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ANALYSIS

of THE ECONOMIC AND SOCIAL COUNCIL on SOCIAL AUDIT EXPERIENCE AND PROSPECTS FOR DEVELOPMENT (own-initiative analysis)

Sofia, December 2010

The 2010 action plan of the Economic and Social Council envisions the elaboration of an own-initiative analysis on the topic of:

Social Audit - Experience and Prospects for Development


The President of the ESC by means of his Letter with Issuance 02306 08 02 20 0, Pursuant to Article 15, Paragraph 1, Item 9 of the Regulations of the Economic and Social Council assigned the elaboration of the analysis to the Labour, Income, Living Standards and Industrial Relations Commission together with the Budget, Finance, Insurance and Social Security Commission. Aleksandar Zagorov, Member Group II of the Council Organisations Representing Workers and Employees, was appointed rapporteur on this analysis. Zlatka Gospodinova, Auditor, and Tatyana Mihailova from the Institute for Trade Union and Social Research at the Confederation of the Independent Trade Unions in Bulgaria (CITUB) were involved to participate in the preparation of this analysis. At their joint meeting, held on 14 December 2010 The Labour, Income, Living Standards and Industrial Relations Commission together with the Budget, Finance, Insurance and Social Security Commission discussed and adopted the project for this analysis. At its Plenary Session, held on 20 December 2010 The Economic and Social Council adopted this analysis.

Contents 1. INTRODUCTION................................................................................................................................... 3. THE HISTORY OF SOCIAL AUDIT ...................................................................................................... 4. THE GLOBAL CONTEXT OF SOCIAL AUDIT .................................................................................... 5. EUROPEAN EXPERIENCE ................................................................................................................ 6. BULGARIAN EXPERIENCE ............................................................................................................... 7. REGULATION..................................................................................................................................... 8. WORLDWIDE INITIATIVES AND STANDARDS FAMILIAR IN BULGARIA ....................................... 9. EXPERIENCE AND PRACTICES IN BULGARIAN ENTERPRISES ................................................... 10. SOME ORGANISATIONS ENGAGED IN SOCIAL AUDIT IN BULGARIA ........................................ 11. BENEFITS AND LIMITATIONS / ADVANTAGES AND DISADVANTAGES .................................... 12. PROSPECTS FOR FURTHER DEVELOPMENT OF CSR AND SOCIAL AUDIT IN BULGARIA ..... 13. CONCLUSION .................................................................................................................................. 14. ANNEX - Organisations, standards and initiatives ............................................................................ ABBREVIATIONS USED: ESC CSR CITUB HRDOP NGOs GLIEA UN OECD MNC HSW EU UNGC EC EEC PPE NBU Bulgarian Economic and Social Council Corporate Social Responsibility Confederation of Independent Trade Unions in Bulgaria Ministry of Labour and Social Policy Human Resources Development Operational Programme Non-Governmental Organisations General Labour Inspectorate Executive Agency United Nations Organisation for Economic Cooperation and Development Multinational corporations Health and Safety at Work European Union United Nations Global Compact European Community European Economic Community Personal protective equipment New Bulgarian University

1. INTRODUCTION The purpose of this analysis is to present the concept of social audit, its development and practical application in the world and Europe, as well as the existing practice in Bulgaria. Due to the voluminousness of the information on topics such as corporate social responsibility, sustainability reporting, sustainable investment, sustainability indices, ethical labelling, sustainable consumption, codes of conduct, ecological, social and ethical accountability - which runs to tens of thousands of pages, the present analysis does not claim comprehensiveness but focuses only on the most important trends and developments in the field. Due to the fact that in Bulgaria social audit is performed only in relation to one of the standards: environmental protection, and that this responsibility has been voluntarily assumed by many Bulgarian business organisations, and many consultancy firms and experts are already offering their services in this field, this particular aspect of social audit has remained outside the focus of this analysis. The methods used for the analysis are: desktop research of over 1,200 documents, websites and publications on the Internet, telephone interviews with 6 social audit professionals from Bulgaria, and 2 surveys using short standardised e-mail interviews of more than 4,000 Bulgarian enterprises. The analysis includes the results from interviews of key members of CITUB and the territorial divisions of the Confederation of Labour (CL) "Podkrepa" who offer their opinion on the practice of businesses for which there is evidence of social accountability, on the debate on corporate social responsibility and accountability in the social dialogue at the level of the enterprise, and on the question whether the issues of CSR are part of the sector social dialogue.

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2. MAIN CONCLUSIONS AND RECOMMENDATIONS 2.1. Social audit is only a "snapshot" of a given situation - it is performed once per year within an interval of 1 to 3 days. Typically, the duration of the audit (1 to 3 days) is not sufficient to "implement" rather than simply "impose" the concept and practices of CSR. Although in the case of Bulgaria social audit overlaps to a large extent with the regulations of national legislation, it can not serve as a substitute for the activities of Bulgarian controlling authorities, which are responsible for monitoring its performance. Often the audit in an enterprise is paralleled by an audit performed by another organisation, since the commissioner is different and the audit is performed by different organisations. This is a problem that is often emphasised by companies-suppliers, who claim to be subjected to the same auditing procedures several times for different customers, which also takes too much time and resources. 2.4. Social Audit does not offer enough instruments capable to solve problems and infringements, as compared to social dialogue. 2.5. Very often, suppliers are not from the so-called "first tier" but from the "second" and even "third" one. This means that between global buyers and suppliers there may be an agent, a licensed company, etc. This leads to inadequate communication along the supply chain and therefore to confusion with respect to the responsibilities assumed. 2.6. Companies that have been subjected to social audit are not always able to present documentation regarding their policies and procedures related to the labour of their employees, their working hours and vacations, holidays, wages, their recruiting and dismissing of workers, and generally with regard to human resources. The documentation required in respect of records of workers is usually perfect. 2.7. Employers, and hence even more so their employees, are not fully aware of the purpose of social auditing and the codes of conduct they are expected to comply with. There are serious weaknesses in meeting the requirements for transparency and consultation, as well as with respect to the creation of functioning (not merely formal) committees (groups) on the conditions of employment. 2.9. Since some of the codes include requirements for environmental protection, it is established that some Bulgarian enterprises are still at the very beginning of understanding their true impact on the environment. The environmental impacts of businesses that have a complex permit and permits for trade in greenhouse gas emissions are regulated in full detail and subject to constant monitoring on part ________________________________________________________________________ ESC/2/023/2010 Commission on Labour, Income, Living Standards and Industrial Relations Commission on Budget, Finance, Insurance and Social Security

of the control authorities of the environment - The Regional Inspectorates of Environment and Waters (RIEW). The process of inclusion of the other enterprises is slow and difficult but advances with small steps towards improvement. 2.10. ESC believes that the coordinated efforts of all stakeholders must be combined and that subsequent activities should be directed to the study, promotion and dissemination of various instruments for the socially responsible behaviour of both social partners and other civil society organisations. .11. The problems related to this so far rather fragmented approach to the promotion, implementation, reporting and verification of CSR activities can be solved only on a voluntary basis. "Market forces" should be encouraged to create favourable environment to the launch of "social audit". . It is necessary to develop national (sample) indicators for reporting on CSR based on observations, research and analyses. They should be logically supplemented by specific indicators used by the national councils for tripartite cooperation in different sectors. 2.13. The CSR Advisory Board should focus its activities on the study, promotion and dissemination of various instruments for socially responsible behaviour of businesses and other organisations - NGOs, the government (ministries), public organisations, educational and medical organisations. This can solve the problem posed by the so far rather fragmented approach to the promotion, implementation, reporting and verification of CSR activities. 2.14. To support the work of the CSR Advisory Board of the Minister of Labour and Social Policy, it would be appropriate to examine and translate a number of European and international (as well as the available Bulgarian) documents and practices of social audit. 2.15. ESC evaluates as appropriate and timely the opportunity created by means of the Human Resources Development Operational Programme for training of over one hundred leading and internal social auditors, as well as the forthcoming creation of a concept and information system for social auditing in one particular branch. ESC will assist for the presentation of these activities to a wide range of stakeholders and, after their critical reception is considered, it will commit to the promotion of this approach. 2.16. The Plan for the National Strategy for CSR 2011 may include corresponding specific activities. So far the Strategy and the Action Plan 2010 Do not include any ideas or proposals concerning the compulsory or voluntary reporting ________________________________________________________________________ ESC/2/023/2010 Commission on Labour, Income, Living Standards and Industrial Relations Commission on Budget, Finance, Insurance and Social Security
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of the environmental, social and ethical behaviour of business, and indicators which can be used in a comparative account of the situation; Nor do they address social audit as an instrument for the verification of CSR activities which can be used to strengthen the confidence of stakeholders. 2.17. The Action Plan for the National Strategy for CSR 2011 and 2012 should stipulate and provide with resources the responsibilities and commitments of the social partners and the state in the promotion and dissemination of knowledge on CSR and the development of social dialogue on issues concerning CSR and social auditing. 2.18. With respect to public procurement, the government and the social partners should discuss the opportunities for expanding the legal incentives for companies to apply the principles of social responsibility and social auditing. In this case it will be necessary to create additional capacity in the competent authorities for the performance of such functions. 2.19. ESC proposes the creation of an opportunity to systematise the information about the training and certification of social auditors by means of a voluntary register. 2.20. We believe that in the Bulgarian environment the processes of reporting and auditing should be developed gradually respecting the principle of voluntary disclosure of data concerning socially responsible practices. Social reports should contain adequate information and should account for the results of the social activities performed by enterprises. After sufficient information has been disclosed and practical experience has been accumulated, the subsequent step - to auditing the process of reporting - may be undertaken. 3. THE HISTORY OF SOCIAL AUDIT 3.1. Concept As social audit is associated primarily with the concept of corporate social responsibility it is important to outline the development of this concept over the years. What we understand as CSR today can be traced back to the second half of the 19th century, when philanthropist John D. Rockefeller made his first donation the continuity of which we see today - more than one hundred years later with people like Bill Gates for example. The concept of Corporate Social Responsibility (CSR) emerged in the 1940s when Theodore Kreps - a scholar of the era of the Great Depression - first used the term "social audit", urging ________________________________________________________________________ ESC/2/023/2010 Commission on Labour, Income, Living Standards and Industrial Relations Commission on Budget, Finance, Insurance and Social Security

companies to recognise their responsibilities to the citizens. However, the term "corporate social responsibility" entered popular language in the 1950s through the seminal book of R. Bowen "The Social Responsibilities of the Businessmen." . One of the fundamental definitions of the contemporary concept of CSR surfaced in the 1970s - the four-part model of Carroll1 for corporate responsibility. According to this model, the corporation has economic responsibility to be profitable, legal responsibility to respect the law, ethical responsibility to do what seems right, and philanthropic responsibility to do what society desires. This is when the first code of CSR - the Global Sullivan Principles - appeared. There also emerged a new wave of interest in social and ethical accounting, auditing and reporting (SEAAR). The concept of "stakeholders" was developed and organisations, such as the U.S. Chamber of Commerce, establish the connection between the practical implementation of CSR and its improvement - and long-term profitability. Regulation in the social sector increases and one example of this trend is the appeal of the International Confederation of Free Trade Unions (ICFTU) for regulation of the power of Multi (Trans) national corporations (MNC). The Centre for Multinational Corporations of the United Nations, OECD and ILO discussed the activities of MNC and debated how they could be best regulated. As a result, the OECD adopted the Declaration on International Investment and Multinational Enterprises in 1976 and in 1977 the Tripartite ILO Declaration2 on the principles relating to multinational companies and social policy was approved. Codes of conduct were introduced in the early 1990s, after it became apparent that the international regulatory environment is insufficiently prepared to face the consequences of the rapid growth of global supply chains. For example, boycotts and protests in response to findings of violations of labour rights in the industries of apparel and sporting goods in the early 1990s put pressure on companies to take active steps to monitoring working conditions in their supply chains. . In the 1990s CSR was institutionalised by standards such as ISO 14001 and SA 8000, the guidelines of the Global Reporting Initiative (GRI) and codes of corporate governance such as those of Cadbury and King. In the 21st century development continues with the emergence of numerous guidelines, codes and standards of CSR (more than 100 of them are listed in A to Z of Corporate Social Responsibility 3 ).
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Carroll, A. B. (1979): Three-dimensional model of corporate performance, Academy of Management Review 4 (4): 497-505 2 http://www.ilo.org/public/english/standards/norm/sources/mne.htm 3 Wayne Visser, Dirk Matten, Manfred Pohl, Nick Tolhurst: The A to Z of Corporate Social Responsibility, ISBN: 978-0-470-72395-

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3.2. Definitions of social audit . Since there is no generally accepted definition, and in order to give a more comprehensive idea of the concept, several different definitions of social audit are presented below: Social Audit: is systematic assessment of the social impact of the organisation according to set standards and expectations.4 Social Audit: a method that organisations can use for planning, managing and measuring their nonfinancial activities and monitor both the internal and external effects of the social and business performance of the organisation.5 Social Auditing: is a process that allows organisations and agencies to evaluate and demonstrate the benefits and limitations of their social, environmental activities and their performance in the community. It is a way to measure the extent to which the organisation complies with the shared values and goals which it has committed to implement and promote.6 Social Auditing: is a process in which the organisation can report its social performance as well as report and improve on these achievements. It assesses the social impact and ethical behaviour of the organisation in relation to its objectives and those of its stakeholders.7 A more detailed definition8 :

Social Auditing is a process that allows organisations to assess and demonstrate their social, economic and environmental benefits and limitations. It provides an opportunity to measure the extent to which the organisation adheres to the shared values and goals to which it has committed itself.

Social Auditing provides an assessment of the impact of the non-financial objectives of the organisation by systematically and regularly monitoring its achievements and the opinions of its stakeholders.

Social Auditing requires the active participation of stakeholders. This may include employees, customers, volunteers, investors, contractors, suppliers, local residents, civic movements, NGOs,

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6 7

Green Paper on promoting a European framework for corporate social responsibility of the EC Social Audit Toolkit (1997), Freer Spreckley, Social Enterprise Partnership Social Economy Agency Northern Ireland The New Economics Foundation Overview of Social Auditing , www.interpraxis.com

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the government, and other parties interested in the organisation. Stakeholders are defined as persons or organisations that are interested or have invested resources in the organisation.

Social audits are carried out by the organisations themselves and those who are directly involved. A person or group of people outside the organisation verify the accuracy and objectivity of the social audit. Social audit can be one of the following three types:

First party audit when the enterprise undertakes a self-evaluation using its own internal auditors. Second party audit when the enterprise audits its suppliers to its own code of conduct or to an external standard. Third party audit when the enterprise is audited by an independent external organisation. . First party audits are often carried out by a visiting auditor or certification body

employed by the management of the enterprise to conduct an internal audit although some global companies accept self-evaluation performed by the suppliers themselves to the code of the company. Second and third party audits are often undertaken by global buyers or a professional accountancy firm to verify suppliers' compliance with the code of the enterprise. They are based on a single visit and are typically performed within a very short interval of time which may vary depending on the customer requirements and on the type of the auditing organisation. The social auditor receives or makes himself a checklist against which to verify compliance with the code or standard. Sometimes the components of this checklist are categorised depending on whether they are requirements or recommendations (a "requirement" is typically the case where international standards and national legislation are concerned; a "recommendation" may refer to work-related social issues and sectoral requirements). If ii is discovered that the supplier fails to comply with the "requirements," it does not pass the audit. Partial failure to comply with a "requirement," however, leads to immediate correction before compliance may be verified. If it is discovered that the supplier fails to comply with a "recommendation," prescriptions for corrective measures are made. Non-compliance or partial compliance is followed by prescriptions for corrective measures within a specific time limit. Third party audits of suppliers' compliance with independent codes provide to global buyers a recognised form of external verification that minimum labour standards are complied with along the supply chain. Such third parties may be non-governmental organisations, established specifically to audit employment-related issues in developed or developing countries, and companies ________________________________________________________________________ ESC/2/023/2010 Commission on Labour, Income, Living Standards and Industrial Relations Commission on Budget, Finance, Insurance and Social Security

with long-lasting traditions in performing audits of management, environmental or health and safety standards. Furthermore, financial auditing companies, such as Price Waterhouse Cooper and KPMG, also conduct audits of corporate social responsibility and social audit.9 Accreditation of social auditors Accreditation of social auditors exists in some countries in compliance with accepted national standards or codes of conduct:

UK - AccountAbility USA - Social Accountability International (SAI) France - l'Institut de l'Audit Social (IAS 2004) Based in Scotland network of social auditors (Social Auditors Network) (SAN 2004). etc. ,

The first two of them have become international standards. 4. THE GLOBAL CONTEXT OF SOCIAL AUDIT 4.1. The definitive documents on a global scale are:

ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy, adopted in 1977 and updated in 20 Declaration on Fundamental Principles and Rights at Work adopted by ILO in 1998; Declaration on International Investment and Multinational Enterprises, an integral part of which are the guiding principles for the ICC, adopted by the Organisation for Economic Cooperation and Development (OECD) in 1976 and updated in 2000;

UN Global Compact. 4.2. Depending on type CSR instruments may be: Guidelines for management systems and certification schemes: auditing guidelines for

implementation, review and external certification of compliance with standards, audit of standards. Some standards are related to the organisation (e.g. EMAS), some to the corporation (e.g. SA8000), and some to the product (e.g. FSC criteria). These standards enable businesses to improve their internal procedures for CSR activities and to gain the confidence of consumers and other stakeholders by means of certification or verification.

Participatory Social Auditing: A Practical Guide to Developing a Gender-Sensitive Approach, Diana Auret and Stephanie Barrientos, Institute of Development Studies 2004, ISBN 1 85864 850 5

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Rating indices are mainly used by agencies for socially responsible investment: they are a set of criteria used by rating agencies and social investment funds to identify companies that are considered acceptable in terms of "socially responsible investing." Different funds have different criteria. Individual investors can choose the fund which corresponds best to their requirements. Recently, however, independent indices for social investment were developed by FTSE and Dow Jones. . Framework initiatives for accountability: guidelines for processes which include mechanisms for accountability (e.g. AA1000S and GRI). These standards do not specify high levels of achievements but provide a framework for communicating and responding to concerns of stakeholders in relation to social, environmental and economic achievements. "10 4.3. Some international organisations and standards International Labour Organisation (ILO) The International Labour Organisation formulates international labour standards by means of conventions and recommendations, setting minimum standards for fundamental labour rights: freedom of association, right to organise and collective bargaining, abolition of forced labour, equality of opportunity and treatment, and other standards regulating conditions across the entire spectrum of work related issues. Bulgaria is one of 183 member states of the ILO. 4.3.2. UN Global Compact. UN Global Compact is a voluntary initiative established in 2000. It encourages the private sector, the structures of the civil society, trade unions, UN agencies and other stakeholders to implement the ten universal principles of social responsibility and environmental protection in their daily activities. The Global Compact aims to engage businesses in the fight against major social and environmental challenges inherent in the increasing globalization. AA1000 Standard AA1000APS 2008 is issued by the UK-based organisation AccountAbility. It is used by organisations to develop a responsible and strategic response to the problems of sustainability including by means of reporting. It provides auditable criteria for each of the three principles for inclusion, responsibility and materiality in the context of the auditing commitment AA1000AS.

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Towards a sustainable corporate social responsibility , European Foundation for the Improvement of Living and Working Conditions , 2003 on , ISBN 92-897-02 3-3

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SA 8000 Standard Social Accountability International (SAI) is a non-profit organisation, based on a multistakeholder principle generally dedicated to improving the workplace and society as a whole through the development and implementation of standards of social responsibility. It is also a partner in the initiatives for the elimination of exploitation (i.e. sweatshops) by promoting ethical working conditions, labour rights, corporate social responsibility and social dialogue. SAI developed one of the world's best social standards - SA 8000 decent working conditions. It is an instrument for implementing international labour standards which recognises the importance of each job and seeks to establish uniform recognition of the dignity of every person involved in the supply chain - from worker to the retailer and consumer. The SA 8000 standard uses the influence of businesses and consumers so that they purchase products manufactured by producers that recognise rather than ignore the honest labour of people for their livelihood. As of 30 June 2010 on a global scale there are 2258 enterprises from 66 countries in 60 sectors with a total of 1,306,579 workers that are certified under the SA 8000 standard. Many more jobs are involved in programmes using SA 8000 and other SAI guidelines. Corporate Programmes are the main component of the work of the SAI. These programmes involve corporations interested in the development of socially responsible supply chains. At the top level corporations participate in a comprehensive corporate evaluation program that analyses their supply chain and makes recommendations for improving the social responsibility from headquarters to subcontractors. Some of the corporate members of the SAI are Dole food Products, Gap Inc., Otto Versand, Tchibo, Eileen Fisher, Toys "R" Us, Timberland, Gucci The Limited, Hewlett Packard Tex Line, Charls Vogele and Cutter & Buck. SAI expanded its corporate coverage in 2006 by entering into an agreement with the European Business Social Compliance Initiative (BSCI), whose essence is that 83 European retailers to work with their supply chains, using the SA 8000. BSCI operates in public-private partnership with the German Development Agency (GTZ). Some retailers are Metro, I & A, Migros, Coop Switzerland, Kesko and Ahold. Furthermore, SAI is an active participant in global cooperation programs and organisational partnerships such as:

ISEAL Alliance of which SAI is a founding member which gives to SAI access to a significant

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number of companies in many industries. Other members include Fair Trade Labelling Organisation, Marine Stewardship Council, Rainforest Alliance and Forest Stewardship Council;

MFA Forum, in the Executive Committee of which SAI participates and which can provide opportunities for joint efforts with respect to the activities of Forum under the programme in Lesotho. SAI is aware that voluntary standards for compliance are just a part of what is

necessary to improve compliance with labour laws. Through its regional programmes SAI has accumulated extensive experience worldwide of working with the governments of many countries on initiatives to improve labour rights in various industries. More recent programmes include:

Project Cultivar: Encouraging labour rights in agriculture in partnership with the US Department of Labour, the Ministries of Labour of the Dominican Republic, Nicaragua and Honduras, focusing on improving labour standards and competitiveness in the agriculture sector of these countries.

Continuous Improvement in the Central American Workplace (CIMCAW), on which SAI is working together with the US Agency for International Development (USAID) and the Ministry of Labour of Guatemala, the Dominican Republic, Nicaragua, Honduras and El Salvador. Moreover, the Ministry of Labour of Nicaragua is a member of the advisory committee for the project. The project has been running since 2003

Italy requested that SAI would work with local governments throughout Italy to promote the SA 8000 and connecting the certification standard to application procedures in public procurement. The regions involved in the project are Umbria, Tuscany, Abruzzo and Rome.

The government of Pakistan adopted the SA 8000 standard for national labour standard and uses it to enhance the competitiveness of local enterprises as well as a tool for increasing exports. SAI provides consultancy services to government. The purpose of these programs is to build an environment in which labour rights are

respected by means of:

Strengthening of local capacity and leadership to support the efforts of employers to comply with the standards and creating a favourable environment for the inclusion of workers; Promoting social dialogue as the basis for sustainable change and Connecting legal standards to the encouragement of voluntary compliance incentives. SAI is one of the leading global organisations, providing training for compliance, which has

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to this date trained over 20,000 people, including company managers and company employees, officers on the compatibility of global brands, auditors, inspectors, labour union representatives and other advocates of workers' rights. Here are some examples:

490 workers, managers, labour inspectors, government inspectors were trained within a USAIDfunded programme in Central America the aim of which is to provide training that will help benefit 50,000 workers from participating companies.

SAI has provided training and technical assistance to investors in development, including staff from the FMO, the Development Bank of the Netherlands. With the assistance of a EU grant scheme SAI works with the Federation of European Trade Unions (textiles, clothing and leather) and the European Confederation of the Footwear Industry and provides training and capacity building projects for employers and trade union representatives in 10 European enterprises producing shoes and leather processing plants. The latest developments of CSR and social standards based on conventions of the International Labour Organisation SA 8000 are implemented. The project includes the development of documentation for the regulation of social responsibility designed for companies and corporations.

Over 4,000 workers were trained under the program "Training of Trainers" (developed jointly with the International Textile Garment and Leather Workers Federation (ITGLWF), supported by the Ford Foundation, US State Department (Democratic Human Rights & Labour Programme) and the Joyce Mertz Gilmore Foundation. Lesotho was one of the parties in this respected and prestigious project.

SAI provides training to suppliers of clothing and shoes in Vietnam aiming to increase the knowledge and experience of managers, government agencies and auditors with respect to the implementation and monitoring systems with social action such as the SA 8000. The project includes the development of a tool for supplier self-assessment, convening of round table sessions for shareholders on an international scale and conducting joint training of workers and managers. 4.4. Global Reporting Initiative (GRI)11 The beginning of the GRI is rooted in the Boston-based NGO "CERES" and the "Tellus"

Institute. Co-founder and former CEO of GRI, Dr. Alan White, Vice President and Senior Fellow at Tellus, marked the beginning of a framework of environmental reporting as an advisor to CERES in the

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http://www.globalreporting.org

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early 1990s, to create a mechanism for accountability ensuring companies' compliance with the CERES principles of responsible environmental behaviour. Since its inception in 1997 GRI has developed from a bold idea to a thriving international network involving 30,000 people in 70 countries. This growth is a reflection of the coming of age of sustainability reporting, which has evolved from an extraordinary exercise by a few pioneering organisations a decade ago to an essential management and communications tool for many businesses and a valuable resource for their stakeholders. 10 yeas on, over 1000 organisations now self declare the use of the GRI Guidelines in their sustainability reports. Reporting on sustainable development is a practice that seeks to achieve sustainable development and includes measurement, dissemination and reporting the performance of the organisation to internal and external stakeholders. "Accounting for Sustainable Development" is a broad concept - synonymous to similar terms used in considering the economic, environmental and social impacts (e.g. ternary reporting, reporting of corporate responsibility, etc.). The report on sustainable development must include a balanced and responsible disclosure of the reporting organisation's performance with respect to sustainable development and includes both positive and negative contributions. Reports on sustainable development using the GRI Reporting Structure, reveal the achieved effects within the reporting period as well as results with respect to the undertaken commitments, the strategy and management approach of the organisation. Reports can also be used for the following purposes:

To provide a standard and a means of evaluation of the effectiveness of sustainable development in accordance with laws, rules, codes, standards for performance and voluntary initiatives. To demonstrate how the organisation influences and is influenced by the expectations for sustainable development and To provide means of comparison for the organisation's performance at different moments of time and with the performance of other organisations. All documents pertaining to the GRI structure have been developed using a process that

seeks agreement through dialogue between stakeholders from the business, the community of investors, the working civil society, the accountancy branch, the academia, etc. All documents in the reporting structure are subject to trials and continuous improvement. The GRI structure is intended to ________________________________________________________________________ ESC/2/023/2010 Commission on Labour, Income, Living Standards and Industrial Relations Commission on Budget, Finance, Insurance and Social Security

serve as a benchmark for reporting on economic, environmental and social performance. It is designed for use by all organisations regardless of their size, sector of activity or location. It takes into account the practical recommendations of a diverse range of organisations - from small businesses to large transnational companies with operations worldwide. The GRI structure contains general and industry specific content that is consistent with a wide range of stakeholders around the world so that it can be generally applicable to reporting performance on sustainable development of any organisation. In October 2006 GRI issued G3 - the so called Guidelines for Reporting of Sustainability of the "third generation." 4.5. UN Principles for Responsible Investment The Principles for Responsible Investment are a set of six principles aimed at large institutional investors who assign paramount importance to environmental, social and governance issues when making investment decisions. This initiative is rooted in the growing understanding that while finances "nurture" the global economy investment decisions and practices relating to ownership do not sufficiently reflect social and environmental concerns and this must change. The initiative started in 2006 with the support of more than 200 institutions and with capital of approximately 11 trillion USD. 4.6. ISO 26000 The voluntary standard ISO 26000 was officially published on 1 November 2010 It provides guidance on the fundamental principles of social responsibility, the acceptance of social responsibility and the engagement of stakeholders, key themes and issues related to social responsibility and how to integrate socially responsible behaviour in organisations. The standard has been prepared so as to be useful for all kinds of organisations in the private, the public and the NGO sector, both small and large organisations operating in developed and developing countries. Since not all parts of the standard are suitable for all organisations, each organisation should identify at its own discretion the features that correspond to its needs and in dialogue with the stakeholders. The standard provides guidance for consumers and is not intended, nor suitable for certification purposes. Offers for certification under ISO 26000 or claims that someone is certified under ISO 26000 would constitute misrepresentation of the intent and purposes of this International Standard. Fair Labour Association (FLA) ________________________________________________________________________ ESC/2/023/2010 Commission on Labour, Income, Living Standards and Industrial Relations Commission on Budget, Finance, Insurance and Social Security

Established in 1999, FLA is a joint effort of socially responsible companies, colleges, universities, and civil society organisations to improve the working conditions in enterprises worldwide. FLA has a code of conduct in the workplace based on ILO standards, as well as a practical process for monitoring, verification and corrective measures for attaining these standards. FLA adds value to the efforts of individual companies or universities by offering:

A collaborative process that enables businesses, civil society organisations as well as colleges and universities to discuss issues of common interest; A system for comprehensive review of internal compliance programs of companies by unannounced and independent external monitoring and verification; Innovative and sustainable strategies to improve compliance with labour standards; Public access to all reports of independent external monitoring through the FLA website; and A mechanism to address the most serious infringements of labour rights through third-party complaint procedures.

5. EUROPEAN EXPERIENCE 5.1. Some initiatives and organisations CSR Europe CSR Europe is a leading European business network for corporate social responsibility with about 70 MNC members and 27 national partner organisations. CSR Europe is a platform for:

Connecting companies to share and develop best practices on CSR; Creating innovative projects and based on cooperation between companies and stakeholders; Facilitating dialogue between business and the sustainability and competitiveness policy.

The organisation was established in 1995 by eminent European business leaders in response to the appeal of the President of the European Commission Jacques Delors. Since then it has evolved into an inspiring network of business people working at the forefront of CSR in Europe and globally. Multilateral Forum on CSR Created on 16 October 2002, the Multilateral Forum on CSR is a pan-European initiative to create a common understanding of corporate social responsibility and to improve its credibility and its effectiveness in supporting the achievement of the economic, social and environmental objectives of the EU. It is chaired by the European Commission and brings together 20 representatives at the EU level organisations - corporations and other stakeholders, including trade unions, NGOs, investors and ________________________________________________________________________ ESC/2/023/2010 Commission on Labour, Income, Living Standards and Industrial Relations Commission on Budget, Finance, Insurance and Social Security

consumers. Its objective is to promote innovation, convergence and transparency of existing CSR practices and tools (such as codes of conduct, labels, reporting and management tools). The Forum is a central element of the Commission's strategy for encouraging CSR and sustainable development as stated in the Communication on CSR of July 2002 (IP/02/985). Another of the Forum's objectives is to facilitate the sharing of best practices by organising round tables and to assess whether the creation of common guidelines for CSR practices and tools is appropriate. In their work the round tables take into serious consideration issues where the discussed topics intersect, such as competitiveness, environmental protection, social cohesion, consumers, international dimensions, human rights and democratisation and conflict prevention. The Fair Wear Foundation (FWF) FWF is an independent non-profit organisation established in 1999. Its independence is guaranteed by the tripartite (multilateral) board in which employers' organisations, trade unions and labour NGOs are represented by an equal number of members. It is based in Amsterdam but works with companies from across Europe and with manufacturing plants worldwide. By 2010 it has over 50 member firms across Europe. It carries out verification and auditing in China, India, Bangladesh, Turkey and Bulgaria. 5.2. The role of European social dialogue 5.2.1. Recent years have witnessed a growing social dialogue at the European level between social partners on issues related to corporate social responsibility and its reporting. A wide range of sector specific documents have been signed at the European level defining the commitments to corporate social responsibility of social partners which should also bind Bulgarian employers and trade unions (in hoteliering and restaurateuring, in the sector of electricity production, sugar production). However, the issue of representation of trade unions and employer organisations at both national and European level remains unregulated. In these sectors the nationally represented Bulgarian employer structures are not involved in the European social dialogue and are not bound by those agreements. The same situation exists in the leather industry where in 2008 the social partners at the European level have adopted standards for reporting social and environmental practices in the sector. The new Europe 2020 Strategy indicated that a "new agenda that puts the emphasis on people and responsibility." Encouraging corporate social responsibility is seen as a key element in ________________________________________________________________________ ESC/2/023/2010 Commission on Labour, Income, Living Standards and Industrial Relations Commission on Budget, Finance, Insurance and Social Security

securing long-term employment and consumer confidence." At the end of October 2010 70 international companies and 27 European business associations have launched the Enterprise 2020 Initiative in support of the European strategy for sustainable growth - Europe 2020. The initiative aims to:

Support companies to achieve sustainable competitiveness by providing a platform for innovation and exchange of experience; Encourage close cooperation between companies and stakeholders by exploring new ways of working together to build a sustainable future. The initiative is supported by the network of CSR Europe, the European Commission, the Belgian

EU presidency and an increasing number of European governments. The main goal of Enterprise 2020 in a global world is "Transparency for confidence - measuring and reporting environmental and social performance and theses for good governance." 5.3. Regulation in individual EU countries The requirement for environmental, social and management accountability is regulated by EU Directive 2003/15/EC of the European Parliament and the Council of 18 June 2003 amending Directives 78/660/EEC, 83/349/EEC, 86/635 / EEC and 91/674/EEC of the Council on the annual and consolidated accounts of certain types of companies, banks and other financial institutions and insurance companies. However, given the development of financial reporting and the potential burden placed on undertakings below certain sizes, Member States may choose to exempt such enterprises from the obligation to provide non-financial information in their annual report. Many European countries have already transposed the Directive into their national legislation. Currently, activities related to sustainability, good corporate governance, CSR, social accountability, etc. are regulated in 6 EU Member States - France (NRE 2001 in force since 2003), UK (2007), Denmark (2010), Sweden (2007) Belgium (2003), and Norway (1998) . It should be noted that the regulations concern mainly the obligation for companies listed by the stock exchange to include in the annual reports activities related to environmental, social and corporate governance. Moreover, an important point is that this information is to be audited so far as financial auditors should express an opinion that the information in the Management Review is consistent with the data in the financial statements. In other words, the financial auditors do not collect additional information and do an audit the claims made in these reports. ________________________________________________________________________ ESC/2/023/2010 Commission on Labour, Income, Living Standards and Industrial Relations Commission on Budget, Finance, Insurance and Social Security

. France Article 116 of the French law regulating the new economic arrangements ( requires companies to report "social and environmental consequences" of their activities in their annual reports. This text is applicable to companies listed on the stock exchange concerning their reports for 2001. The content of the reports is stipulated by the regulation for the implementation of the law. Reporting requirements are based on forty indicators - many of them inspired by GRI indicators. In addition, various organisations are developing standards for social accounting, reporting and auditing. These standards use different approaches - from the standards for processes to performance standards from voluntary to mandatory standards, from topic-specific standards to the standards covering many topics. Only a few of them cover the full spectrum of topics specific to corporate social responsibility. The tradition of non-financial reports in France can be traced back to the 1970s when the President of the Republic demanded the enactment of a law (passed in 1977) requiring all companies with 300 or more employees to publish social review including more than 100 indicators. 5.3.2.2. Norway The Norwegian Accounting Act of 1998 requires the inclusion of data on working environment, gender equality and environmental issues in the Management Report. Furthermore, it contains a requirement to implement measures for preventing or reducing adverse effects related to the aforementioned topics. This requirement is applicable to all companies registered in Norway that are required to keep accounts as well as to foreign companies which operate on the territory of Norway and are subject to taxation in Norway. 5.3.2.3. United Kingdom A key element of the legislation came into force in July 2000 changes to the Pensions Act 1995, which requires pension funds to disclose the extent to which they address social, environmental and ethical issues when making investment decisions. While at first this step seemed insignificant, it proved very powerful because it focused the attention of the financial sector and other companies on the growing importance of ethical investment. Since October 2007 publicly-listed companies are required to report social and environmental conditions, including in relation to all existing policies and the effects of these policies. If the annual report does not include such information, the uncovered areas should be addressed. UK is the first and the only Member State that has elected a special Minister of corporate social ________________________________________________________________________ ESC/2/023/2010 Commission on Labour, Income, Living Standards and Industrial Relations Commission on Budget, Finance, Insurance and Social Security

responsibility. 5.3.2.4. Denmark On 27 December 2008 Danish Parliament adopted Act amending the Danish Financial Statements Act (CSR reporting for large companies). Under this amendment, in the future, Danish large companies have the obligation to report on their CSR activities in their annual reports. Danish companies can decide at their own discretion whether to have such activities or not but since 2009 they must address CSR in their reports. Danish Commerce and Companies Agency has published guidelines for compliance with legal requirements. This Act entered into force on 1 January 2009 and applies for financial years beginning on 1 January 2009 or thereafter. Upon its entry into force it is expected that around 1,100 companies will fall under the provisions of CSR reporting. The aim is to encourage businesses to take a proactive stance on social responsibility and to provide information about it. The legal requirement is part of the government's Action Plan for CSR (of May 2008) and is expected to enhance the international competitiveness of Danish trade and industry. The Act covers major companies accounting class "C", publicly-listed companies and public companies with accounting class "D". Large companies with accounting class "C" are those which exceed at least two of the following three limits:

Total assets / liabilities amounting to DKK 143 million (approximately EUR 20 million); Net revenues worth DKK 286 million (approximately EUR 38 million); Average of 250 full-time employees. Subsidiaries are exempt from the reporting of social responsibility if the parent corporation has

submitted a report for the entire group. These reporting requirements have been introduced for institutional investors, mutual funds and other publicly-listed financial companies (financial institutions, pension funds and insurance companies, etc.) which are not covered by the Financial Statements Act. For these companies the requirement was introduced by means of Executive Orders issued by the Danish Financial Supervisory Commission. What should be reported? Companies should include in their reports the following information:

Policies on corporate social responsibility, including standards, guidelines or principles of social responsibility that they have been using. The means by which the company realises its policies and commitments concerning social

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responsibility, including the systems or procedures used to such end.

Assessment of the achievements of the company with respect to its social responsibility initiatives within the past year and expectations for the results of future initiatives. If the company has not formulated policies for social responsibility, this should be reported. Where it should be reported? The report on social responsibility is included in the section "Management review" of the annual

report. At their own discretion companies may include a statement of social responsibility in addition to the annual report or on the website of the company. In this case, the "Management review" should specify where the report on social responsibility is published. If the company had joined the UN Global Compact and Principles for Responsible Investment (PRI), it is sufficient to make reference to the progress report which members to these initiatives submit. Companies that produce sustainability reports or similar reports of their social responsibility initiatives can refer to them in the "Management review". In this case, however, this report must meet the legal requirements. Based on the performed audit, the auditor of financial statements has an obligation to express his opinion on the CSR report which is an integral part of the section "Management review." No additional action (other than the usual financial audit), by which the claims made in the "Management review" are verified, are required from the auditor. 5.3.2.5. Sweden In 2007 Swedish Ministry of Enterprise, Energy and Communications issued Guidelines for External Reporting for companies owned by the state. According to these guidelines, which take effect in 2008, enterprises owed by the state should issue sustainability reports using the guidelines of the Global Reporting Initiative (GRI). These statements are subject to quality certification by an independent examination and published before the annual general meetings, i.e. together with the annual accounts. This obligation entails a significant increase in sustainability reporting by companies owed by the state in Sweden. Companies are required to "report or explain why they are unable to do so" - the result being that more than 89% of state-owned companies in Sweden published GRI reports. 5.3.2.6. Belgium ________________________________________________________________________ ESC/2/023/2010 Commission on Labour, Income, Living Standards and Industrial Relations Commission on Budget, Finance, Insurance and Social Security

The Social Balance 2003 requires reporting of the nature and development of employment as part of their annual reports of all companies that employ staff (large and very large) and NGOs. In addition, some companies that are not legally required to prepare annual accounts, for example, hospitals and branches of foreign companies in Belgium, should also produce a social balance. Some of the information included in it is for example the number of employees, staff turnover, staff training.

6. BULGARIAN EXPERIENCE An important feature of the situation in Bulgaria is that social audits are almost entirely audits of the supply chain. This means that foreign customers that have codes of conduct, ethics or standards, carry out or order social audit of their suppliers in Bulgaria in compliance with these codes or standards. In fact, this means that social audit in Bulgaria in the best case is accepted "voluntarily" in order to gain a competitive advantage, and in the worst it is "imposed" by the customer as a condition for collaboration (i.e. obtaining contracts). . It must be stressed that the codes spreading along the supply chain are codes that seek to regulate the supply chain itself, i.e. customers usually have a much more advanced and comprehensive strategy of CSR as compared to the requirements to suppliers included in the codes. This is understandable, considering the fact that large multinational companies operate worldwide - in countries with different levels of legislative regulation of labour standards. In this sense, to suppliers in countries where regulation is weak the codes add extra regulations beyond what is required by the law. In Bulgaria this is not the case. After Bulgaria's accession to the EU and following the ratification of fundamental ILO Conventions, Bulgarian legislation is already very comprehensive in terms of rules and regulations provided by international conventions. European directives are fully transposed into Bulgarian legislation. Another question is whether at the national level there are sufficient mechanisms to ensure compliance with this legislation. In this connection it should be stressed that both CSR and social audit can not be considered as alternatives to replace national laws or instruments to ensure compliance.

7. REGULATION 7.1. ILO conventions ratified by Bulgaria The document "Corporate Social Responsibility Strategy 2009-2013," published in 2010, prepared at the initiative of the Ministry of Labour and Social Policy by an inter-departmental team of experts comprising representatives of state authorities, business associations, organisations of social partners, ________________________________________________________________________ ESC/2/023/2010 Commission on Labour, Income, Living Standards and Industrial Relations Commission on Budget, Finance, Insurance and Social Security

NGOs and international organisations, provides a list the ILO conventions ratified by Bulgaria. 7.2. Other international agreements and treaties to which Bulgaria has become party

The Lisbon Strategy Universal Declaration of Human Rights European Social Charter The 1992 Rio Declaration (Agenda 21) European Green Paper on CSR Charter on the Rights of the Child UN Global Compact. 7.3. Bulgarian legislation Bulgaria has ratified ILO Conventions and other international agreements and arrangements.

Relevant European directives are also transposed into Bulgarian legislation. Over 100 Bulgarian laws and regulations, and other national documents make provisions concerning CSR. Some of them are:

Constitution of the Republic of Bulgaria Labour Code Social Security Code Health and Safety at Work Act Environmental Protection Act Protection Against Discrimination Act Child Protection Act, etc.

8. WORLDWIDE INITIATIVES AND STANDARDS FAMILIAR IN BULGARIA Bulgarian organisation on the UN Global Compact12 UN Global Compact is a voluntary initiative encouraging the private sector, civil society structures, trade unions, UN agencies and other stakeholders to implement the ten universal principles of social responsibility and environmental protection in their daily activities. The Global Compact aims to engage businesses in the fight against major social and environmental challenges arising from growing globalisation.

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http://www.unglobalcompact.bg/bg/index.php

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Since its launch in Bulgaria in January 2003, under the auspices of President Parvanov, the Global Compact brings together more than 120 companies in a informal network. The Bulgarian Global Compact Network is an informal association of companies, NGOs, and academic institutions which share the principles of the Global Compact and implement socially responsible practices; they commute their experience, initiate dialogue or partnerships with other persons - the government, local authorities, employer organisations, civil society organisations, and academic institutions. To strengthen and enhance the role of the Global Compact Network in Bulgaria in 2006 a management structure consisting of Advisory Board and Secretariat has been introduced. Unfortunately only about 50 companies, members of the Global Compact in Bulgaria, published their reports on their progress in CSR practices. In 2010 systems to measure CSR at the national and enterprise level were developed under regional project on "Increasing the transparency and credibility of CSR practices by establishing a system for monitoring and evaluating CSR in the new EU Member States funded by the European Community. In Bulgaria the project is implemented by the Bulgarian network of members of the UN Global Compact. Both groups of indicators were developed by leading CSR specialists from the UK in direct consultation with representatives of the governments, NGOs and businesses from the countries participating in the project. Following summarising the results of testing practices and indicators to measure corporate social responsibility at the level of the company, in October 2010 a guide for selfassessment of the effectiveness of CSR in companies was issued in October 2010. The handbook is available in electronic form at the website of the Bulgarian Global Compact Network. The Ten Principles of Global Compact cover human, labour and trade union rights, care for the environment and fighting corruption. It should be noted that the countries subscribing to the Global Compact Principles are not subject to certification or external audit / monitoring. SA 8000 In Bulgaria there are only 4 companies that have themselves initiated their social audit. They have done this to obtain SA 8000 certification. One of these companies ceased operations in 2010

9. EXPERIENCE AND PRACTICES IN BULGARIAN ENTERPRISES Several provisions should be made at this point concerning the access to information on social audits in Bulgaria: . As already mentioned, social audits in Bulgaria are primarily in the supply chain (second party ________________________________________________________________________ ESC/2/023/2010 Commission on Labour, Income, Living Standards and Industrial Relations Commission on Budget, Finance, Insurance and Social Security

audits). Therefore, the social auditors are committed to privacy and may not disclose the names of the audited units. This is not essential in this case, but still brings uncertainty about the total number of audited enterprises in Bulgaria, as audits performed by individual audit organisations can be duplicated. Many audits are carried out by employees of corporate clients, i.e. represent their internal information which is not published anywhere. Some multinational companies, following their strategy on CSR (including transparency of conduct), publish lists of their global suppliers. Thus they take responsible risks of negative media coverage if it is discovered that the supplier has not complied with certain social, ethical or environmental standards. A desktop internet research did not find in the public domain in Bulgaria any voluntarily published reports of social audits made in relation to voluntary CSR initiatives (codes, standards, etc.). Often the outcome of the audits (which is in the form of a report or a corrective action plan) includes requirements and recommendations related to the weaknesses of the supplier, i.e. there is little likelihood that they could be voluntarily published. The practice of social auditing in Bulgaria, performed by Bulgarian social auditors, dates back to around 2000. It is known that social audits were made as early as 1998 but they were carried out by foreign social auditors.

10. SOME ORGANISATIONS ENGAGED IN SOCIAL AUDIT IN BULGARIA 10.1. Bureau Veritas13 Bureau Veritas is accredited to issue SA 8000 certification and made its first certification to a company in Bulgaria. Bureau Veritas in Bulgaria is a subsidiary of Bureau Veritas - Corporation providing QHSEServices (Quality, Health & Safety and Environment), specializing in quality management, safety and environmental protection. The corporation has a network of 640 offices and laboratories in 160 countries with 19,000 employees and approximately 300,000 clients from different industries - from sole proprietors to multinational corporations. Offering a wide range of services Bureau Veritas is developing in three main areas: certification, conformity assessment and training. Bureau Veritas is the largest organisation offering solutions and conformity assessment of assets, products and systems. 10.2. Intertek

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http://www.bureauveritas.bg/

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Intertek is the Bulgarian branch of the international certification company Intertek. Since 1999 the company has been performing social audits under SA 8000, BSCI, WRAP and the codes of conduct of their client companies. The activity of Intertek relating to social audits covers industries such as cosmetics, textiles and apparel, food processing and heavy industry. The company has 1 certified auditor who is certified to carry out social audits SA 8000, BSCI, WRAP and codes of conduct of its clients. Intertek performs annually around 100 audits the individual companies that are being audited are about 50.14 10.3. TUV Rheinland TUV Rheinland is the Bulgarian branch of the international certification company TUV Rheinland. In Bulgaria it has been carrying out social audits under SA 8000, BSCI, WRAP, Adidas - under the FLA standard and codes of conduct since 2002 63 audits have been performed since then. It has 2 certified social auditors. They perform audits and other countries as well. 10.4. RINA RINA is the Bulgarian branch of the international certification company RINA SpA It was founded in Genoa in 1861 RINA S.p.A. and its subsidiaries operate primarily in the area of certification, verification, testing and consulting services to improve the safety and quality of products and services. In Bulgaria it has been carrying out social audits under SA 8000, BSCI and codes of conduct since 2008. Over the last two years it has carried out 58 audits - 56 sunder the BSCI standard and 2 under a code of conduct. RINA has 2 social auditors who perform audits in other countries as well. RINA audits companies for textile and clothing, footwear, toys and haberdashery. RINA has certified under SA 8000 2 companies engaged in construction and transportation of waste. 10.5. Balkan Institute for Labour and Social Policy (BILSP) BILSP has carried out social audits since 2004 This activity stems from its cooperation with partners in the CSR project involving BILSP, the European Trade Union Federation of Textiles, Clothing and Leather (ETUF-TCL), Nike, Adidas, H&M, Levi Strauss, entitled "Bulgarian clothing industry - a leader in corporate social responsibility" (completed 2004). BILSP performs social audits under the FLA standards (2 audits of 2 enterprises), FWF standards (9 audits of 5 enterprises) and the Levi Strauss code of conduct (52 audits of 22 enterprises). From 2004 to 2010 BILSP has performed 63 audits of 29 enterprises in Bulgaria - exclusively companies in the textile and clothing industries. Besides, BILSP performs audits under the FLA code of conduct at the
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Since some businesses are undergoing more than one audit for various clients.

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workplace in Albania and Slovakia. BILSP has 12 experts who are prepared to carry out social audit. For audits in other countries BILSP also has 5 foreign experts. Under the HERMES project, together with its partners from Romania, Portugal, France and Switzerland, BILSP has developed in 2008-2009 training programs with modules ranging from increasing awareness of CSR to a MA university programme on CSR which includes social audit. Currently, this training is included only as a module in the MA programme in Finance and Audit of the New Bulgarian University (NBU). Within the framework of a UNIDO project, funded by Switzerland, social audit was performed in 25 Bulgarian hotels using the REAP assessment tool. This however does not lead to specific certification. In Bulgaria, certification under SA 8000, BSCI and codes is also conducted by SGS (3 social auditors) and LRQA but their websites contain no detailed information concerning this particular business activity. 11. BENEFITS AND LIMITATIONS / ADVANTAGES AND DISADVANTAGES 11.1. "Good" Practices We put the word "good" in quotation marks because, as it was mentioned above, CSR and some of its inherent social auditing tools are in their early stages of development. However, there are positive aspects of social auditing activities that have been taking place in Bulgaria for approximately 12 years now:

Enterprises that are rather in the "SME" category gain access to the latest trends in the area of CSR through their foreign customers; Suppliers have the obligation to show a publicly accessible place the codes of conduct of their clients thus providing another opportunity for workers to become acquainted with internationally recognised labour rights;

After being interviewed,

workers become aware hitherto unknown employment rights and

obligations of their employers under the codes and Bulgarian legislation; 11.2. Benefits

Quality Management Managing environmental impact Recruitment and retention of workers Promoting better partnership with suppliers Risk Management Better management

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Better accountability Stakeholder participation Increased confidence of investors Reputation of the client 11.3. Common findings of social audit

The following most common findings were derived from consultations with professionals engaged in social audit in Bulgaria (not listed in order of importance): When it is found that an enterprise has no trade union, it is very difficult to establish whether this is due to ignorance and disengagement of workers or because the employer created obstacles to their freedom of association (implicit pressure); Often there are cases of complaints for preferential treatment to some workers as a result of kinship or close social contacts; No cases of workers without employment contracts have been registered in audited enterprises; The most common discrepancies are in the field of health and safety (use of PPE, fire safety, etc.). Another common discrepancy is the application of excessive overtime; Very often employees are unaware of how their wages are calculated when one component of remuneration is linked to the implementation of a norm; 12. PROSPECTS FOR FURTHER DEVELOPMENT OF CSR AND SOCIAL AUDIT IN BULGARIA 12.1. CSR strategy and reporting socially responsible practices The Bulgarian Corporate Social Responsibility Strategy (2009 - 2013) is aimed at creating prerequisites for the development and adoption of an attitude towards voluntary implementation of corporate social responsibility practices. It argues that social dialogue is an effective means of promoting CSR initiatives, and recommends development of the tendency for social and environmental reporting, i.e. corporate social reports The main objective of the strategy (goal 4) is "Promoting transparency in the implementation of CSR initiatives through the following tasks: 1. Promoting transparency in the implementation of CSR practices. 2. Promoting accountability of corporate social responsibility initiatives. ________________________________________________________________________ ESC/2/023/2010 Commission on Labour, Income, Living Standards and Industrial Relations Commission on Budget, Finance, Insurance and Social Security

Under social statements in the strategy is understood - "reports for initiatives implemented as an expression of socially responsible behaviour according to established criteria." The Strategy outlines the role of the state "in playing an active role in promoting socially responsible practices in Bulgarian society, by promoting, encouraging and supporting the implementation of CSR in Bulgaria, and by creating favourable conditions for effective partnerships between all stakeholders. In order to guarantee the implementation of those commitments it creates an appropriate legal and institutional environment and coordinates sectoral policies for the accelerated implementation of CSR. The Plan for the fulfilment of the National CSR Strategy for 2011 should include specific activities because:

So far, the Strategy and plan do not include any ideas or proposals on compulsory or voluntary reporting of environmental, social and ethical behaviour of businesses and indicators that should be followed for the sake of comparability;

So far, the strategy and plan do not address the social audit as an instrument for verification of CSR activities which can be used to strengthen the confidence of stakeholders. 12.2. Advisory Council on CSR With view to the implementation of the Bulgarian CSR Strategy an Advisory Board on CSR was

established on 9 November 2010 at the Ministry of Labour and Social Policy. It includes one representative from each of the involved ministries and other public institutions, national organisations representing social partners, NGOs and academic institutions. At the first meeting of the Advisory Board on CSR particular attention was paid to the practices for reporting CSR and social auditing. It was noted that despite the growing number of companies declaring their commitment to implement socially responsible practices, still an insignificant number of them actually provide social reports. It was generally agreed that the state may increase its role with respect to CSR by creating conditions for the realisation of the so called social public procurement and green procurement while social audits and reports could be used as tools for the verification of the extent to which CSR commitments are actually implemented in the enterprise. 12.3. Social dialogue and CSR According to the Bulgaria CSR Strategy, the 20) main obstacle to CSR is the lack of uniform, ________________________________________________________________________ ESC/2/023/2010 Commission on Labour, Income, Living Standards and Industrial Relations Commission on Budget, Finance, Insurance and Social Security

national or sectoral policies or strategies for CSR. So far in Bulgaria there is no sectoral social dialogue on the problems of CSR (the only exception being the Branch Council for Social Partnership in the brewing industry). The main reason for this is still a lack of understanding of employers that their main partner in the implementation and reporting of socially responsible practices (not just stakeholders) could be the trade unions, not only at the level of the enterprise but also at the regional and sectoral levels. The interviews with trade union leaders and key members of CITUB and the territorial divisions of CL "Podkrepa" - the unions that had their structures in the enterprises submitting social reports - found that in no enterprise the representatives of the workers and trade unions have participated in the development of business strategies or in the reporting of CSR activities. Moreover, trade union structures are not well aware of the nature and importance of CSR, they have not developed their views and positions concerning their own role in implementing the policies of socially responsible business behaviour. They can become involved together with the organisations of employees in the development and implementation of CSR policies as well as in determining the indicators showing the progress of enterprises in this area. Social dialogue at the sectoral level can be an effective means of promoting CSR initiatives and can play a constructive role in exchanging best practices in this area. The social partners could discuss and develop sectoral policies on CSR as well as industry-specific indicators by which to report progress. Corporate members of "Enterprise 2020" are a number of MNC having offices in Bulgaria ABB, Enel, Coca Coal Hellenic, Danone, HP, Nestle, Solvay, TITAN, etc. They have adopted the objectives of the initiative and therefore will make progress reports in the specified areas. In all these MNC divisions in Bulgaria there are structures of CITUB and CL "Podkrepa" and employers are members of the national representative bodies. At the level of the enterprise, the problems of CSR and social reporting should be subject to social dialogue at the sectoral level and special attention should be paid to the divisions of the MNC involved in the network "Enterprise 2020. They should be regarded as models for best practices for the implementation and reporting on CSR. 13. CONCLUSION For society it is more useful corporate social responsibility to be developed alongside and integrated with industrial relations because employers and trade unions are better informed about the needs of a wider range of people and the labour market. Moreover, CSR policies require further cooperation with the civil society - organisations of local communities, consumers, youth, environmental, educational and other organisations with which trade unions have already established relations of ________________________________________________________________________ ESC/2/023/2010 Commission on Labour, Income, Living Standards and Industrial Relations Commission on Budget, Finance, Insurance and Social Security

partnership. This indicates a trend for corporate social responsibility to form an essential part of a global process - social responsibility, and for social audit to be a tool whose significance transcends the usual verification of the socially responsible enterprise. The role of the government is to support and stimulate the process of social dialogue on the problems of CSR and to actively participate in tripartite forms of industrial relations (at the national, sectoral, and regional levels).

Prof. Lalko Dulevski, Ph.D PRESIDENT OF THE ECONOMIC AND SOCIAL COUNCIL

14. ANNEX - ORGANISATIONS, STANDARDS AND INITIATIVES ISO 26000 Standard SA 8000 Social Accountability International Standard AA 1000 AcountAbility Standard BSCI Business for social compliance initiative Standard SAI Social Accountability International IAS 2004 lInstitut de lAudit Social SAN 2004 Social Auditors Network Standard GRI Global Reporting Initiative Global Reporting Initiative (GRI) FTSE Stock index Dow Jones EMAS Eco-Management and Audit Scheme FLA Fair Labor Association Fair Labour Association (FLA) FWF Fair Wear Foundation The Fair Wear Foundation (FWF) MFA Multi-Fiber Arrangement ________________________________________________________________________ ESC/2/023/2010 Commission on Labour, Income, Living Standards and Industrial Relations Commission on Budget, Finance, Insurance and Social Security

USAID CIMCAW TGLWF FMO CERES CSR Europe Corporate Social Responsibility WRAP ETUF-TCL H&M LRQA SGS SEAAR ICFTU FSC UNIDO

United States Agency for International Development Continuous Improvement in the Central American Workplace Textile, Garment and Leather Workers Federation Coalition for Environmentally Responsible Economies Corporate Social Responsibility Europe Principles for Responsible Investment Worldwide Responsible Apparel Production Standard European Trade Union Federation Textiles, Clothing and Leather Hennes and Mauritz Lloyds Register Quality Assurance Socit Gnrale de Surveillance

, , , Social and Ethical Accounting, Auditing , and Reporting International Confederation of Free Trade Unions Forest Stewardship Council United Nations Industrial Development Organisation

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