicated above), and secondly, because they are the recipients whose


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assessment and opinion is followed with much attention. According to the latest research findings,almost two thirds (73.1%) of Hungarian consumers think that the importance of corporate socialresponsibility is medium or higher (Figure 6).

These findings demonstrate that consumers are one step ahead of companies in the “CSR-cycle". For companies, although the issue and concerns of corporate social responsibility are present,they appear only in a latent way in the form of ad hoc measures and programmes, not integrated in

any strategy. Consumers, in comparison, are somewhat more aware and would welcome publiclyresponsible corporate actions (Figure 7).

Figure 6. The importance of corporate social responsibility – according to consumers

38,3%34,8%

15,9%

7,4%3,6%

0%

10%

20%

30%

40%

50%

Very important Medium Somewhatimportant

Not important atall

Don't know

Source: Braun & Partners – Median Opinion and Market Research Institute: Public opinion research

on Corporate Social Responsibility – A representative survey on what people know and think ofCSR, 2006

Figure 7. The model of the corporate/consumer/employee CSR cycle

Companies Consumers Employees latentincreasing

strengtheninginstitutionalised

uncertainwelcome

expectedobligatory

hoped forbeneficial

requestedprescribed

Besides stakeholder involvement, the other major pillar of corporate social responsibility isaccountability. The core of accountability lies in publicly released information on business activity,management processes, strategic decision-making, results and objectives (reports, websites,publications, etc.) Such publicly available information on socially responsible business activity and thetendencies revealed by them are explored in the Accountability Rating Hungary survey. This 2006survey found that the Hungarian average (17%) was far behind the global average (34%), whichclearly indicates that the practice of corporate social responsibility is still very much in the earlydevelopmental phase. This is confirmed by the fact that, the first non-financial report at the

international level was released as early as the start of the 1970s, the first Hungarian report of thiskind, EBK (Egészség, biztonság és környezet – Health, safety, environment), was published only in1996. At the same time, the gap between top performers (52% and 72%) indicates that the leadingHungarian companies are rapidly catching up with the international level.

In summary, it can be stated that responsibility and the consideration of environmental, economic andsocial factors are present in domestic companies (more than 1100 companies are ISO 14001 certified,7 EMAS schemes are registered in Hungary, and about 40 companies publish environmental orsustainability reports),12 but there are only a few organisations where this is manifested in actualstrategies and actions developed with stakeholder involvement.

Civil society shows a similar picture. Hungarian NGOs are increasingly embracing the cause ofcorporate social responsibility as a whole or by focusing on one particular issue, such as employment.

A growing number of initiatives and programmes support corporate efforts and provide guidelines,12 Source: KÖVET, http://www.kovet.hu/view/main/173.html.


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models and professional assistance. Nonetheless, just as we have seen with companies, civil societyas a whole has not yet reached the level of international practice.

In two fields: employment and environmental protection have already shown more intensiveand definitive social initiatives and results. The domestic trade union movement has taken a firm andeffective approach to the issue of employment and employee interest representation. In accordancewith provisions and guidelines established in the ILO Tripartite Declaration of Principles concerning

Multinational Enterprises and Social Policy, the United Nations Global Compact, and the OECDGuidelines for Multinational Enterprises, they strive to develop a quality labour practice that canensure sustainable performance and competitiveness in both domestic and international markets.

With respect to environmental issues, we can find both professional consultancy firms andorganisations having successful civil initiatives, as well as an international background, perspectiveand access to information who rigorously call companies to account for environmental protection.They primarily represent aspects of social responsibility concerning environmental sustainability (e.g.:KÖVET, Air Action Group, Greenpeace Hungary, Védegylet).

The promotion of CSR is a central element of the European Union’s sustainability strategy. Already in 1993, Jacques Delors’ Appeal called upon businesses to assume a role in addressing socialproblems, which was subsequently integrated in the 1995 Declaration against Social Exclusion. Thefirst official position on the business case for responsibility was taken at the Lisbon Summit in March

2000 and published in the Strategy adopted on that occasion. The European Council has stated thatcompanies have a key role in reaching European strategic objectives. Socially responsible businessoperations are a crucial factor contributing to the attainment of sustainable economic development,which requires competitiveness, a knowledge-based economy, better job opportunities andstrengthened social cohesion. As soon as the topic was put on the Community’s political agenda, itgrew into a seriously supported and widely negotiated case, as it was addressed by the EuropeanCouncil both in March 2001 in Stockholm and in June 2001 in Gothenburg.

The CSR issue was also raised at the Gothenburg Summit in the context of sustainabledevelopment. It was pointed out that for the development of a knowledge-based, competitive anddynamic European economy and long-tem sustainability, besides economic and social aspects, it isalso essential to consider environmental and ecological sustainability.

It was also at the Lisbon Summit where the still ongoing debate and discussion of the topicwas launched. Highlights of these ongoing negotiations and exchange of ideas include the 2001 EUGreen Paper on Corporate Social Responsibility, the new CSR Strategy published in July 2002, and theEuropean Multi-Stakeholder Forum which has been operating since the autumn of 2002, with theobjective of attaining the broadest possible societal involvement in the Europe-wide dialogue oncorporate social responsibility.


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THE GSZT’S RECOMMENDATIONSDrawing from the above discussion, with a view to create a publicly aware society, to promote thenation’s cultural, artistic and academic endeavours, and to ensure responsible behaviour andcompetition, the GSZT makes the following recommendations addressed to marker actors, the state,local governments, civil society and the media:

1)

The Market Sector, Companiesa) Stakeholder Involvement

i)

DialogueThe primary aim of stakeholder involvement is to develop strategic trends and operatingprinciples which ensure sustainable performance and development. In such a process, theknowledge acquired from the stakeholders and resulting innovations allow the company toincrease its performance in a way that will be sustainable in the long term. This willbenefit not only the company, but also the stakeholders themselves and society as awhole.

The GSZT recommends that companies operating in Hungary engage in systematic and

transparent dialogue with their stakeholders, and integrate their findings into theircorporate strategy.

ii)

Responsible LobbyingOne form for companies to assume social responsibility and exert influence is bychannelling their interests into government policy and decisions. Responsible lobbyingpractices provide a framework for this in a way that fits well with the ideas andimplementation of corporate social responsibility. Responsible lobbying does not distortmarket competition in favour of the company.Responsible lobbying is consistent with corporate strategy and corporate values, thus, itcannot result in actions and influences that diverge from the declared principles.Furthermore, it is pursued in accordance in areas and with principles that have been

publicly established, and is open to stakeholder demands. Responsible lobbying iseffective in sustainably integrating corporate practice into legislation, as it mergesongoing regulatory processes with the practical knowledge of company experts by clearlyindicating the fields influenced, the scope of envisaged results, and the possible andaccepted lobbying channels.

The GSZT recommends that companies operating in Hungary set frameworks whichensure transparent and accountable lobbying activity, in accordance with the principles ofresponsible lobbying. With their lobbying activity, they should only advocate interests that

promote fair competition.

b) Management

i)

Independent Managers and Board MembersIn corporate management processes, the most effective way to implement the principlesof corporate social responsibility in practice is to designate independent members fromthe board of directors and the supervisory board. Independent managers and boardmembers (i.e. neither owners nor employees of the company) can more be more effectivein representing the principles and values of social responsibility, especially if they areexperts, external advisors or members of NGOs dealing with various areas or issues ofsocial responsibility. A further essential requirement is that their responsibilities anddecision-making powers be channelled into the company's strategic decision-makingprocesses.

The GSZT recommends that companies operating in Hungary involve independentmembers in their board of directors and supervisory board in their corporate governance


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system who represent the values of business and social sustainability in strategic decision- making independently from the owners and management.


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ii)

Institutionalisation of Business EthicsWe would like to emphasise that socially responsible operation and efforts to realise themmay not serve to relieve companies from any obligations stipulated by law or byinternational conventions. The observance of the latter is an essential condition forresponsible operation. In addition, companies are free to establish codes of ethics to

regulate their own operations.The drafting and implementation of codes of ethics, the creation of an internal ethicscommittee, the dissemination of ethical behaviour and attitudes in the business world areall different manifestations of social control and responsibility. However, socialresponsibility should not only be the concern of top managers, but also that of middlemanagement, and, in fact, of all employees. Real corporate social responsibility isachieved when it forms an organic part of corporate strategy, and when each and everyemployee participates in its implementation. Business ethics institutions (codes of ethics,ethics committee) contribute to the equal treatment of each employee, customer andpartner, compel the company to publicly and unambiguously declare its ethical values andto observe these when making decisions. This can significantly strengthen the managers'and employees' commitment to ethical business conduct.

The GSZT recommends that companies operating in Hungary develop business ethicsinstitutions (codes of ethics, ethics committees, etc.) as required and permitted inconsideration of the company's size, and to make these accessible to stakeholders.

c)

Strategy

i) Responsible MarketingCorporate marketing activities also require responsible conduct (product liability, ethicalissues related to services, environmental impact of the product and its packaging,responsible pricing, ethical establishment of distribution channels, etc.). Some of theserequirements are also regulated by law. Nevertheless, even within the legal framework,

there is a need for developing responsible ethical principles and values and forimplementing ethical principles established by specific professions or sectors in order toensure responsible marketing activity.

The GSZT recommends that companies operating in Hungary carry out their marketingactivities with due consideration to the principles in the codes of ethics published by thegiven professional representation body based on industry-wide negotiations.

ii) Implementing the Recommendations of International OrganisationsInternational recommendations and standards adopted after wide-ranging consultationswith business and NGO representatives can greatly contribute to the realisation of publiclyaware corporate practices.

These recommendations include:

the United Nations Global Compact, which establishes a set of 9 principles in the fieldsof human rights, employee rights and environmental rights;

The ILO Tripartite Declaration of Principles concerning Multinational Enterprises andSocial Policy, which systematically reviews all topics related to socially sustainabledevelopment and human rights, employment and labour;

the EU Green Paper presented by the European Commission in July 2001;

the OECD Guidelines for Multinational Enterprises;

the Human Rights Guidelines for Companies published by Amnesty International,which reminds companies of the prohibition of discrimination, calls for the observanceof human rights and for the provision of fair working conditions and fair wages;

the AA1000 series is a comprehensive set of standards providing detailed guidelinesfor a number of subtopics. This initiative attempts to fulfil two basic needs: firstly, itserves as a framework which enables organisations to assess and change their ethicaland social performance, and secondly, it gives an opportunity for outsiders to verify


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the authenticity of said performance. The standard is centred on the mapping andinvolvement of social groups and the development and maintenance of social dialogue.

The GSZT recommends that companies operating in Hungary, in their strategic planningand during the operation of their socially responsible practices, apply internationallyaccepted and tested models, standards and recommendations.

d)

Performance Management

i) The Application of Management Systems for Corporate GovernanceBesides strategic processes, performance management and corporate governance arealso regulated in numerous international standards, which integrate the fundamentaldemands of publicly responsible corporate behaviour. Such management systems forcorporate governance include: ISO 9001 on Quality Management Systems, ISO 14001 onEnvironmental Management, EMAS (Environmental Management and Audit Scheme): anEU regulation in force since 199313, which allow industrial companies seeking to improvetheir environmental performance to voluntarily register in a common European Unionsystem, and to authenticate and publish their environmental declaration.

These integrated management systems also help with the drafting of sustainabilityreports, since, in addition to the establishment of the actual processes, they can facilitatethe collection of required measurement figures and data.

The GSZT recommends that companies operating in Hungary, in their strategic planningand during the operation of their socially responsible practices, apply internationallyaccepted and tested standards for corporate governance management systems.

ii)

Development of “Social Labelling” ProcessesPlacing different “social labels” on products and services allows producers and serviceproviders to set their socially and ecologically responsible products apart from the othersand also to communicate this feature to consumers.

Social labels may be requested based on compliance with qualification systems andprinciples under state supervision. Such labels include one that is actually called sociallabel , granted based on compliance with ILO principles on working conditions andcircumstances (following the Belgian social label), or various ecolabels granted toproduction technologies and products complying with environmental protectionrequirements.

The GSZT recommends that companies operating in Hungary use “social labels”,Hungarian “Environment-Friendly Product” labels and “European Ecolabels”.

iii)

Responsible Development of Supplier RelationshipsBesides social and environmental impacts of its operation, a socially responsible company

also assumes responsibility for the economic impact of its activities. This may beimplemented through the responsible development of supplier relationships and byestablishing principles and codes which are also applicable to and expected from thecompany's suppliers. This is the best practice of corporate social responsibility: if theordering companies demonstrate responsible practices to their suppliers and demand thatthey to follow the example, this will also reinforce their own responsible behaviour.

The GSZT recommends that companies operating in Hungary lay down principles andcodes which are also applicable to and expected from their suppliers.

13 Eco-Management and Audit Scheme, EC1836/93


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e)

Sustainable Corporations, Publication

i) Sustainability ReportingThe sustainability report is a major pillar of accountability and transparency. The aim ofsustainability reporting is for organisations to render accounts of the economic,

environmental and social aspects of their activities, products and services at one place.One of the benefits of reporting is that it increases the commitment of the partiesconcerned, and due to transparency and information supply, it reinforces stakeholderdialogue and increases the stakeholders' satisfaction and commitment. It improves themeasurement of the organisation’s contribution to natural, human and social capital,thereby ensuring its legitimacy. As a result, the organisation’s performance will remainsustainable in the long term.

It is important that international companies operating in Hungary should not contentthemselves with the sustainability report of their mother company, but should also drawup independent domestic reports. However, the global comparability of such reports, bothin structure and in content, can only be ensured if internationally accepted standards are

followed in their preparation. Companies applying different international standards andrecommendations may participate in global competition, catch up with leading companies,and benefit from the increasing recognition and commitment of global and localstakeholders (employees, customers, partners). One of the most widely used andaccepted reporting standards is the GRI (Global Reporting Initiative), which setscomprehensive guidelines and indices for measuring and presenting the social, economicand environmental impacts of business activity.

The GSZT recommends that companies operating in Hungary draw up sustainabilityreports (in an internationally comparable form, if possible), and make these accessible tostakeholders.

f)

AuthenticationThe mere presentation of facts and data and reporting is not sufficient if they are notconnected to long-term sustainability and strategy. Authentication by an independentorganisation is required in order to verify that the data and figures featured in the reportreflect actual processes and results, and that the information is balanced and impartial.

Authentication may concern the data and indices included in the report, the process itself,or the management systems at the strategic level.

The GSZT recommends that companies operating in Hungary seek authentication for theirsustainability reports, management processes and CSR activity from independentorganisations.

2)

The State and Local Governments

a)

Stakeholder Involvement and Getting InvolvedResponsible competition and socially responsible corporate behaviour are based onstakeholder involvement. In this process, the state acts as a market sector stakeholderwhich must represent its opinion and values. On the other hand, the state and localgovernments are themselves economic operators as well, which means that they alsohave to integrate the principles of responsible operation into their activities; hence theyshould involve their own stakeholders (the economic, civil and academic sectors, citizensand the media) in their operations. Traditional forms of involvement are already inoperation, such as elections, councils, representations, etc. The added value ofstakeholder involvement in responsible business activity is that each stakeholder group isasked for feedback in connection with specific decisions and issues, and that they areencouraged to engage in an active dialogue.


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The GSZT recommends that the Government of the Hungarian Republic and the localgovernments take an active part in the stakeholder dialogue of economic actors, and alsoinvolve stakeholders in their own economic operations, asking for the opinion of eachstakeholder group about specific decisions and issues.

b) Governance: Role Model (Transparency, Role as Owner and Employer)

The operation of the state, state entities and local governments also determines thebehaviour of economic operators. It is essential that they show an example that can andshould be followed by all. The first and most important step is to ensure the transparencyand accountability of state and governmental organisations and public undertakings. Anexample of this is a publication by the German Government which gives a detailedaccount of long-term obligations assumed by the state and of its open and indirectsubsidies.14 Accountability is a necessary component of democracy, which serves as abasis for public legitimacy.Besides transparency, another important thing is the ownership and employer role of thestate and local governments. Accordingly, they should apply the same principles andinternational standards to their own economic activities, which are applicable to economicoperators. As a natural consequence of their idiosyncratic nature, pubic undertakings, and

the state and local governments in their ownership and employer roles cannot be fullyequated with private sector companies. Nevertheless, the application of CSR principles,and the related economic, environmental and social requirements are indispensable forthe long-term sustainable operation and development of the national economy.This means that the principles of transparency and accountability should also apply to thepresentation of state and local governmental activities; for example the accessibility andauthenticity of impact studies and analyses regarding the results of state activities mustbe ensured.

The GSZT recommends that the Government of the Hungarian Republic and the localgovernments ensure the transparency and accountability in respect of surveys on theimpact of their own operations, budget and performance.

c) Strategy

i)

Providing an Appropriate Legislative and Economic Policy FrameworkSocially responsible companies are not enough on their own if they are not integrated intoa political, economic and institutional environment that allows for the functioning ofresponsible competition. Competitiveness, and, parallely, long-term sustainability do notonly determine business operations, but also influence the economy at the regional,national and even international level. It is therefore an essential requirement that thefeatures of corporate social responsibility function at both the micro- and macroeconomiclevels. The responsible behaviour of market actors will be sustainable in the long term ifthe surrounding market, economic and legislative environment recognises and endorses

such efforts.Socially responsible behaviour is also important for financing of state and governmentalbodies and in fiscal planning. The current input financing of the state budget must betransformed to output financing and, eventually, to outcome financing. Socialresponsibility requires that, similarly to the company sector, budgetary areas also becomemore responsive to performance-based endowments. This may result in a morereasonable, transparent and accepted budgetary policy, which would also highlight therecognition of public administrative work.

Any tax reform should fully consider the social requirement that fiscal policy must bepursued consistently: it may not permit certain social groups to be exempted from theirobligations, thereby increasing the tax burden of others.

14


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The GSZT recommends that, in order to establish the appropriate legislative and economic policy framework, the Government of the Hungarian Republic and the Parliament shouldset up a committee on the basis of equal representation with a mandate to review thedomestic legislative environment in consideration of the aspects of CSR and responsiblecompetition, and to make proposals on the transformation, development and expansion ofthe existing legal framework to make it more supportive of CSR. The GSZT recommends

that the committee should involve representatives and experts of the affected economicand social organisations.

ii) Adoption of International Recommendations, Participation in International InitiativesSome international standards and recommendations contain not only guidelines forcompanies, but can also be interpreted and applied at the level of the national economy(ILO, OECD, Transparency International). The adoption and gradual implementation ofthese norms and adequate regulatory amendments can promote the efficiency of stateoperations, the realisation and acceptance of accountability.It is essential for the state and local governments to take part in national, European andinternational conciliation processes which seek to develop and measure recommendationson CSR and national and international responsible competition. In addition, by endorsing,

disseminating, and, in certain cases, even monitoring the domestic application ofstandards aimed explicitly at companies, the state could do much encourage thedissemination of CSR. At the macro level, an important addition would be themeasurement of actually implemented responsible competition, for which measurementschemes are already available (RCI, NCRI), which attempt to link the aspects of corporateresponsibility with national competitiveness.

The GSZT recommends that, on the basis of the already existing measurement schemes(Responsible Competitiveness Index [RCI], National Corporate Responsibility Index[NCRI]), the Government of the Hungarian Republic, together with the internationalorganisation responsible for their development (AccountAbility), should initiate themeasurement of actually implemented responsible competition, and provide resources for

that purpose.

d) Performance Management

i)

Responsible Public Procurement A major tool and form of state and local government economic activities is publicprocurement. Responsible public procurement means that the public procurementprocedure requires or gives preference to adequately certified and authenticatedresponsible products and services or to tenderers demonstrating corporate socialresponsibility (the policy of favouring the socially and environmentally more advantageoustender).The EU Acquis regulates public procurement criteria in detail, granting authorities the

opportunity to integrate environmental, social or ethical criteria in their publicprocurement procedures.

The GSZT recommends that, in public procurement procedures, the Government of theHungarian Republic, the Parliament and the local governments, in line with EUregulations, support responsible corporate behaviour, consider and give preference toresponsible products and the services of responsible companies.

ii)

Development of Incentives A determining feature of corporate social responsibility is that it is voluntary. Sociallyresponsible business behaviour is not generated by legal requirements and regulations;rather, it is the result of changes in the economic environment. Consequently, the state is

not required to lay down strict and generally binding rules. On the contrary, the state mayexert a beneficial impact on the dissemination of socially responsible business behaviourby developing economic incentives which recognise responsible companies but which do


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not impose sanctions on ones that fail to integrate these principles into their marketrationale.

As an example of such an incentive, the state may create different qualification or “labelling” schemes, e.g.: ecomark, social label or fair trade. These qualification schemesserve to distinguish companies which are in full compliance with certain guidelines (forinstance the ILO recommendations in the labour field) and compliant products and

services. This positive discrimination encourages economic operators to form theirbusiness performance in line with such social and environmental principles, and alsomotivates consumers to consider these aspects when making purchase decisions. Existinglabels (such as the Hungarian “environment-friendly product” label) should be reviewed,and new, accepted qualification schemes should be introduced.It may serve as a further economic incentive if socially responsible companies areacknowledged, and the requirement for social responsibility is incorporated as anassessment criterion in the various state subsidy programmes.

The GSZT recommends that the Government of the Hungarian Republic initiate theapplication of further public qualification and “labelling” schemes and elaborate thedetailed rules thereof (ecomark, social label or fair trade). The GSZT will also contribute to

the development of such a label by its own means.

e) Publication

i)

Sustainability Reports on Public UndertakingsReporting is a major means of accountability. Accordingly, for companies owned by thestate or local governments, annual reports and sustainability reports have a dual function:to serve as a role model for other economic operators, and to ensure the transparency ofthe state as an economic operator. If accepted, internationally recognised standards areapplied, the performance of public undertakings can be compared to the results of bothdomestic and foreign companies.

The GSZT recommends that the Government of the Hungarian Republic and localgovernments compel each company in which they are majority owners to draw up annualand sustainability reports (in an internationally comparable form, if possible), and to makethem publicly accessible.

ii)

Targeted CommunicationSocially responsible economic actions will result in business gains for the company in thelong run if they are also valued by society (for example in making purchase decisions).This is why the state – besides creating an appropriate economic and legislativeenvironment – should also make efforts educated society and raise public awareness.This requires the integration of public awareness issues into the educational system,complemented by trainings which help assume related citizen roles.

Support should also be provided to research, conferences and researcher forums whichsupply both multifaceted theoretical surveys and impact studies, and the provision offactual, wide-ranging and balanced information.

The GSZT recommends that the Government of the Hungarian Republic launch acommunication campaign with a view to changing citizens’ attitudes towards publicawareness and social responsibility, and to positively influence related views.

f)

Authentication; Establishment of Qualification BodiesIn respect of authentication, the state should assume a crucial role. State-establishedqualification bodies could serve as the basis for the application of different product labels(ecolabel, social label, etc.). Such market-independent qualification schemes play a

significant role in the authentication of responsible corporate practices, environmentallyconscious products or production processes which allow for sustainable development.


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The GSZT recommends that the Government of the Hungarian Republic and theParliament set up qualification schemes which recognise responsible corporate activities,and responsible production, products and services which meet environmental and socialdemands.

3)

Civil Society

a) Stakeholder Involvement

i) PartnershipPartnership with the market and civil society, and the establishment and maintenance ofcommon dialogue both lay the foundation for the creation of an economic policyenvironment which supports socially responsible business operations. Tripartitenegotiations ensure that the different interests and values are expressed, discussed andthe opinions are incorporated. On that basis, it is possible to establish mutual agreements,norms or regulations which stimulate cooperation between the market sector, the

government and civil society.Furthermore, civil society can contribute to the renewal of tax awareness amongindividuals and tax-paying organisations.

This partnership can serve as a basis for serious cooperation if it is implemented in everypossible case, which means that more and more negotiations, preparatory andconsultative forums are held with the joint participation of state, market and civilrepresentatives.

The GSZT recommends that NGOs operating in Hungary initiate cooperations, joint andactions with the company sector that result in the exercise of civil society’s verifying andauthenticating function in a way that is also effective for the stakeholders of company

operation and contributes to the raising of tax awareness.

ii) Publication of Cooperative Principles and ValuesRelationships between NGOs and the market sector can be established in several waysand through multiple channels. For the sake of transparency, one responsible NGO shouldmake publicly available those cooperative principles and values governing its relationshipswith companies and public authorities.

The GSZT recommends that NGOs operating in Hungary publish on their websites or byother means the cooperative principles and values which determine their relationshipswith economic operators.

b)

Governance

i) Independent Expert ParticipationIn the field of performance management, an important feature of socially responsiblecompanies is that they involve independent managers and board members who areresponsible for the implementation of responsible company behaviour. On the basis oftheir expertise, involvedness and represented principles, civil experts can also fulfil thesetasks themselves, thereby representing the needs and interests of their own field ofspecialisation (e.g.: the employment of disadvantaged workers or environmentallyconscious production) or of general social and environmental needs in corporate decision-making processes.


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The GSZT recommends that NGOs operating in Hungary participate as independentexperts and board members in corporate decision-making and in the preparation ofstrategic decisions.

ii) Transparent Management As in the market and state sectors, transparent management is indispensable also for theresponsible operation of NGOs that can further strengthen trust in NGOs, and allow themto respond faster and more effectively to economic and social challenges. If powers,designation procedures and management processes are made transparent and publiclyaccessible, it will also facilitate reporting to stakeholders.

The GSZT recommends that NGOs operating in Hungary make their managementstructure and processes transparent and publicly accessible.

c)

Strategy: Dissemination of International Standards and RecommendationsNGOs can have a decisive role in the dissemination of international recommendations,principles and standards. There are already some serious organisations in Hungarydealing with the dissemination, installation and auditing of various international

management systems for quality assessment or corporate governance, but they are stillfew in number. A possible driving force behind this effort may be a number ofinternational NGOs or networks dealing with CSR which also have Hungarian branchoffices.NGOs could be in the frontline for the domestic implementation of such efforts andprinciples as the employment of disadvantaged workers, the creation of equalopportunities at companies, environmentally conscious corporate governance, etc., andalso possibly even in international cooperation in these areas.

The GSZT recommends that NGOs operating in Hungary represent and activelydisseminate international standards, principles and recommendations on corporate socialresponsibility.

d) Performance Management: Trainings for the Market Sector and the MediaIn the field of performance management, NGOs have a decisive role to play in trainingsfor the market sector and the media. As external independent actors and advisors, theycan help companies explore and understand their industrial impact on environmental,economic and social levels. Furthermore, they can provide training for the media, wherethey present the different areas of and possibilities for corporate social responsibility.

The GSZT recommends that NGOs operating in Hungary hold trainings for the marketsector and the media on corporate social responsibility and on the practice of

performance management.

e)

Publication, Public ReportsIn civil society, transparency constitutes a fundamental principle which can ensurelegitimate operation between market and state. Actual accountability and the presentationof transparent economic relations will strengthen the role of NGOs in the economy and asopinion leaders. As well, the position of trust they enjoy owing to their independencyentails a corollary responsibility to fully observe the principles of transparency andaccountability in their operations. In their case, budgetary accounts and the presentationof management and social activities form particularly important elements of their publicreports.

The GSZT recommends that NGOs operating in Hungary draw up public reports to presenttheir responsible operating practices, and make these accessible to the stakeholders, in

particular to the state and the corporate sector.


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f) Participation in AuthenticationNGOs as external experts can have a decisive role in the authentication of sociallyresponsible corporate practices. This can include, on the one hand, examination andqualification of responsible corporate behaviour as such, together with the relatedcorporate and involvement processes, on the other hand, it may refer to the examinationof the correctness of published data and results, and it may also mean qualification of

responsible principles and processes implemented at the strategic level and systematicallyintegrated into corporate governance.

The GSZT recommends that NGOs operating in Hungary take an active part in theauthentication of the economic operators’ socially responsible practices.

4) Mediaa) Strategy

The media has a dual responsibility in the field of corporate social responsibility. Firstly,they also operate in a corporate form, thus their own operations also require socialresponsibility, stakeholder involvement, the assessment and improvement of economic,social and environmental impacts.

Secondly, in the era of an information-based society, the media has a prominent role inraising relevant topics, opinion and problems, and in informing/educating the public.Therefore, the balanced supply of information, objectivity and the presentation of thewidest possible range of opinions is indispensable for responsible media operation.The media are also an important channel for boosting public awareness, since by raisingissues of environmental and social sustainability and by giving a balanced overview ofdifferent opinions, arguments for and against, they can promote and reinforceopportunities for the forming of opinions in the private and civil sectors. Transmittinginformation and providing the opportunity for in-depth knowledge of divergent views willgenerate an ever-greater demand for information. A society which is more aware willoperate in a substantially more democratic context – an important feature of mediaactivity. An important consideration in that regard is that the media can utilise their

unique potential for developing public awareness, including the improvement of taxawareness among individuals and taxpayer organisations.Naturally, each different type of media highlights different types of topics: for instance,internet and television offer a forum for different stages of stakeholder dialogue, whiledifferent ecological issues may be raised in a newspaper or on a satellite televisionprogram. However, they shall all assume the same responsibility for the ways theypresent and select information, news and events.15

The GSZT recommends that Hungarian media actors, following the responsible practice ofother countries, initiate sectoral cooperation and set up a forum for raising (public)awareness in society, raising issues of social sustainability, presenting different opinions,arguments for and against and information related to the assumption of responsibility and

responsible operation, and also for promoting responsible advertising and self-regulation.

b)

Active Stakeholder PartnershipThe media can have an active role in the process of stakeholder involvement anddialogue, firstly, as a channel for the opinions of the different sides, and secondly, as animportant stakeholder itself in corporate social responsibility. This is why it is importantthat media are represented in the establishment of stakeholder partnership, and that theyinform the broader public of these processes.

The GSZT recommends that Hungarian media actors be active members and agents in theestablishment of stakeholder dialogue and multilateral partnership.

15 The GSZT endorses the position adopted by the Hungarian Advertising Association and Braun & Partners, whichcan be found annexed to this document.


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c) Publication ChannelThe media acts as a key actor in the formation of public opinion and social awareness. Inthis respect, their reports on the economic actors’ socially responsible activities and onsocially conscious corporate behaviour form one of the most efficient publication channelsfor companies, NGOs and the state. At the same time, the media bear a crucialresponsibility for the supply of this type of information; they should make all efforts to

present transparent and authentic corporate performance which rely on real involvementand strategic processes, instead of serving as a mere “advertising surface”.

The GSZT recommends that Hungarian media actors provide a forum for the presentationof authentic and transparent business operations, examples, and socially responsibleactions, thereby raising the awareness of and providing information to the recipients insociety.

d) Tools for Verifying Authenticity Authentication is a means for “measuring” and assessing corporate social responsibility.The media can provide active assistance in this area by using their own tools (reports,fact-finding, news, information gathering, interviewing stakeholders) to investigate,

demonstrate or to question authenticity, and to enumerate good examples and practicesworth following.

The GSZT recommends that Hungarian media actors use their own tools to presentcorporate social responsibility, to examine authenticity and to present good examples and

practices worth following.


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SUMMARY: AN OVERVIEW OF THE GSZT’S RECOMMENDATIONS

SECTORS

FIELDS

Market, companies State, local governments Civil society

1. stakeholderinvolvement

- to create stakeholder dialogueand involvement- responsible lobbying

- stakeholder involvement andgetting involved

- to cooperate with the mand state sectors- to publish the principlesvalues and forms which gtheir responsible cooperawith the market

2. governance - independent members on themanagement board- to adopt a code of ethics

- to be a role model oftransparency, and also as anowner and employer

- to participate as indepeexternal experts- to ensure the transparetheir own operations

3. strategy - responsible marketing

- to adopt and strategicallyimplement recommendations ofinternational organisations

- to provide an appropriate

proper legislative and economicpolicy framework- to adopt internationalrecommendations, toparticipate in internationalinitiatives

- to disseminate internati

standards andrecommendations

4. performancemanagement

- to apply corporate governancemanagement systems- to set up “social labelling”processes- to develop responsible supplierrelationships

- responsible publicprocurement- development of incentives

- training for the market sand the media

5. Publication - sustainability reports - sustainability reports of publicundertakings- targeted communication

- sustainability reports

6. Authentication - authenticated social reportsand processes

- to develop and operate “sociallabelling” schemes

- to participate in authent


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ANNEX

Legal demarcation

As a consequence of the currently effective interpretation of the law (by the National Radio and

Television Commission – ORTT), the display of a business association’s socially responsible actionsqualifies as covert advertisement, and entails the imposition of substantial fines. We disapprove of thispractice for several reasons.

“Covert advertisement” as defined in the Media Act (paragraph 4 Article 2) comprises encouragementto purchase goods, to use a service or to perform any other business action. Where viewers/listenersare informed of a market operator’s socially responsible actions, the above-indicated factor is onlyvery minimally present. The presentation and reception of such information will not result in directbusiness action. This type of presentation only serves to generate an image of a socially committedbusiness actor in the viewer’s/listener’s mind, which – though it may indirectly contribute to a morepositive judgment on that economic operator – does not at all imply that it would be manifested indirect purchase of goods or use of services. For the above reasons, we claim that the interpretationand sanctioning of reports on socially responsible activities as covert advertisements is based on a far-

fetched and unlawfully extending construction of "encouragement to such actions", which conflictswith both the legislator’s intent and with the literal meaning of the provision. This broad interpretationis no less harmful for society, since real endorsement for the CSR business case, whereby the statecould also share its public responsibility with market actors, would require realistic legislation and lawenforcement.Contrary to the logical treatment of the issue in the Act on Advertising, in the Media Act, “covertadvertisement” is not defined by cross-reference to the definition of “advertisement”, still, it is alsoteleologically probable that the two concepts are dogmatically linked. Therefore, to get a properunderstanding of “covert advertisement”, it is advisable to first examine the definition of

“advertisement”. This requires that publication is made in consideration, which is again not true in theabove-discussed cases.Consequently, if the electronic media reports on a market actor’s socially responsible activity, this doesnot qualify as advertisement, provided that no product or service is displayed that is directly availableon the market, and no advertising line or encouragement to purchase is included which would giveencourage purchase or directly display the corporate image. Such reports contain mere facts withoutconfirmation or value judgment, and inform of responsible practices without consideration.

Documents

GSZT Recommendations on Social Responsibility