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Center for Corporate Social Responsibility Development

CORPORATE SOCIAL RESPONSIBILITY

of

SMALL AND MEDIUM ENTERPRISES IN UKRAINE:

EXPERT SURVEY

Kyiv - 2009

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CONTENTS

List of abbreviations 3Introduction 4

Section 1. Understanding of the term "responsible business practices" and "CSR"

for SMEs in Ukraine 14Section 2. Prospects and obstacles to the implementation of CSR for small and

medium enterprises in Ukraine 24Section 3. Evaluation perception of the importance of CSR activities among

small and medium enterprises in Ukraine 29

Section 4. Expectations of the outcome from the CSR for SMEs in Ukraine 39Section 5. The role of trade unions and collective bargaining for SMEs in

Ukraine 45Section 6. CSR Activities implemented by SMEs 57

Section 7. Participation of small and medium-sized enterprises in the activities of

large national and international companies 62Section 8. SME ability to invest in CSR activities 65

Recommendations 74

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List of Abbreviations

CSR - Corporate Social Responsibility

SME - Small and Medium Enterprise

UNIDO - United Nations Industrial Development Organization

NGO - non-governmental organization

SLR - social-labor relations

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Introduction

CSR practices in Ukraine demonstrate that the main CSR projects are implemented mainly by

large domestic and multinational companies. Expert communities havent paid sufficient

attention to development CSR among SMEs. However, this does not mean that SMEs were notinvolved in the process of CSR. Their corporate social responsibility practices are focused at

such issues as philanthropy, social entrepreneurship, staff professional development and others.

But these actions are not determined as CSR by SMEs themselves and SMEs do not have a clear

CSR strategy yet.

This report studies the expert opinions to track and assess the peculiarities of the achievements

and prospects in the development of CSR among SMEs in Ukraine. A survey was conducted by

the Center for Corporate Social Responsibility Development1 jointly with the United NationsIndustrial Development Organization (UNIDO)2 with the support of the State Committee for

Regulatory Policy and Entrepreneurship3 under the Project "Establishment of regional network

of corporate social responsibility in Central, Southern and Eastern Europe. UNIDO project is

implemented in four countries: Bulgaria, Bosnia and Herzegovina, Ukraine, Croatia.

Small and medium enterprises (SME) in the economic structure of Ukraine.

SMEs business sector in independent Ukraine witness fast growth: for over 16 years the number of small businesses increased seven times, from 47,084 in 1991 to 380,789 in 2007. It should be

noted that in Ukraine since 1991 only small and large enterprises were calculated, and only with

the adoption of the Commercial Code in 2003 the term of medium enterprises appeared in

statistics reports.

According to the Commercial Code of Ukraine from 16.01.2003, 436-IVthe term small

enterprises is defined as the enterprises of any kind of ownership with the average number of

employees up to 50 in the reporting financial year.

The term medium-sized businesses means businesses with the number of employees from 51

to 250 people. Although the category of medium enterprises existed in 2003, a system for

monitoring medium-sized businesses in Ukraine was imperfect, and overview information about

trends in its development was limited. Unlike detailed statistics of small enterprises, the official

statistics on the development of medium business in Ukraine is given in the table 1.1.

1 www.csr-ukraine.org2 www.unido.org3 www.dkrp.gov.ua

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Table 1.1 Economic Development Results in 2007 (Source: State Statistics Committee of

Ukraine)Total number of

enterprises,

including

Large enterprises Medium enterprises Small enterprises

Number of enterprises, units 380789 770 56008 324011 Number of companies per

population of 10 thousand

people

82 - 12 70

Average number of part-time

employees, thousands

9154,3 3131,2 4275,0 1748,1

Average number of full-time

employees, thousands

9075,2 3131,2 4269,8 1674,2

Payroll fund, mln. of UAH 140948,6 66157,3 60971,0 13820,3Average monthly salary of

one full-time employee, hr.

1294,27 1760,69 1189,97 687,91

The number of purchased

products, works and services

(without VAT and excise

duties), mln. of UAH

2414715,3 663033,5 1645632,3 106049,5

Operational costs of

purchased products (works,

services), mln. of UAH

2312792,6 610769,8 1594502,4 107520,4

In the overall economic structure of enterprises in Ukraine in 2007 the part of small enterpriseswas 85.1% (324 thousand), medium - 14.7% (56 thousand), and only 0.2% of large enterprises

(770 units).

Table 1.2 Number of enterprises in 2007 (Source: State Statistics Committee of Ukraine)

Total number of

enterprises, Including

Large enterprises Medium enterprises Small

enterprises Number of enterprises, units 380789 770 56008 324011Enterprises part, %4 100 0.2 14,7 85.1

To compare, in developed and other developing countries SMEs constitute 99 percent or more.

Thus, quantitative indicators of small and medium enterprises in the total economic structure of

Ukraine correspond to the average level of SMEs indicators, for instance, in the EU member

states.

However, the further analysis of statistics and comparison with EU countries shows a significant

lag of Ukraine in qualitative and quantitative indicators of SME development, i.e. for number of

4 State Statistics Committee of Ukraine//http://www.ukrstat.gov.ua/

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SMes per population of 1000 people. In particular, according to State Statistics Committee, in

2007 per population of 10 thousand people there were 12 medium and 70 small enterprises in

Ukraine, which accounts for only 8.2 SMEs per population of 1000 people (Table 1.3.). In

Central and Eastern Europe this indicators equals 40.

Table 1.3 Number of companies (2007) (Source: State Statistics Committee of Ukraine)

Total number of

enterprises,

including

Large enterprises Medium enterprises Small

enterprises

Number of enterprises by 10

thousand people, units

82 - 12 70

There is a significant misbalance in the SME structure. The medium business sector in foreigncountries produced about half of gross domestic product, however in Ukraine the part of the

medium business in total cost of purchased products (works, services) equals 68%, and the part

of the small business - only 4%.

Table 1.4 The amount of sales and services of companies in Ukraine in 2007

Total number of

enterprises, including


The production volume(excluding VAT and excise

duties), mln. of UAH

2414715,3 663033,5 1645632,3 106049,5

The production volume

(excluding VAT and excise

duties),,%5

100 27.5 68.1 4.4

In general, small and medium-sized enterprises in Ukraine can not be described as the economy

driving force, as SMEs in the EU create 40 - 67% of GDP, while in Ukraine only 5 - 7%.

However, taking into account recent positive trends in development of small business in Ukraine,

the presence of the sufficiently large informal sector of small enterprises, which accounts for

60% according to some expert views, and distortion of the primary reporting data made by

entrepreneurs themselves, analytics consider SME sector as an important segment of the country

economy and powerful force for social and environmental development of Ukraine.

Overview of corporate social responsibility development in Ukraine.

5 State Statistics Committee of Ukraine//http://www.ukrstat.gov.ua/

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Understanding CSR is built on the Global Compact principles and key provisions of ISO 26000,

a new international standard developed by the International Organization for Standardization,

according to which social responsibility is a responsibility of an organization for the impacts of

its decisions and activities on society and the environment, through transparent and ethical

behavior that contributes to sustainable development, including health and the welfare of society;takes into account the expectations of stakeholders; is in compliance with applicable law and

consistent with international norms of behavior and is integrated throughout the organization and

practiced in its relationships6.

The beginning and the first stage in CSR development in Ukraine can be considered in

December 2005. Then the representatives of the Ukrainian government, business community, the

united Nations, international and local NGOs, media, schools held the International Forum on

CSR. The Forum's goal was in fact to promote dialogue on CSR in society and mobilize core

group of companies to sign the Global Compact, which was officially launched in Ukraine 25th

April 2006. The first of the Global Compact - a 34 leading Ukrainian and multinational

companies, associations and NGOs.

Simultaneously, at the end of 2005 Forum was held socially responsible business (CSR) in

Ukraine. Ukrainian company leaders united in the CSR.

The second stage is characterized by its focus on understanding of CSR and companies first

effort in developing CSR strategies. As a result, many activities held to discuss issues of CSR,

including two major events in 2007, conducted with foreign experts. The international

conference "Corporate Social Responsibility: How to build relationships with staff, public

authorities, organized by business magazine" Expert Ukraine "and the International Media

Forum on Corporate Social Responsibility Media and Corporate Social Responsibility, organized

by the UN Office in Ukraine partnership with the business magazine "Expert Ukraine". The third

main event of this phase was 1st November 2007 - Ukraine joined the global initiative of theInternational Organization for Standardization ISO 26 000.

The third and most valuable stage in the development of social heralded CSR reporting

companies, two of which were prepared according to standard GC - social report of the bank

"Nadra" and DTEK. Global Compact Network was institutionalized in the country and is

recognized as the most dynamic network of Global Compact in Eastern Europe. It was created

by the Board of the Global Compact and the elected representatives of the companies

participating in its work from companies, trade unions and of association of employers of

6 DRAFT INTERNATIONAL STANDARD ISO/DIS 26000, www.iso.org/wgsr

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Ukraine. The first emphasis was placed on problems of climate change and action, which was

supported by 23 leading companies and organizations, the Global Compact initiative was the

"Green Company. Gold sponsor of the Conference on CSR in Europe (Prague) became the first

Ukrainian company "System Capital Management

The second feature of this stage is a rational approach to CSR and understanding the differences

between CSR as a business strategy and own funds and philanthropy. The concept of CSR

becomes widespread in the provinces.

Fourth stage 2009-2010 characterized by signs of slow development and particular attention to

environmental issues. Global Compact in Ukraine held its first Business Summit on climate

change. Another peculiar to this stage of CSR development factor is a shift in priorities from

business to educational institutions to develop a sustainable framework of CSR in the country.Center for the development of CSR has created a network of "CSR in education, joined by 22

universities.

Survey methodology.

The study was conducted among small and medium-sized Ukrainian enterprises to obtain

information on the understanding of "corporate social responsibility (CSR) and the

implementation of CSR in their activities.

The study is the first step of the Project aimed at establishing the Regional SME network of

corporate social responsibility in Central, Southern and Eastern Europe (hereinafter - the

Region). The CSR network of such kind will contribute to sustainable development and improve

environmental, social and economic performance indicators of the industry in the region,

increasing its competitiveness and export capacity through support of peer organizations and

advisory institutions (business associations, chambers of commerce and industry, universities,

NGOs) in promoting CSR. The survey results will help in adapting the planned training and

consultation courses to the realities of small and medium businesses in the country. Criteria for

selecting companies for participation in the project.

The expert survey was conducted by questioning the target group of 104 representatives of small

and medium enterprises of Ukraine, mostly the owners or top managers.

Selection of companies taken part in the survey was made in cooperation with the regional

branches of the State Employment Center, which provided information about the leadingregional SMEs to meet the following criteria: active participation in public or social life,

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financial stability, innovative approaches of making business and availability of foreign

investments if any.

Interviews were conducted by the Centres experts through the combined method - self-filling

questionnaires and personal or phone interviews with representatives of small and medium

business.

The obtained information was processed with national statistics software OCA

(www.oca.com.ua) and program software SPSS (statistical package for social sciences).

The detailed structure of indicators was developed. These indicators helped to evaluate the

overall situation of CSR development among SMEs and identify the level of impact on CSR

promotion amongst SMEs made by such factors as sectoral affiliation, scale (micro-, small-,

medium-sized enterprise), financial-economic background, geographic location of the company.

Industrial structure of SMEs involved in the Survey

The business sector of the company has a considerable impact on its development. According to

official statistics, nearly one third (35.5%) of companies in Ukraine are working in the field of

trade and services, 18.4%. - in real estate, 15.8%. - industry, 9.4% - in construction. A similar

situation is in the small and medium-sized enterprises sector structure.

Therefore, within the Survey, the SME sector structure is different which can be explained by

inequal level of CSR integration in the companies (Fig. 2.1) of different industrial sectors.

Fig.2.1. Sectoral distribution of surveyed enterprises

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The study covered SMEs in 13 economic sectors, which can be grouped into 4 main sectors:

industry (27.1%), commerce (22.4%), construction (6.8%) and services (22.4%). Grouping of

enterprises in economic sectors can be seen in the table 2.1.

Table2.1. Distribution of surveyed SMEs by economic sector and their sector grouping

Branches of economic activity, (%) SECTOR OF THE ECONOMY, (%)

.INDUSTRY 27.1

Industrial production 12.6

Food industry 8.7

extiles 2.9

Technologies 2.9

. TRADE 22.4Retail trade 11.7

Wholesale 10.7

. CONSTRUCTION 6.8

Building materials 6.8

V. SERVICES 22.4

Tourism 6.8

Finance and Insurance 3.9

Transport 4.9

Automotive 3.9

Aircraft 1.9

Science and Pharmacology 1.0

V. OTHER SECTORS 21.4

Others 21.4

As one can see, the most represented enterprises in the survey are the industrial enterprises

(27.1%), trade enterprises (22.4%) and service enterprises (22.4%). A large proportion of

respondents (21.4) have indicated their enterprises belonged to other economic sectors.

However, 6.8% construction companies involved in the Survey quite fully mirror the situation of

CSR development in the construction sector with part in the country economy of 9.4%.

Indicators of interviewed SMEs

The size of enterprise is one of its strategically important characteristics. Statistics of foreign

countries, as well as in Ukraine, use the different indicators to define the size of an enterprise,

but the leading indicator isnumber of employees , because SMEs ensure about 50% of

productive employment (45% in the EU and North America, 66% in Japan, 72%, Asia 65%

Africa and 77% in South America) [8]. According to official statistics in Ukraine SMEs provide

the jobs for 66% of population, among which 47% - in medium, and 19% - in small enterprises

(Table 2.2).

Table 2.2. The average number of employees occupied in the Ukrainian enterprises (2007)

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Total number of

enterprises, including


The average number of

employees, thousands of

persons

9154,3 3131,2 4275,0 1748,1

The average number of

employees, %

100 34.2 46.7 19.2

In our opinion, the size of the company in some way affects the willingness of its owners and

management to implement CSR activities - the companies with the greater number of employees

are more actively involved in CSR. The detailed analysis of enterprises under Survey with the

number of employees can disclose the level of such impact.

Table 2.3. Classification of the enterprises by the number of employees

Number of employees Number Part, %10-50 42 40.4250 6 5.8Total 104 100

Fig.2.1. Classification of the enterprises by the number of employees

In the structure of our Survey sample the part of small enterprises is 71,7%, considerably less

than the part of such enterprises in the economic structure of Ukraine (85.1%). However,representation in our sample of medium-sized businesses (22.1%) is slightly higher than their

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representation in the country structure of the economy (14.7%). Thus, quantitatively, the most

represented in our survey are small enterprises with number of employees up to (50 people -

71.7%, more of which are with staff of 10-50 people and microenterprises (up to 10 people)

account for 31.7%.

Another indicator of the enterprise is the financial stability which is the key factor in

understanding the specific context of SMEs attitude to CSR, especially at the present stage of the

global economic downturn that had a serious impact on the financial and economic situation in

Ukraine.

Table 2.4.Classification of enterprises in terms of financial stability

Aspect of Financial stability Number Part, %

Minor financial difficulties 31 29.8Financial stability over 3-5 years 24 23.1Financial stability during 3-5 years 21 20.2Financial stability during 1-3 years 13 12.5Regular financial difficulties 9 8.7 Financial stability of less than 1 year 6 5.8Total 104 100

Almost a third part of SME respondents in our survey experienced a minor financial difficulties

(29.8%), yet 8.7% - reported about the regular financial difficulties of their enterprises.

However, the vast majority of SME entrepreneurs interviewed stated the stable financial

situation of their enterprises. Obviously, the CSR issues are more integrated in the companies

with financial stability of more than 5 years (23.1%) and 1-3 years (20.2%). It is a proven fact of

the statement that CSR activities also serve a solid foundation for SME financial stability.

Socio-economic and environmental conditions of SMEs, as well as implementation of their CSR

activities usually differ from region to region proving the statement about the regional specifics.

In particular, SME representatives from 14 regions of Ukraine participated in the Survey which

were divided into three regional groups: Central and North West, East and South.

The most CSR active SMEes are located in Donetsk (11 SMEs), Cherkassy (10 SMEs), Kherson

(10 SMEs), Lviv (9 SMEs), Lutsk (9 SMEs), Chernigiv (8 SMEs), Kharkiv (8 SMEs) and

Mykolaiv (8 SMEs).

Conclusions.

1. The report is based one-dimensional and two-dimensional analyses of data obtained from 104

SMEs experts in Ukraine.

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2. The sample included SMEs in 13 economic sectors grouped into 4 main blocks, most of which

represented industry (27.1%), commerce (22.4%) and services (22.4%). Quite well represented

in the sample are the enterprises of the construction sector (6.8%), whose part in the economy is

9.4%

3. The sample classification of enterprises by size demonstrate 71.7% of small enterprises in

comparison with 85.1% of such enterprises in the economy of Ukraine. However, representation

of medium (22.1%) and large (6%) enterprises is higher than their representation in the economic

structure (14.7% and 0.2% respectively). Obviously, the larger enterprises show the higher

interest toward CSR.

4. The vast majority of experts reported about the stable financial situation of their enterprises.

Therefore, financial stability can be regarded as a warranty for CSR in SMEs, and vice versa -CSR can be a solid basis for financial stability of SMEs in Ukraine.

5. The survey covered small and medium-sized enterprises in 14. regions of Ukraine divided into

three geographical clusters when analyzed: Central and North West, East and South.

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Section 1. Understanding of the term "responsible business practices" and "CSR" for

SMEs in Ukraine

Among Ukrainian SMEs the understanding of responsible business practices has not yet

formed. The question How do you understand the term :responsible business practices? What

activities they provide? was put to the interviewed SMEs, and the reply options are shown inTable 3.1.

Table 3.1. Interpretation of the term "responsible business practices"

How do you understand the term :responsible business practices? What activities they provide?

1. The obligation of the company due to the labor and environmental legislation2. Responsible attitude to its work, no problems with tax and legal consideration

3. Responsibility for its activities, including ethics and law. The responsibility for the consequences of their activities4. Responsibility for its production activities to staff and community5. Responsibility for its activities to employees, customers, partners and government6. Developing the business in such a way, that it would not harm the environment, bring benefits to

society and community7. Participating in different spheres of communitys development8. Conduct for business development, based on the principles of the needs of the community, employees,

quality of production, environmental protection9. Voluntary initiatives of the company on its obligations to employees, customers and society10. Participation of companies in solving social and environmental problems, charity11. Responsibility of employer to people, with whom he collaborates12. Balance of 3 concepts: people, money, nature

The responses can be divided into two main groups. To the first group we can refer the

definitions which characterized more conditions for CSR rather than an element of responsible

business practices, e.g. company's obligation due to labor and environmental legislation or

payment of taxes and legal consideration.

Overwhelming majority of the answers contains definitions that include the scope andcharacteristics of a socially responsible company, such as "for its production activities to the staff

and the community," for its activities to employees, customers, partners, government.

Sources of information about CSR.

According to Survey results, the most popular source of obtaining information about CSR for

small and medium enterprises in Ukraine is the media (44%). A significant number of

respondents also reported that they first learnt about CSR from other companies (16%) and local

NGOs (9%). Around 3% of SMEs first learnt about corporate social responsibility from business

associations, Chamber of Commerce and the UN Global Compact. If to divide by sectors, SMEs

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of trade and industry learnt about CSR from media (65.2% and 48.0% respectively), the

construction companies the same from media (42.9%) and other companies (42.9%).

Fig. 3.1. Sources of information about CSR

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Fig. 3.2. Sources of information about CSR in SMEs of different sectors

SMEs from service sector actively used information about CSR from media (26.1%), other

companies reports (21.7%) and NGOs (17.4%), and also mentioned . UN Global Compact as a

source of information on CSR (8.7%).

In general, such criteria as SMEs size, financial stability and regional location have no effect on

the sources of obtaining information on CSR.

Fig. 3.3. Sources of information about CSR in SMEs with different financial situation

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Significantly lower level of participation of other potential actors in promoting the principles of

CSR among small and medium business in Ukraine, in particular - business - associations. This

is an important finding as according to official data of 2006 in Ukraine operated a solid business

support infrastructure consisted of 421 business center, 70 business incubators and 305 leasing

centers, 763 credit unions, 204 Entrepreneurship Support Fund, 1539 audit firms, 762 auditing

private companies and 412 insurance companies.

Description of CSR by respondents: Almost one third of respondents believe that CSR could

be best described as:

- a way to manage companies economic, social and environmental results and to interact

with its stakeholders (28.8%);

- promoting corporate fairness, transparency and accountability through the use of certain

rules and processes, with the help of which the business is managed (27.9%);

- a set of policies, practices, programs and integrated through business operations to reduce

negative impact on social and environmental surroundings of the company (26.9%);

- a way to achieve commercial success, which is not contrary to the welfare of employees

and local communities"(23.1%).

Interestingly, that among the respondents there is an opinion that CSR can not be a set of random

philanthropic CSR practices or initiatives motivated by public relations or marketing reasons

(1.9%) as well as a voluntary charitable activities of the company, which the company

introduced only in some cases for needs of local communities (7.7%).

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Besides, some respondents described CSR as SME responsibilities due to labor and

environmental legislation (20.2%), not taking into account the fact that global concept of CSR

provides additional and higher standards of doing businesses in the social and environmental

spheres than legally established norms.

SMEs do not view CSR as a part of the formal process of management through which companies

collaborate with stakeholders (1.9%), reflecting the real situation. Respondents also pointed that

in modern Ukraine CSR has not become yet a component of the overall business strategy. Only

large companies or the representative offices of foreign companies operating in Ukraine try to

implement CSR practices and policies, unlike SME sector.

Table 2. Which of the following definitions in your opinion, best describes the CSR (the amount

is higher than 100% because respondents were able to choose up to 2 definitions) 9. CSR describes the way the company manages its economic, social and environmental relations andinteracts with its stakeholders (including employees, customers) 28.8

3. CSR promotes the corporate fairness, transparency and accountability through the use of certainrules and processes, with the help of which the business is managed 27.9

5. CSR is the set of policies, practices, programs that are integrated through business operations toreduce the negative impact on social and environmental surroundings of the company 26.9

7. CSR is a way to achieve commercial success, which is not contrary to the welfare of employeesand local communities 23.1

2. CSR is the duty of the company due to the labor and environmental legislation 20.2 8. CSR describes the process of decision making based on ethical values and conformity to legalterms 12.5

1. CSR is the charitable activities of the company, which are implemented only in some cases for theneeds of the community 7.7

4. CSR is a set of random philanthropic practices or initiatives motivated by public relations or marketing considerations 1.9

6. CSR is a formal process of management through which companies collaborate with stakeholders1.9

SME sector analyses demonstrate the following trends:

- the service sector respondents believe that this is a set of policies, practices, programs,

integrated to reduce the negative impact on social and environmental surroundings of the

company (47.8%),

- construction enterprises representatives are convinced that CSR promotes corporate

fairness, transparency and accountability, with the help of which the business is managed

(42.9%),

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- employees of the commercial enterprises consider CSR as a way to achieve commercial

success, which is not contrary to the welfare of employees and the local community

(34.8%) and decision making based on ethical values and compliance with legal

conditions (34.8%).

Fig. 3.4. Description of CSR by SME representatives of various sectors

CSR and SME size: The figure shows that the enterprises employing over 50 persons have better

understanding of CSR, and the microenterprises have scattered understanding of this concept.

Fig. 3.5. Description of CSR by representatives of SMEs of different sizes

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Geographical location: If representatives of SMEs in Western region give preference to

description of CSR as a way of achieving commercial success (33.3%), how the company

manages its economic, social and environmental relations (33.3%), respondents from Eastern

and Southern region tend to believe that CSR is primarily a set of policies to reduce the negative

impact on social and environmental surrounding of the company (30.8%). The Center and the

North believe that the most significant is that CSR promotes corporate fairness, transparency andreporting (32.1%).

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3.6. Description CSR representatives of SMEs from different regions

Financial stability: Different level of understanding of CSR can be witnessed among

representative from SMEs with different financial stability.

Fig.3.7. Description of CSR by representatives of SMEs of different financial situation

Experts from the most financially stable companies chose options demonstrating a fundamentalapproach to the CSR concept, where CSR is regarded as the way the company manages its

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economic, social and environmental relations (40.0%) and to reduce the negative impact on

social and environmental surrounding of the company (31.1%).

Companies representatives of financial stability for less than 3 years understand CSR as

activities that promote corporate fairness, transparency and reporting (26.3%) and provide

policies to decrease the negative impact on social and natural environment (26.3 %).

Companies with financial difficulties tend to descriptions determinations, according to which

CSR promotes corporate fairness, transparency and reporting (30.0%).

Respondents views on statements on CSR

Under survey the respondents were proposed to evaluate the different statements on CSR. The

popular statement about CSR among small and medium enterprises of Ukraine is that the

condition of social responsibility must be in compliance with labor law and environmental

protection (82.5), and responsible companies perform much more than that under the law for a

positive impact on society and environment (70.8).

The majority of respondents think that the legislation on CSR should exist to speed up its

promotion among companies and general public (78.2). Another popular opinion is that CSR

activities should include practices of environmental protection (77.7), thus demonstrating that

SMEs think responsibly and understand the environmental impact their activities.

Table 3.3. Respondents views on statements about CSR

Indicate whether you agree with the following statements

Percentage of

respondents

agreed with the

statement1. CSR is a very expensive concept 28.32. CSR is more obligatory to large companies than for small and medium enterprises 32.73. CSR has to be promoted by the government 43.94. Small and medium enterprises can implement CSR in the availability of resources

provided by state or other institutions51.5

5. CSR should be resolved on the legislative level to fasten its spread 78.26. Responsible company is a company that complies with labor and environmental legislation 82.57. Responsible companies perform much more than it is needed by the legislation 70.88. CSR is an important issue to establish business relations with the Western companies 53.19. CSR is an equivalent of the corporate governance 60.2

10. CSR is the equivalent of the charity 38.811. CSR includes activities for protection of the environment 77.712. SME (small and medium enterprises) could implement CSR only with the help of foreign 7.3

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advisers13. CSR includes activities for protection of the environment 61.114. CSR is the new unusual name for the activities that companies have made before 38.515. CSR is more important for the companies from developed countries than for the

companies from developing countries32.0

16. CSR is more important for the field of production than for the service sector 20.0

17. CSR is motivated by the public relations and marketing considerations of the company 55.818. CSR can increase the profit 54.6

It should be noted that only 7.3% of respondents believe that CSR can be implemented only with

the assistance of foreign advisers, 20% of respondents agree that CSR is more important in the

production than service sphere. Almost a third of respondents (28.3%) consider CSR as a costy

and expensive thing to have, and 32.0% of them support the statement that CSR is more

important for companies from developed rather than developing countries.

Regional aspect: Despite of some differences of aassessment of the statements about CSR among

SMEs representatives from different regions, they all agree on the following:

1. CSR should be resolved on the legislative level to fasten its spread.

2. Responsible company is a company that complies with labor and environmental

legislation.

3. Responsible companies perform much more than it is needed by the legislation.

4. CSR includes activities for protection of the environment.

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Fig.3.10. Assessment of statements about CSR among SMEs from different regions

The least popular among experts from different regions are the following statements:

1. CSR has to be promoted by the government.

2. CSR is the equivalent of the charity.

3. SME (small and medium enterprises) could implement CSR only with the help of foreign

advisers.

4. CSR is more important for the companies from developed countries than for the

companies from developing countries.

5. CSR is more important for the field of production than for the service sector.

Conclusions.

1. The most popular source of obtaining information about CSR for SMEs of different sectors,

sizes, regions, and with different financial situation in Ukraine is the media (44%), other used

sources are other companies (16%) and local NGOs (9%).

2. Significantly lower is the level of participation of other potential actors in promoting the

principles of CSR among small and medium enterprises in Ukraine. In particular, according to

the survey, not much attention to CSR is paid by business associations which is an important

finding as Ukraine in 2006 established a well-developed business support infrastructure, which

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included 421 business centers, 70 business incubators and 305 leasing centers, 763 credit unions,

204 Entrepreneurship Support Funds, 1539 audit firms, 762 private auditors, 412 insurance

companies.

3. The survey respondents proved the fact that CSR is, above all, the way the company: a)

manages its economic, social and environmental relations and interaction with its stakeholders,

and b) promotes corporate fairness, transparency and accountability; c) achieves commercial

success, not contradicting employees welfare and the welfare of the local community. An

important contribution to the development of general CSR concept is understanding of the

necessity to develop and implement CSR mechanisms with appropriate policies, practices,

programs, integrated through business operations to reduce negative impact on social and

environmental companies (26.9%).

4. The general undertanding of the terms "CSR" and "responsible business practices" among

Survey respondents vary depending on industry affiliation, size, financial position and

geographical location of the company that they represent. This can be explained by different

CSR practices, as well as the lack of the holistic vision of CSR as a strategic concept for the

development of modern enterprises among Ukrainian SMEs.

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Section 2. Prospects and obstacles for the the implementation of CSR among small and

medium enterprises in Ukraine

The continuous dissemination of the corporate social responsibility concept and UN Global

Compact principles (support for human rights, labor standards, environmental protection) , CSR

implementation by the leading companies in Ukraine encourage SMEs to engage in the processof developing effective programs of corporate social responsibility.

Assessment of SME experts views and CSR practices in their companies revealed that 53.6% of

them, the process of implementing CSR may take from 6 months to 1 year (Table 4.1).

Table 4.1 Respondents views on the question: "How much time can take the implementation of

CSR in your company?"

# period %1. 2-3 weeks 1.02. 1 month 3.93. 2-6 months 17.6 4. 6-12 months 20.6 5. 1 year 33.36. Other 23.5

As one can see from the table, period from 2-3 weeks to 1 month is obviously insufficient for the

implementation of CSR in most of SMEs.Fig.4.1.Time required to implement CSR in SMEs

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More time (from 6 months to 1 year inclusive) for the implementation of CSR in their

companies' activities are required in the trade companies (65.2%) and industrial enterprises

(62.9%) (see Figure 4.2).

Fig . 4.2. Prospects of the implementation of CSR in SMEs of different sectors

Experts explain readiness of construction companies (28.6%) to implement CSR in a rather short

period of time (from 1 month to 2-6 months) by to the dynamic nature of their activities.

Regional aspect: Among SMEs highest readiness for the implementation of CSR (1 month to 2-6 months) was shown by the companies from the Central and Northern regions (28.6%).

Fig . 4.3. Prospects of the implementation of CSR in SMEs in different regions

More long-term plans on implementation of CSR within the company is shown by the SMEs

from Eastern and Southern regions. According to the majority of the respondents in these regions

(64.1%) the process will take place from 6 months to 1 year.

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Number of employees : There is no significant differences in terms of the period for CSR

implementation found among enterprises with different number of employees (Figure 4.4.).

Fig . 4.4. Prospects of the implementation of CSR in SMEs of different sizes

SME and Financial stability: Practically no difference in terms of the period of CSR

implementation within companies can be seen among Ukrainian SMEs of different financial

stability (Figure 4.5.).

Fig.4.5. Prospects of the implementation of CSR in SMEs of different financial stability

In general, quite a balanced position on the period of CSR implementation within companies can

be explained by the awareness of the SME representatives about the capacity needed for CSR

implementation. Indeed, a successful system of CSR implementation is a complex, long-term

strategy for any company, including SMEs. It involves changes in its overall business strategy

and structure for integrating social and environmental priorities in the company's activities at all

levels of decision-making process, which should lead to improving the management of the

company and its activities in general.

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Barriers / obstacles to the implementation of CSR in SMEs in Ukraine

Implementation of corporate social responsibility in SMEs can not only bring some

achievements but also some obstacles to overcome.

The main reason to hinder the development of social responsibility among small and medium

enterprises in Ukraine is the lack of funds (Table 4.2) which is strongly connected with the lack

of legislative promotion of responsible SMEs

Table 4.2. SME representatives answers to the question "What is the biggest obstacle to the

implementation of CSR in your company?

Percentage of responses, %Lack of human resources 10,8

Lack of funds 37,3Lack of know-how 14,7 Lack of technology 13,7 Lack of support from management 3,9Lack of employees motivation 5,9Lack of profit from CSR 7,8Other 5,9

The idea of corporate social responsibility in Ukraine requires legislative support. Western

standards and norms motivate the entrepreneurs to make voluntary social investments. Incontrast, some domestic laws are compulsory or some are not yet developed Ukrainian

legislation imposes a series of mandatory business social functions which shows their only fiscal

nature. Social insurance, which in fact takes up to 41.7% of revenues of enterprises, built on the

principle of lack of alternativeness. It compels employers to use the scheme of "grey" wages

which will results in reduction of social benefits in the future. In addition, Ukrainian legislation

provides small set of preferences to encourage spendings on social actions. Therefore, only 4%

of the profits of the company paid to the charitable foundation or organizations is not under

taxed. Financial support provided to research, cultural, sports institutions and religious

organizations is VAT-exempted7.

It should be noted that the problem of lack of funds for CSRT implementation is of high

importance for both small and medium enterprises (Figure 4.6.).

Fig.4.6. Obstacles to the implementation of CSR in SMEs

7 .. : // . 2008, . 18.6, -.200-204.

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Logically, for smaller companies another problem is appears lack of human resources.

Representatives from companies with the number of employees up to 50 people also tell about

the problem of knowledge deficit more than others, while companies with the size of 10-50

employees indicate a lack of technologies for implementing CSR.

Conclusion

1. According to the majority of experts, the period necessary for implementing CSR into SMEs

management system can take in from 6 months to 1 year. That's the period needed to implement

CSR according to the experts of trade and industry enterprises in Eastern and Southern regions.

2. Readiness for dynamic implementation of CSR (1 month to 2-6 months) was shown by the

companies of the construction sector in the Central and Northern regions.

3. The main obstacle to the implementation of CSR in SMEs is the lack of funds and human

resources.

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Section 3. Evaluation perception of the importance of CSR activities among small and

medium enterprises in Ukraine

The specific cases could tell us much about the principles of corporate social responsibility in the

company. And therefore, crucial for the implementation of CSR in SMEs is the task to identify

appropriate measures and implement the most important activities within the CSR concept.

SMEs experts were evaluated according to the importance of 47 types of companies CSR

activities on a scale from 1 to 6 points, where 1 - is the most important, and 6 - is the least

important (Figure 5.1).

Experts responses proved the prevailing role of the CSR activities in the following areas:

working environment, product quality, satisfaction of employees, certification and evaluation of

employees.

Fig. 5.1. The importance of CSR for SMEs

Analyzing the evaluation results of the evaluation, it is worth noting that only 11 among 47 of

the proposed activities were recognized at a level below the average (more than 3 points).

Detailed analysis reveal that among these positions of the less importance there are such

important practices as activities under the national criminal law (3.1), interaction with schools

and universities (3.1), the cleaning procedure (3.1), social assessment (3.2), gender-balanced

environment (3.3), freedom of associations (3.3) and charitable contributions (3.4). The fact of

great concern is understanding by the SME experts of the collective bargaining (3.4), non-

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financial reporting (3.5), non-use of child labor (3.6) and the existence of trade unions (4.0) as

the least important practices.

SMEs and sectors: Further review of the results showed the polar understanding (the most

important and least important) of the CSR issues for representatives of particular sectors.

For the industrial enterprises, the most important activities in view of CSR is evaluation of staff,

rationalization of water use, working environment, improvement of working conditions for

employees and energy efficiency.

Fig.5.2. The importance of CSR for SMEs of industrial sector

The least important activities for SME experts from the industrial sector, is to resolve the issue of gender balance, collective bargaining, child labor and trade unions - which generally corresponds

to the rating of these positions in the overall results of the Survey sample.

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Another variety of the most important practices of CSR emerges in the commercial sector. It is,

first of all, the satisfaction of employees, health and safety, employee training, leadership style,

business ethics and transparency.

Fig.5.3. The importance of CSR for SMEs of trade industry

The least important for this sector are such practices as charitable contributions, non-financial

reporting, and expert analysis and, as in the previous results from other sectors, non-existence of

child labor and trade unions.

An analysis of expert opinions from the sphere of construction reflects the priority target for

development of their social relations, which have a condition to ensure satisfaction of customers

and employees.

Fig.5.4. The importance of CSR for SMEs in construction industry

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Specific for this group of experts, the least important are such practices as working hours

overtime work, interaction with schools and universities, traditionally, the issue of child labor

and the existence of trade unions.

Almost in parallel with the previous groups, experts, SMEs of service sector are willing to

acknowledge the important role of such activities as satisfaction of customers and employees,

work environment, health and safety for CSR in their business. High ranking place in this group

received a such issue as certification.

Fig.5.5. The importance of CSR for SMEs of service sector

Among the least important - traditionally repeated in the rankings of other sectors of the practice

of CSR (Figure 5.5.).

Overall, survey results found some specific significant CSR practices to each type of economic

activity of enterprises. In particular, industrial companies put the focus on practices to ensure the

development of effectiveness of their activities, business commerce focused on improving the

social (labor, economic) relations and the construction sector companies and the services sector

are working on improvement of system of human resources, quality of service. What isinteresting that practically all sectors of SMEs agree on the least important CSR practices within

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SMEs - improvement of labor practices, the existence of trade unions, freedom of association,

collective bargaining, working hours overtime work, not using of child labor, gender-balanced

environment.

Besides, such important CSR practices as non-financial reporting and social assessment are

underestimated by SMEs respondents.

SMEs and numbers of employees: The results confirm the certain differences SMEs with

different number of employees in regard to the importance of CSR activities.

Fig.5.6. The importance of CSR for micro, small and medium-sized enterprises

Interesting to know that that unlike larger enterprises, micro ones (up to 10 employees) are more

focused on external CSR practices and feel the need to address such issues as customer

satisfaction, corruption overcoming and compliance with tax obligations.

Fig.5.7. The importance of CSR for micro SMEs

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Less attractive to micro enterprises in terms of CSR practices is the establishing of trade unions,

non-financial reporting, charity donations and freedom of associations.

The enterprises with the number from 10 to 50 employees are mostly concerned about issues of

certification, product quality, customer satisfaction, which can be solved by forming an

appropriate work environment and proper salary.

Fig.5.8. The importance of CSR for small SMEs (10-50 employess)

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Recognizing the role of labor relations in CSR development, representatives of SMEs ignore the

importance of such issues as the existence of unions, collective bargaining, child labor, gender

balanced work environment.

It is worth stating that among the most important CSR activities in medium-sized enterprises is

the internal CSR: health and safety, staff satisfaction, improvement of working conditions for

employees, working environment, respect of national labor and environment legislation.

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Fig.5.9. The importance of CSR for medium-sized enterprises

However, it should be noted that the medium enterprises in Ukraine have not yet paid the proper

attention to the issues of child labor, national criminal law, non-financial reporting, and

traditionally under-estimated issue of the establishing of trade-unions.

Regional aspect: There are also different opinions of SME experts from different regions on the

importance of CSR.

Fig.5.10. The importance of CSR for SMEs by region

Financial stability and SMEs: Financial situation of the company also has an impact onunderstanding of the CSR importance.

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Fig.5.11. The importance of CSR for SMEs, which have different financial situation

Assessing the importance of activities of the CSR issues in accordance with ISO 26000 (new

international standard on social responsibility) 8

The grouping CSR practices according to their importance was made on the base of ISO 26000

issues which include human rights and labor practices, fair operating practices, social

development, consumer issues, environment and organizational governance.

Table 5.1. The importance of CSR activities according to ISO 26 000 (based on the scale from 1

to 6 points, where 1 - very important, and 6 - are not important)

Consumers issues 2.4Certification 2.5Customers satisfaction 2.4Product quality 2.4

Fair operation practices 2.8Business ethics and transparency 2.7Taxes 2.6Corruption 2.6National criminal law 3.1Financial reporting 2.8

CSR assessment of business partners 3.0ENVIRONMENTAL PROTECTION 2.82

. Cleaning procedures 3.1Decreasing of Industrial Pollution 2.7Energy efficiency 2.7Renewable energy sources 2.8Water consumption 2.7Waste handling 2.9National environmental law 2.7Environmental impact assessment 3.0

Sourcing policies/requirements 2.8

Human rights/labour practices 2.91Human resource policies 3.0

8 Planned to be adopted in May, 2010

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Fatigue at work 3.0Harassment at workplace 3.0Gender-balanced work environment 3.3Wages 2.6Trade-unions 4.0Child labor 3.6

Signing collective bargaining 3.4Working hours and over-time 3.0Hygiene at workplace 2.7National labor law 2.7Health and safety 2.4Employee satisfaction 2.5Work-life Balance 2.9Maternity privileges 2.9Level of noise and dust at workplace 3.0Ergonomics of workers 2.5Freedom of association 3.3Working atmosphere 2.4Training of employees 2.5Staff performance evaluation 2.6Management style 2.7

Social development 3.13Social impact assessment 3.2Charity donations 3.4Stakeholder engagement 2.9Community work 2.9Cooperation with schools and universities 3.1

International standards 2.9Non-financial reporting 3.5

As one can see, SMEs are primarily interested in CSR practices aimed at meeting the demands of

consumers, and the most important issues is the issue of the quality of products and services for

consumers. These data clearly support the fact that SMEs connect implementation of CSR

strategies with economic development of their companies, which is also proved by the fact that

business ethics and protection of the environment are also very important issue for SMEs.

Besides, it should be noted that SME representatives pay less attention to human rights and labor

practices (2.9 points) and social development in general (3.1 points).

Conclusions.

1. Generally interviewees pointed out the importance of CSR practices in their activities. Thus,

the results of evaluation of 47 types of different CSR activities on their importance for company

found out that majority of SME experts rank as the top such issues as working environment,

product quality, satisfaction of employees, certification and evaluation of employees. Only 11

types of activities were evaluated below the average (they got more than 3 points according toscale where 1 is the most important activity and 6- is the least important one). However, the

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survey demonstrated that SME experts dont pay much attention to such important activities as

freedom of associations, collective bargaining, the establishing of trade unions, non-financial

reporting, child labor, gender-balanced work environment and charitable contributions.

2. The considerable interest of SME experts in CSR practices aimed at meeting consumers can

prove the fact that SMEs closely link the implementation of CSR strategies to the economic

development for their companies. However, the least important issues for experts are human

rights and labor practices, and social development practices.

3. Such indicators as the economic sectors of SMEs, size of the enterprise, geographic location

and financial stability also have an impact on determination of the importance of CSR practices

for small and medium enterprises.

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Section 4.

Expectations of the results of the implementation of CSR and benefits for SMEs in

Ukraine.

The level of awareness of our experts about the possible results from the CSR implementationamong Ukrainian SMEs could be shown by analysis of their answers to the question: "What

impact has CSR on the following indicators?".

The experts were asked to evaluate the expected results of CSR implementation in 22 directions.

Evaluation was carried out by the 5-stage scale: significant positive impact; medium positive

impact; significant negative impact; medium negative impact and no effect;

According to survey results, all experts have great expectations for the positive impact of theCSR implementation for their enterprises (see table 6.2). Almost all of the experts have opinions

that the most positive results from CSR implementations are improvement of the reputation

(93.6% of respondents), raising awareness of the brand (86.2%), establishing relations with the

government (85.3%). Also, CSR implementation within the company will have a positive impact

on the quality (85.3%), competitive advantages (83.3%), innovations (83.0%), productivity

(80.4), sales (80.2%), income (77.7) and other indicators of economic development of the

company.

Table 6.2 SME evaluation of the positive impact of CSR

Possible Results Respondents views, %1. Reputation of the company 93.62. Level of brand awareness 86.23. Government relations 85.54. Quality 85.35. Competitiveness 83.3

6. Innovations 83.07. Media presence 82.88. Customer satisfaction 81.79. Productivity 80.410. Sales 80.211. Investors relations 78.912. Profit 77.713. Market access 71.314. Market share 68.415. Export 68.116. Risk management 67.8

17. Employee turnover 64.918. Credit arrangements 63.119. Absenteeism rate 55.2

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20. Value added per employee 51.621. Operational costs 51.222. Pricing 41.5

According to the SME representatives the CSR implementation is also associated with certain

risks, most of which are increased operating expenses, turnover, absenteeism levels, value added

per employee and pricing (see table 6.3).

Table 6.3 SME evaluation of the possible negative impact of the CSR activities

Possible negative impact Respondents views, %Operational costs 20.0Employee turnover 17.0Absenteeism rate 16.1Value added per employee 15.1Pricing 13.8

Some SME experts have the opinions that CSR does not affect the enterprises activities and

certain indicators, primarily economic ones: pricing, additional cost loans, export share of the

market, risk management, operational costs, and access to markets.

Table 6.4. Respondents opinions on no-impact of CSR implementations for SMEs.

Indicators of enterprises activities No CSR impact, % of respondentsPricing 44.7

Value added per employee 33.3Credits 32.6 Export 29.8Market share 29.3Risk management 29.0Operational costs 28.9Absenteeism rate 28.7 Market access 27.7 Government relations 19.4Investors relations 18.9Employee turnover 18.1Profit 17.0Sales 16.7 Media presence 16.1Customer satisfaction 15.3Innovations 14.9Productivity 14.1Competitiveness 13.5Level of brand awareness 12.8Quality 12.6 Reputation of the company 5.3

Conclusions.

1. Evaluation of the possible impacts from the CSR implementation on SMEs based on 22indicators revealed a high level of expectations among respondents about the positive impacts in

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such areas as improved reputation, increasing brand awareness, establishing relationships with

the government. Also SMEs expect the positive impact of CSR on quality improvement,

competitive advantage, innovation, productivity, sales, profits and other indicators of economic

development.

2. Respondents view the negative impact from the CSR activities in terms of increasing

operating expenses, turnover and absenteeism levels, value added per employee and others.

The benefits for implementing CSR within small and medium enterprises in Ukraine

According to the matrix of business opportunities for social responsibility, composed in 2004 by

SustainAbility International for emerging markets, companies receive such benefits from CSR

activities:

- improvement of manufacturing processes increase of productivity, revenue, cost

savings with the use of environmentally friendly equipment;

- formation of the company's reputation - increasing customer loyalty, brand value,

partnerships;

- stability of workforce, saving resources for attracting and retaining qualified personnel;

- access to new markets - standardization according to international standards (ISO);

- effective risk management - a timely and efficient access to specific information, anopportunity to respond to risky situations;

- fundraising from special funds - "social investments" for social programs for the

responsible companies.

Situation of the awareness on the benefits of implementing CSR in SMEs is represented by the

answer to the question: "Briefly describe the benefits that your company can get from the

implementation of CSR?"

Responses of the experts about the potential benefits from the implementation of CSR are related

to four main business areas: labor practices, business practices, consumer issues and social

development (figure 7.1).

Fig.7.1. Benefits from the CSR implementation for SMEs.

Due to the experts evaluations, most benefits are expected from the CSR implementation in the

area of labor practices, which include:- discipline improvement;

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- reducing of staff turnover;

- improvement of working conditions;

- employees motivating;

- improvement of productivity;

- promoting employees responsibility;- providing social packages;

The SME experts as well have great expectations in the areas of fair operating and transparent

business policies of the companies, such as:- business ethics;- brand advertising;- support from foreign investors;- new markets;- reputation, cost reduction;- promoting cooperation with international companies;- access to media;- competitiveness;- financial benefits in the future.

SME experts believe that the implementation of CSR will improve product quality, satisfy

customers and bring benefits to businesses in matters of customer loyalty.

The SME representatives expect that the implementation of CSR will have the effect of

increased prosperity, improved relationships with the community, increasing funds for

promotion of social projects and contribution to social development in general.

Only three experts from 104 respondents think that the CSR implementation has no benefits at

all.

CSR practices in the SME.

Only 13 respondents reported about the CSR practice at their enterprises. The most popular in

SMEs are the CSR activities related to labor practices, environmental issues, fair operating

practices and community development.

Most CSR activities related to the labor practices are:- activities to ensure safe working conditions;

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- opportunity for studying;- a training center at the enterprise;- reward system for the best workers;- health-care system;

- creating new working places;- sport events and tournaments for the employees and the management;

- organization of the family entertainment;

Besides, SMEs also try to improve CSR practices in the area of fair operating and transparency

practices including:- respect to the business partners;

- anticorruption policy;- implementation of the ethics code;- service improvement.

SME experts also report on the CSR practices aimed at the community development, such as:- charity;- community support;- providing residents with low accommodation prices;- aid to the orphanages.

Also, the environment protection activities are developed nowadays:

- implementation of environment-friendly technologies;- cleaning the territory around the company;- careful attitude to the environment;

It should be noted that SME respondents also pointed out as CSR practices the activities they

have to do under the law: tax payment, collective bargaining and salary payment.

Conclusions.

1. CSR is an effective tool for corporate SME policy, which assists in updating the modern

management style to a new level with its own corporate philosophy and pre-conditions for

numerous competitive advantages. The SME respondents state such potential benefits fro SMEs

from the CSR implementation as improved corporate policy in labor practices, improved

business activities, customer satisfaction and promote social development.

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2. Studying the CSR practices of the SMEs showed that they are implemented in the areas of

labor relations, environmental protection, fair operating practices and community development.

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Section 5. The role of trade unions and collective bargaining for SMEs in Ukraine

Analysis of the situation on the level of social dialogue and status of trade unions within SMEs

in Ukraine is based on the responses to the following Survey questions:- Does the company have a trade union?- If it has, what problems does it solve?- If it hasnt, then, is there a need of establishing trade unions at the small and medium

enterprises? If not, why?- Does your enterprise have a collective bargaining?

According to the Survey, there is a low number of SME trade unions in Ukraine. Only 20.2% of

respondents stated that their SME has a trade union (see Fig. 8.1).

Fig.8.1. The number of trade unions within SMEs in Ukraine

More usual are the trade unions for SME of industrial sector (28.6%) and trade unions are least

represented in the commercial sector (8.7%).

Fig.8.2. Trade-unions within SMEs of different sectors

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Also, a direct correlation between size and density of trade unions could be seen. In particular,

trade unions were formed within every third medium-sized enterprise (27.6%), and only every

tenth micro ones (12.5%).

Fig.8.3. Trade unions within SMEs of different size

According to survey results, financial stability of SME hardly influence the establishment or

absence of trade unions.

Fig.8.4. Trade unions within SMEs of different financial stability

However, Survey results show that trade unions are more usual for SMEs in Central and

Northern regions (28.6%), while the smallest representation of them is in the Western region

(10.0%).

Fig.8.5. Trade unions within SMEs in different regions

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In general, the status of trade unions in SMEs in Ukraine reflects trends that have developed in

many countries - the majority of SMEs, especially micro and small ones, is not covered by the

employees representation organizations, and relations between employees and employers are

made mostly via direct personal agreements.

Relevance of trade unions for SMEs

Respondents find it necessary to promote trade union activities as more than 40% of respondents

are confident that trade unions should be established within SMEs.

Fig.8.6. The necessity for development of trade unions in SMEs

Most representatives of the construction sector considered the development of trade unions as an

important CSR task. Most opponents of trade union activity are in trade area (fig. 8.7.).

Fig.8.7. The necessity for development of trade unions in SMEs in different sectors

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The greatest need for the establishment of trade unions was expressed by the representatives of

the microenterprises (41.4%) and small enterprises (37.5), slightly lower is this the need for

medium-sized enterprises (28.6%).

Fig.8.8. The necessity for development of trade unions in SMEs of different size

A bit more willingness to establish trade unions was shown by the enterprises with long-term

stable financial situation.

Fig.8.9. Necessity for development of trade unions in SMEs of different financial stability

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Regional data demonstrate that moods towards development of trade unions are more usual for

the East, South (48.4%) and the North 40.0%). The SME representatives in the Western region

mainly show the little interest to establishment of trade unions (78.9%).

Fig.8.9. Necessity for development of trade unions in SMEs in different regions

The main activities of trade unions in SMEs

According to the survey, SMEs often deal with several trade union issues: collective bargaining,

social protection of workers, improvement of working conditions, employee training and

informing.

Fig.8.10. The main objectives of trade unions activities in SMEs

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The most complex and representative is the work of trade unions in industry and construction

sectors.

The highest level of credibility and transparency of the activities of trade unions is demonstrated

by the larger enterprises.

The survey results show that regional differences exist not only in the number of trade unions.

Obviously, the SME employees in Central, Northern, Eastern and Southern regions feel positive

impact of trade unions on their work.

Logocally, the major objective of the activities of trade unions is defending the interests of

workers at enterprises that are experiencing financial difficulties.

While taking into consideration the different level of activities of SME trade unions across

various sectors, sizes, financial situation and geographical location, one general characteristic

could be seen - low level of respect towards trade unions. In fact, all activities of trade unions are

not widely popular, as even the most common among them were chosen by a very small

percentage of SME respondents (from 3% to 16,2%)(see fig.8.10).

Perspectives for trade-union activities.

SME experts helped us define the most needed activities of trade unions: an improvement of

working conditions (30.3%), collective bargaining (30.3%), social protection of employees

(27.3%), improvement of wages system (27.3%), legal protection of employees ( 24.2%),

transparency of corporate policies (24.2%) and training for employees (24.2%).

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Fig.8.15. Current issues of trade union activities in SMEs

SME in different economic sectors : The SMEs in construction sector mostly have a need to

promote trade union activities.

Fig.8.16. Current issues of trade union activities in SMEs of different sectors

SMEs of different size: Micro and small enterprises tend to support the trade unions.

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Fig.8.17. Current issues of trade union activity among SMEs of different-size

SMEs and financial stability: Respondents from financially stable enterprises have higher

expectations for activities of trade unions.

Fig.8.18. Current issues of trade union activities in SMEs of different financial stability

SMEs in different regions: There are also significant differences of willingness to involve trade

unions in resolution of important issues of social and labor relations among SMEs in different

regions. Unlike Western region, the more prospects for establishing the trade unions can be seen

in Eastern and Southern regions.

Fig.8.19. Current issues of trade union activities in SMEs in different regions

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Thus, the number density of trade unions among SMEs in Ukraine, as well as the awareness of

about trade-unions and importance of issues solved by them are determined by the economic

sectors of SMEs, their size, financial situation and regional location.

Motives to deny trade union activities in SMEs

In the situation where the number of trade union on SMEs is ~ 20, while the proportion of

respondents who opposed the establishment of trade unions is 60 percent, the logocal question

was put to SME experts: Why do SMEs have no need in trade unions?

In response to this question, the following reasons were mentioned:

- employees dont want to pay contributions;- it is more appropriate to have an Employee council;- trade union requires extra financial costs and time;- very small staff number;- distrust in trade union leaders;- the easier way is a direct personal agreement between the parties;- company takes the main responsibility from the trade unions to protect the rights of

employees;- companies dont like the state principles of trade unions;- the collective bargaining could be made instead of establishment of trade unions;- with a small staff the compromise can be reached through negotiations.

Collective bargaining in SMEs.

SMEs in Ukraine are important employers and collective bargaining and collective agreements

serve as a proven tool for improving the social and labor relations.

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The Law of Ukraine "On Collective Contracts and Agreements" concretize the requirements for

maintenance of the collective agreement. It establishes mutual obligations of the parties to

regulate the production, employment, socio-economic relations, including:- changes in production and employment;

- providing of the productive employment;- wages rationing, establishing the form, system and rate of wages and other employment

benefits (bonuses, premiums);- establishing of guarantees, compensations and benefits;- employees participation in formation, distribution and usage of profits;- working hours and leisure;- environment and health;

- providing residential, cultural, medical care and recreation for employees;- guarantee of the trade union or other employee organization;- conditions of salary funds regulation and setting of interqualificational ratios in payment;

According to the Survey, 60% of SMEs in Ukraine are building social-labor relations on a

contractual basis.

Fig.8.20. Collective bargaining in SMEs

Rather high (over 60%) is the number of collective bargaining in SMEs in all sectors, except

of trade sector where the figure is 39%.

Fig.8.21. Collective bargaining in SMEs in different sectors of economy

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Collective agreements are more frequent in medium-sized enterprises, and the least - in

microenterprises.

Fig.8.22. Collective bargaining in SMEs of different-size

Despite significant regional imbalances in the number of trade union, the survey found out

that collective agreements are quite popular among SMEs in all regions of the country.

Fig.8.23. Collective bargaining in SMEs of different regions

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Collective agreements are an important tool for social protection for employees as its provisions apply to all employees without exception, regardless of whether they are union

members, and are mandatory for both the employer and employees.

Conclusions

1. The remarkable peculiarity of small and medium enterprises is their internal structure,

which indicates the system of social and labor relations and number of representative

organizations of workers at these enterprises. According to SME experts, numbers of tradeunions in the SMEs in Ukraine reaches 20.2%, from 28.6% in SMEs of industrial sector to

8.7% in the trade area, from 27.6% among medium enterprises up to 12.5% in the micro, from

28.6% among SMEs in Central and Northern region to 10.0% of the SMEs of the Western

region. The established trade unions often pay attention to collective bargaining, social

protection of employees, improvement of working conditions, employee training and

informing of employees.

2. Large proportion of SME respondents (60%) told their negative opinion on the prospects of trade unions among SMEs with justification of their denial.

3. The results show that trade unions is to optimize their activities and adopt them to the most

actual needs in the labor relations, including improvement of working conditions, collective

bargaining, social protection of employees, improvement of wages, legal protection for

employees, transparency of corporate policies and training for employees.

4. While rejecting the establishment of trade unions, SME experts, however, supportcollective bargaining and contractual regulation of labor relations. Number of contractual

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regulation of social-labor relations among SMEs is 60%, including 39% - in enterprises of

trade sector and over 60% of SMEs in all other sectors.

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Section 6. CSR Activities implemented by SMEs.

CSR employment practices among small and medium enterprises.

Internal corporate social responsibility is the main condition for the success of companies in the

world. The main directions of internal corporate social responsibility are defined by theinternational standards of social policy in the area of labor relations.

The basic rules and principles of the corporate and public policy in the area of labor relations are

outlined in the documents of the United Nations (UN), conventions and recommendations of the

International Labor Organization (ILO), declared in acts of the Council of Europe and other

international and regional organizations.

The right to work and protection against unemployment are proclaimed in the UniversalDeclaration of Human Rights (UN, 1948), the International Covenant on Economic, Social and

Cultural Rights (UN, 1966), conventions and recommendations of the International Labor

Organization (ILO). At the European level the right to work is declared by the European Social

Charter (Council of Europe, 1961., Revised in 1996) and others.

Working conditions and social and labor relations, according to the results of our survey are very

important direction of CSR in Ukrainian SMEs.

Table 9.1 SME responses to the question: "Which of the below listed activities of labor practices

are the part of CSR?"

, Question %7. Improvement of working conditions 96.05. Training for employees 92.04. Working places for people with disabilities 89.18. Activities for employees motivation improvement 89.019. Development of reward system for the best employees 86.11. Employees inclusion in decision-making process 73.82. Code of ethics 73.7 10. Collective bargaining 73.218. Activities for reducing the noise at the workplace 73.215. Implementation of part-time employment for mothers with small children 68.7 14. Keeping workplaces clean 66.36. Prohibition of smoking at the workplace 57.017. Providing some free time to employees for blood donation and public work 56.6 9. Trade union at the enterprise 51.511. Appointment of women to senior positions 48.03. Free lunches for the employees 46.4

12. Improvement of rooms isolation 44.316. Hiring personnel among ethnic minorities 43.313. Anonymous complaints mechanisms for the employees 30.6

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20. Reducing of the working hours to minimum 22.7

For SMEs, the most important are the activities focused on improving working conditions for

employees (96.0), developing opportunities for staff training (92.0), creating working conditions

for people with special needs (89.1), improving motivation system - improvement of employeesmotivation - 89.0%, development of the rewarding system for the best employees - 86.1,

including employees in decision-making process - 73.8.

However, the statement on reducing working hours to a minimum with 22.7% of respondents

views showed that free time is not considered as an important part in the system of values by

Ukrainian SMEs representatives.

Less than half of respondents stated such CSR practices as appointment of women to senior positions (48.0%), providing free lunches for employees (46.4%), recruitment among ethnic

minorities (43.3%), the introduction of anonymous complaints mechanisms for personnel

(30.6%).

Environment protection.

Today, responsible attitude to the environment is becoming more common among socially

responsible companies. Almost a unanimous position was shown by the SME respondents on theemerging importance of all CSR activities aimed at protecting environment.

Table 9.2. SME responses to the question: "Which of below listed activities are a part of CSR in

the sphere of environment protection?"

1. Waste separation 73.7 2. Installing air condition and heating systems at workplace 74.03. Improving data collection, measurement and filing systems 60.8

4. Utilizing energy saving light pulps 69.45. Reducing air pollution caused by company cars 80.6 6. Cleaning procedures with reduced water consumption 63.6 7. Reducing the need for artificial light at workplace 62.28. Collecting sold products from customers after the product life span for recycling 72.39. Introducing electronic filing systems 72.2

Community Development.

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The largest part of SME respondents agreed that the construction of sport grounds for the local

community, interaction with universities and assessment of CSR commitment of potential

partners are the part of the CSR community development.

Table 9.3 SME responses to the question: "Which of the following community activities are the

part of CSR?

1. Building of playgrounds or sport yards for the local community 85.7 4. Interaction with universities 72.45. Investigating CSR commitment of potential partners 66.02. Sponsorship of the local soccer team 38.13. Non-financial reports for stakeholders 30.9

CSR measures to combat corruption and the activities related to the product quality

The problem of corruption is of high importance in the country. According to the IMD World

Competitiveness Yearbook, Ukraine is one of the most corrupted countries in the world.

Principled position of SMEs representatives is crucial to combat and overcome this phenomenon

in our country.

Table 9.4 SME responses to the question: " Which of the following activities are the part of CSR

in product quality and corruption fighting?

5. Enhancing of quality of products and services 93.17. Proper labeling of products 92.06. Introducing proper storing and inventory management policies 91.11. Introduction of anti-corruption policies 88.13. Regular donations 42.42. Providing small occasional gifts to officials dealing with companys matterssuch as registration or permits

19.4

Almost all respondents (88.1%) agreed that implementation of anti-corruption policies is animportant part of CSR.

However, symptomatic are the concerns of the respondents that regular donations (42.4%) and

small gifts to the officials, dealing with company issues (19.4%) are also a part of CSR.

Although the issues to improve the quality of products and services, proper labeling of products,

proper storage of products are not directly related to corruption, however, entrepreneurs

unanimously declare that compliance with these rules reduces the occasions for corrupted

behavior by representatives of permitting and regulatory authorities.

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Importance of introduction of incentive schemes for implementing CSR

SME respondents believe that the state financial aid and free consultations on CSR could

sme survey report to unido

Documents