Papellinas Group Of Companies To Audit


The Group offers opportunities for employee advancement and development within the business. The organization supports personal and professional development through internal training programs and seminars, price reductions on consumer goods, gifts, financial assistance and opportunities for participation in education programs. The vast majority of employees appears to be aware and satisfied by the benefits offered. Benefits include -among others- providence fund, health care plan, personnel support fund and life insurance. Practices that help employees balance work and family responsibilities are warmly acceptable.  These policies incorporate flexible working hours and parental/family leave policies.

Although the employees recognize and "enjoy" the aforementioned CSR practices, surprisingly 60% of them are not aware of CSR as a concept (See Appendix VI, Survey Results, Graph B.1., p.g.). It is important to notice that this percentage of personnel coincides with the low level of CSR awareness in Cyprus (Doukakis, IKapardis, Katsioloudes, 2005). Although the major perception of CSR is that, it can be an excellent tool for enhancing the company's position and generating positive corporate image, only 30% of employee's support that the social responsibility is vital for the company's profitability (See Appendix VI, Employees' Survey Results, graph B.2., p.g.).

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While evaluating the importance of CSR practices only a rough 30% of employees strongly agreed that social responsibility is such a sensitive issue so that the company should make it a competitive differentiator, whilst a 60% of the managerial personnel, believe the same (See Appendix VI, Employees' Survey Results, graph B.2., p.g.). This obviously shows that there is a mismatch in the strategic goals set by management and the beliefs of employees. This fact could also be considered as evidence of ineffective communication of the company's overall strategy concerning CSR to lower level employees.

On the other hand, customers do not evaluate CSR practices as a competitive differentiator. Almost half of them do not considerate them as so (See Appendix VI, Customers' Survey Results, graph A.1, p.g). Customers tend to consider CSR more as part of the company's public relations and that is completely unrelated to the profitability of the organization. This finding is also supported by the belief of customers that the highest contribution of community CSR policies to a company's success, has to do with increasing customer recognition, esteem and creating positive publicity (See Appendix VI, Customer Survey Results, graph A.2, p.g).

From the above mentioned we can conclude that for Papaellinas customers, CSR is considered as a cost driver. The company's personnel, nevertheless believes that CSR is vital to the profitability of any company and that it can have a significant contribution in increasing profits (See Appendix VI, Employees' Survey Results, graph B.3, p.g). This tendency is stronger for the managerial personnel (See Appendix VI, Employees' Survey Results, graph B.4, p.g).

Global experience shows that companies that integrated CSR into their business model stood to gain competitive advantage. David Grayson, Professor of Corporate Responsibility at Cranfield University School of Management, believes that "Businesses that recognize CSR is about the core way you run your business may see their positions improved" (GlobeScan, 2009).

Papaellinas customers and employees have identified the pressures imposed by the crisis on corporate responsibility commitments. Three out of five employees belonging to the managerial personnel answered that social responsibility will assume a lower priority due to the crisis whilst approximately 65% of the rest of the employees answered the same (See Appendix VI, Employees' Survey Results, graph B.4, p.g). It is nevertheless troubling the fact that two out of five employees belonging to the managerial personnel answered that they don't know what the impact of the crisis will be. This could be evidence that there is no clear strategy on how the company will set the CSR framework in light of the economic crisis. Nevertheless, the global trend shows that CSR expectations from customers are growing significantly (GlobeScan, 2009). Unpublished public opinion data shows average expectations rising across eight of the world's largest economies, where attitudes to CSR have been tracked from 2001 to 2009.

The new data shows that expectations of corporate CSR are on the rise again, and have reached a new high point (GlobeScan, 2009). At the same time, perceived CSR performance continues to fall, and has reached a new low point. We could assume based on our finding as well that this is largely due to the economic crisis. The figure below shows the expectations on CSR versus the industry CSR performance.

Figure - Expectations on CSR Vs Industry CSR Performance

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New pressures imposed by the crisis on corporate responsibility commitments, include the reduced time available for CSR. Janet Blake, Head of Global Corporate Social Responsibility at BT (Telecommunication and Services provider) has stated that "As the leaders focus on financials, social and environmental concerns don't get the same air time as a year ago".

Regarding the social responsibility of Papaellinas Group suppliers, most of the employees, even managerial personnel, stated ignorance to their level of compliance with CSR standards. More precisely, 50% responded that they do not know whether their company's suppliers have good labor standards (i.e. fair wage, work hours and child labor regulation) and 7% answered that they don't have (See Appendix VII, Employees' Survey Results, graph B.5, p.g). This tendency of ignorance grew further in relation to environmental practices held by suppliers. 82% of employees ignore whether the Group's suppliers employ good environmental practices (See Appendix VII, Employees' Survey Results, graph B.5, p.g).

Drawing from other companies experience there are many programs which set as a goal to educate, evaluate and improve supplier's CSR. PepsiCo uses Supplier Code of Conduct to articulate its priorities and the Supplier CSR Risk Evaluation and Management Program to educate suppliers, validate compliance and facilitate continuous improvements within its supply chain (PepsiCo, 2009). On the other hand companies that fail to select suppliers who do not produce externalities to the society, suffer the consequences. A recent example comes from Nestlé.

Nestlé is purchasing palm oil from companies whose plantations cause deforestation of Indonesian rainforests, with all the attendant knock-on effects this has (massive CO2 emissions, indigenous communities destroyed, and devastation of the Orang-utan's habitat). A report generated by Greenpeace provides evidence of how Nestlé's supplier Sinar Mas is destroying Indonesia's last remaining rainforests (Greenpeace, 2010). This fact had a serious impact on Nestlé's reputation and continuously on its stock price.


Figure - Nestlé´s Stock Price Fluctuations

From the above we conclude that it is essential for Papaellinas Group of companies to wisely choose suppliers and have a clear idea about their environmental and social stand, as this is a serious source of risk for the company, since it can widely affect the company´s future.

Papaellinas Group makes efforts to comply fully with all environmental laws and regulations. The organization tries to diminish its environmental impact, lay emphasis on pollution prevention over recycling practices, waste reduction and remediation processes. The company aims with its new distribution center to diminish the environmental impacts throughout its operations.

However, the survey showed that the majority of employees are not aware of the installation of photovoltaic in the new distribution center, of the software installation for ink saving, the introduction of organic products and the replacement of the current fleet with lower emission cars. This indicates a failure of the company to communicate to its employees the company's corporate goals and to develop environmental awareness.

The company is not placed amongst the 58 Cypriot companies that, in corporation with the Cyprus Chamber of Commerce and Industry (CCCI), recently signed "The Climate Change Charter"; a policy statement committing the companies to minimizing their impact on the environment.  Such policy statement can be communicated to all stakeholders and is freely accessible in the workplace. The company needs to integrate environmental factors into all elements of its business decision-making, including business plans, corporate goal, program and strategic planning. The low awareness of the company's environmental practices demonstrated that although the organization may undertake a regular review of its social and environmental initiatives and policies, these are not communicated to customers.

Employees may not receive adequate training to assist them in employing these procedures and programs. The company does not even employ at least a staff member, whose responsibilities include overseeing the development of the environmental policy statement and implementing environmental programs and initiatives. Employee reports and newsletters to all concerned stakeholders are not enough to communicating its environmental activities and accomplishments. Papaellinas will need to further increase employees´ awareness and understanding in these issues as there is approximately a 30% of them stating ignorance practices (See Appendix VI, Employees' Survey Results, graph B.6, p.g).

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Moreover, general environmental practices implemented, not only by suppliers but by the Group itself, could also generate important savings by the company. The fact that Papaellinas employees and customers recognize and understand that preventing pollution, reducing energy consumption and recycling could reduce a company's overall costs is very promising (See Appendix VI, Employees' Survey Results, graph A.3, p.g). Some practices have been established towards waste minimization, recycling and energy conservation. More than 50% of employees recognize the company's efforts in all these three domains (See Appendix VI, Employees' Survey Results, graph B.7, p.g). The survey's findings nevertheless, show that more needs to be done concerning transport options, protection of the natural environment and pollution prevention through the minimization of emissions.

Another important observation concerning the company's environmental impact is the fact that the vehicle fleet, is not operating in the most efficient way: drivers use the company's truck to transport from home to work and inversely resulting in greater amount of emissions. In addition, the Group is lacking management measures to lessen the traffic jams such as staggered working hours and use of public transport.

Furthermore, the improvement of the company's image, environmental laws and response to environmentally conscious customers, are placed amongst the three most important factors on behalf of the employees that have a positive impact on the natural environment (See Appendix VI, Employees' Survey Results, graph B.8, p.g). One of the most crucial questions in our survey concerned, the customers and employees evaluation, on the company´s performance in environmental matters relative to others. 47% of customers stated that they don't know, merely 13% answered that they are performing better than the average competitor and 32% of the customers believe that they underperform or do nothing in comparison to competition (See Appendix VI, Customers' Survey Results, graph A.4, p.g). From the employees perspective most of them believe that the company does more things than average competitors. Yet 1out of 3 answered that they don't know (See Appendix VI, Employees' Survey Results, graph B.9, p.g). The lack of awareness pitfall rises again as one of the issues that need immediate action.

Another observation is that internal audit should assess and report upon not only how well activities have delivered against planned benefits, but also that they have been done in a responsible way. Key to this is an assessment of how effectively negative CSR impacts are minimized and CSR opportunities are maximized.

The survey showed that targeted publics do not know the organization's commitment to CSR. Lack of awareness about a firm's obligations to its stakeholders can produce a legitimacy gap. The organization substantially complies with all local, state and government guidelines and provides equal opportunity regardless of race, gender, religion, marital status or age. 

Generally, according to employees' responses the company does not provide an effective vehicle for them to move forward ideas and suggestions for change. The Group does not have a clearly defined mechanism in place in order to ensure a response and thereby, it may disregard employee suggestions that could provide significant advantages.

Finally, a very important verdict of the CSR audit was the realization of the absence of a corporate vision statement, which is a key success factor for any business. There was no clear report of the vision, nothing mentioned or presented in the company´s website and leaflets.