**5.3 Focus on interest groups in** *Telefónica***<sup>23</sup>**

*Telefónica*'s approach to its stakeholders is to recognize legitimate interests and try to demonstrate their commitment and earn their trust. The following statement, which

<sup>22</sup> The analysis can concern the internal or external environment of an organization. The usefulness of SWOT analysis is not limited to organizations for profit. SWOT analysis can be used in any decisionmaking process where the desired end state has been defined.

<sup>23</sup> With this expression, *Telefónica* wants to include all the subjects and interested parties who meet the company; this expression could also be translated with the common term of Anglo-Saxon derivation "stakeholder."

is exhaustive of the policy implemented by the Spanish group toward all its interlocutors, is reported on the company Web site on *Telefónica*'s corporate responsibility: *"A company of this size generates, every day, millions of contacts with groups that, directly or indirectly, maintain a legitimate interest in it: customers, shareholders, investors, employees, partners, media and suppliers. Furthermore, following these relationships, the Telefónica Group also maintains close contacts with all the companies and countries in which it operates. Each of these relationships is an opportunity to demonstrate Telefónica's commitment to its interest groups … and therefore it is a chance, whether or not to win your trust."*24 The previous quotation highlights a direct relationship with the six interest groups, while the reference to contacts with companies and the countries in which the company operates is presented because of relations with those groups. In the classification of *Telefónica*'s interest groups, the following distinctive features must be noted: 1) special mention, to divide shareholders and investors even if it is considered the same interest group; 2) express reference to shareholders and consideration as an interest group; 3) governments (regulators) are excluded from the interest groups; 4) it includes the means of communication (mass media); and 5) no specific consideration of the "company" as an interest group but derivative of the relationships with the seven interest groups. Furthermore, they do not mention the concept of "company," but a plural and diversified "company and countries in which it operates." *Telefónica* has recognized, in its sustainability communication, suppliers as one of its stakeholders. The procurement process is a process that has standardized the *Telefónica* group, with standardization being carried out through the application of a "common management model," already applied by 100 companies from the group, called the *Sistema Avanzado de Compras* (SAC). The SAC is a manual of conduct that states *"the importance of intervening with rigour, objectivity, transparency and professionalism in the purchasing function, and which reflects the principles and guidelines that should guide actions with suppliers."* This manual is mandatory for all people involved in the procurement process, whether in commercial areas or working in different units. The manual includes 13 general principles, including those most directly connected with the principles of CSR, and the six approaches are as follows: I) customer satisfaction [77]; II) compliance with commitments; III) transparency in the procurement process; IV) equal opportunities for suppliers; V) objectivity in the decision-making process; and VI) contribution to the development of society. To strengthen the implementation of these principles, the manual underlines the *"guidelines to be followed in situations deriving from the relationship with suppliers that can generate conflicts of interest"* and indicates what to do in the working relationship with *Telefónica* suppliers and in other situations of constraint with a supplier, as well as the prohibition of accepting gifts or personal benefits associated with purchases (**Figure 4**).

The procurement process has five stages or phases, as shown in **Figure 4**; these phases are represented by their principal or actor, and in the same way, it is indicated in each phase how to proceed with the distinctive approach in CSR, resulting from the application of the six principles of the conduct manual (SAC). *Telefónica* has classified the acquisitions necessary to satisfy any type of need in five product lines (network infrastructures, services and works, products, market information systems, advertising, and marketing) in the definition of the requirements

<sup>24</sup> The text is taken from the *Telefónica* Web site in the specific section dedicated to RC and sustainability 2009 (www.telefonica.com/es).

*Corporate Social Responsibility and Social Report: A Case Study in the Basque Country DOI: http://dx.doi.org/10.5772/intechopen.105511*

**Figure 4.**

*The Telefónica procurement process, CSR approach. Source: Own elaboration from Telefónica S.A. data.*

considering the global policy of sustainable development of society. Homogeneity is applied in requests for offers so that the information provided to suppliers (through the purchasing area) is the same for everyone to ensure equal opportunities for all interested groups. Another principle is contributing to the development of society, so the policy aims to promote the country's economic activity, which influences purchases. The whole process up to the tender requires the supplier to be approved. The approval of suppliers is achieved by registering in the "supplier catalog," which includes a presentation of the company and the opening of a register managed by the corresponding SAC process unit (there is at least one in each of the 19 countries in which *Telefónica* operates), to the verification process after inclusion in the catalog or to rejection. For the approval or rejection of the supplier, among other things, the criteria set out by the CSR are considered. Purchasing management is done through seven purchasing tables, which are in Madrid, São Paulo, Rio de Janeiro, Buenos Aires, Santiago de Chile, Lima, and Mexico City. Some products require technical approval before being used and therefore require a specific approval process. The specifications of the products/services being assessed include elements of social responsibility, such as those relating with respect to the environment. The negotiation phase is governed by a set of guidelines to ensure compliance with the supplier's treatment, transparency, and objectivity; here are some guidelines for specific situations: a) Limit the requisites required for suppliers, without using the purchasing power of *Telefónica* because the supplier accepts abusive conditions well below the market; b) no offer will be negotiated without any possibility of awarding; c) confidentiality of information obtained from the supplier on offers and other aspects of the purchase tables; and d) there will be no meals or recreational activities during the negotiation period. The trading phase is carried out using the method of trading cycles or auctions. The management of the

purchases of some product categories is carried out through an electronic commerce platform: e-Sourcing Adquira25, with over 4,300 affiliated providers. The ratio of products purchased by these means is not identical in the seven purchase tables and includes a series of items for each of the five product lines. This platform allows the management of bids and negotiation, as well as the implementation and management of purchase auctions. Transparency and objectivity are the principles of CSR that directly affect this phase. It must also ensure that the contract entered reflects what is negotiated with the supplier. In the final phase of contract implementation, the affected areas that they manage must strictly abide by the agreement and check that the supplier complies with its commitments. For the award, the calendar and the specifications of the offer will be considered. As the main aspect of the process analyzed in *Telefónica*, the principles of transparency and objectivity are preferred for the IT solutions that are transforming the company's purchasing system. They point out that there is also an improvement in the efficiency of the system by reducing process costs, which affect both the supplier and the buyer. *Telefónica* is automating all purchasing processes in the value chain with the supplier. Together with the e-Sourcing, the e-Procurement company platform supports all internal procurement cycles (post-purchase), including the delivery of orders.
