**6. Communication on CSR in** *Telefónica***: the annual reports on social responsibility**

The first social report published in Spain was that of *Banco Bilbao*26 in 1978, and this was followed by other large companies such as *Telefónica*, RENFE,27 and *Construcciones Aeronáuticas*28. These relationships represent the aspect of social, not economic, indicators referring to customers, employees, the environment, and the community. However, this effort was soon stopped, due to the accentuation of a purely financial approach in the 1980s, which emphasized the relationship with investors, shareholders, and the media. The increase in CSR, as well as the importance within it of the information provided to interest groups, motivated *Telefónica* to decide to present the reports on corporate responsibility, for which it adopted the methodology of guidelines of the Global Reporting Initiative (GRI). *Telefónica* has also undertaken an attitude of active participation in the GRI, forming part of its

<sup>25</sup> Adquira is the leading trading and provisioning solutions company in Spain, striving to facilitate business relations between businesses through an integrated e-commerce platform. Its mission is to enable companies to take part in e-commerce, meeting their procurement needs, allowing them to do business with significant competitive advantages and offer reliable solutions. Adquira began operating in 2000 as an initiative of four of the largest companies in Spain: BBVA, *Telefónica*, Iberia, and Repsol YPF; the company has a very full database of more than 4,500 suppliers in Spain, in order to improve the purchasing processes of its customers. Its activity, with almost 10 years of experience in the market, allows it to offer specialization, experience, and guarantee of service.

<sup>26</sup> Bank founded in Bilbao in 1857 that gave rise (through subsequent mergers) to the current BBVA group (Banco Bilbao Vizcaya Argentaria, S.A.).

<sup>27</sup> The *Red Nacional de Los Ferrocarriles Españoles* is a Spanish state structure of railway transport founded in 1941 and in force until 2004–2005, which was divided into ADIF (Spanish railway infrastructure management body) and Renfe Operadora (the company that deals with the railway service).

<sup>28</sup> The *Empresa Construcciones Aeronáuticas* S.A. (CASA) created by José Ortiz Echagüe on March 3, 1923, was the first Spanish company in the aerospace sector.

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

Stakeholder Organization (SO) and being represented in its Stakeholder Council by its General Management of Reputation, Brand and Social Responsibility. *Telefónica* creates an integrated corporate responsibility report for the whole group, but it has also left certain freedom to the companies that want it to carry out their reports independently on sustainability; in fact, the following five companies appear in the list of Spanish companies in the GRI database: *Telefónica* S.A., *Telefónica* de España, *Telefónica Móviles España*, *Telefónica Publicidad y Información, S.A.* (TPI), and *Telefónica Investigación y Desarrollo* (*Telefónica* I + D). The logic of this plurality of relationships is that companies have considered it as an element of competitive advantage relevant to their strategy in every sector. In other groups of companies (Ferrovial, BBVA, and Repsol YPF), this proliferation does not occur. The GRI database has a temporary delay concerning the publication of the reports on the Web site of each company; this may be due to the request of the GRI to grant the status of "in accordance" with the reports, which implies a review by this organization. *Telefónica*'s reports are increasingly complete and sophisticated in trying to achieve the stated goal of more transparent information. Similarly, the effect of the improvements in the tool used is felt, following the publication of the 2008 edition of the GRI guidelines. *El informe anual de responsabilidad corporativa 2008*29 by *Telefónica* begins with the president's statement30 and with a specific chapter for each interest group. The information is structured and standardized according to guidelines provided by the group and contains indicators both on the general commitment and on specific areas in the field of telecommunications. The list of indicators (referring to the 2008 report) is shown in its content in the following tables and graphs. In addition to the ratios, the company's annual report includes the company profile, structure, governance [78], stakeholder engagement, and global policies. It should be noted that there are several indicators of social performance suitable for analyzing working conditions, respect for human rights, the relationship with society, and product responsibility because the company is very committed to this type of policy as also demonstrated by the annual report produced by the OSE31. *Telefónica* is a driving force for economic, technological, and social development in the countries where it operates. In 2008, the company generated more than 69,000 million euros in revenue. These revenues made it possible to pay 6,767 million euros to its employees (5% more than in 2007), 10,336 million euros to public administrations (4% more than in 2007), 32,832 million euros to its suppliers (2% more than in 2007), and approximately 6,700 million euros to its shareholders (22% more than in 2007). This is how society has distributed the wealth created. In 2008, *Telefónica* set aside more than 4,600 million euros for technological innovation, which represents a 6% increase compared with 2007. From this amount,

<sup>29</sup> *Telefónica* presents in this annual report on corporate responsibility its behavior toward customers, employees, shareholders, suppliers, society, and the environment. The content is part of the company's CSR strategy and includes information on *Telefónica*'s achievements in this area, its objectives, and challenges for the future.

<sup>30</sup> Cesar Alierta Izuel graduated in Law from the University of Zaragoza in 1967 and after 3 years earned a master's in business administration from Columbia University in New York, United States. Executive President of *Telefónica* S.A. since July 26, 2000, he has contributed significantly to the growing development of the Spanish telephone group in recent years.

<sup>31</sup> The *Observatorio de la Sostenibilidad en España* is an independent project in operation since February 2005, based at the University of Alcalá, and starts its activities following an agreement signed with the Ministry of the Environment, the Foundation for Biodiversity, and the General Foundation of the University of Alcalá.

668 million euros were invested in research and development (R&D), meaning that *Telefónica* ranked sixth in the world in this category and first among Spanish companies, with an amount dedicated to investments that were four times than those of the runner-up in this *ranking*32. Significant progress in some areas of the group in the field of *corporate responsibility* and the need to improve implementation in others, together with the objectives set for 2011, constitute the reference target for 2009; this is the central message of the 2008 annual report by *Telefónica*. Here are the "milestones": *Corporate Responsibility* and *Business Principles*. At the end of 2008, about 50% of the group's employees (excluding Atento teleoperators) had received training in *Business Principles*, which represents 60,219, double the figure for 2007. The aim of promoting dialog with employees on business principles was achieved through the development of forms of internal communication such as publications (e.g., *Somos* magazine), and a variety of presentations in various locations and forums. Abdullah et al. [79] suggest that employees who value CSR campaigns and other practices identify with their company to a greater degree, work with more devotion and loyalty, and show more creativity in their work performance. Or better CSR practices have a significant influence on employee performance in terms of relationships between employee perception of CSR and employee outcome for firms [80]. Training initiatives were launched for employees in Ecuador, while CSR continued its consolidation process in the remaining countries where it had begun to be applied in 2007. Thematic panels

**Figure 5.** *Driving force of progress in Telefónica. Source: Annual Corporate Responsibility Report Telefónica S.A. 2008.*

<sup>32</sup> The 2008 EU Industrial R&D Investment Scoreboard.

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

were promoted in Peru on social inclusion in the sector of telecommunications, the *Intégrame Project*, and the 1st Forum on Antennas and Health. *Telefónica O2 Germany*<sup>33</sup> confirmed its status as the best company in relations within the group and the online dialog issue (**Figure 5**).

To encourage initiatives aimed at ensuring responsible behavior by interest groups and to help consolidate the companies and the good perception of *Telefónica*, the CSR guidelines have been developed for 10 countries, including the 2008 targets. *Environment:* An Environmental Management System has been developed for the entire group based on the ISO 14001 standard. A model that emphasizes the energy efficiency of equipment and products has also been implemented by suppliers in the work area of the OCC. Hang et al. [81] identified a significant and positive impact of CSR and green product innovation on organizational performance. Accordingly, green product innovation positively influences competitive advantage. Competitive advantage mediates the relationship between corporate social responsibility, green product innovation, and organizational performance. Measures aimed at improving energy efficiency, promoting the use of renewable energy and Green IT models, have been developed and implemented as part of the activities of the work area in the *Climate Change Office*34. The year 2008 marks the development of the *Telefónica Environmental Performance Index* (EPI)35 based on a *balanced scorecard*36 of environmental indicators. The rules that are expected to be implemented in 2009 and 2010 in all operations were designed in 2008 as part of the *Global Environmental Management System*37. These regulations cover aspects such as waste management, noise pollution control. *Customers:* Efforts invested in the *Customer Experience*<sup>38</sup>

<sup>34</sup> The Office of Climate Change was established in September 2006 in the UK to help and support the analysis work on climate change and the development of policies and strategies for the future. The organization's goal is to reduce the environmental impact deriving from "hardly responsible" choices by companies and to promote and raise public awareness of issues of great interest today, such as human health and sustainability.

<sup>33</sup> *Telefónica* O2 Germany GmbH & Co. The company offers its German private and commercial customers fixed and mobile telephone services with prepaid contracts, as well as innovative mobile telephone and data transmission services based on GPRS and UMTS technologies, thus becoming an integrated high-speed communication provider, the leader in Germany by market share. In it, the communications company provides information on key performance indicators for 2009 and its commitment to customers, employees, and the community, as well as its CSR goals for 2010.

<sup>35</sup> The EPI aims to give the company a more accurate picture of the state of environmental progress, for each company, by providing reliable quantitative information; the index will help evaluate the measures taken so far and facilitate decision making for the future. These indicators reflect characteristics such as environmental objectives, ongoing legal proceedings, and employee training.

<sup>36</sup> For an extensive discussion of the BSC as an "integrated dashboard of indicators" see Vigano, "The value of the company. Historical analysis and determination objectives" 2001, chap. 3, pp. 93–101.

<sup>37</sup> In 2008, the company designed an Environmental Management System in accordance with the international standard ISO 14001 to set environmental management guidelines for all group companies. The documents that make up the Environmental Management System worldwide are the environmental policy, the Basic Standard, nine specific environmental management standards, and the Environmental Sustainability Index.

<sup>38</sup> The CSI is an "average" synthetic indicator, built based on the assessments given by customers on the individual aspects that put the customer in a relationship with *Telefónica* and on the level of importance that the individual aspects have for each customer. For a careful analysis of the index, see Bryant and Fornell, "American Customer Satisfaction Index, Methodology Report," April 2005.

methodology that was introduced in 2007 resulted in an improvement in the Customer Satisfaction Index, bringing it up to 6.92% with an improvement of 2%. According to a pre-established work plan, in 2008, advice was distributed to customers and the public on the responsible use of technologies, with recommendations on safety, recycling, the use of technologies by children, intellectual property, and the use of technology in public places. The analyses include surveys involving approximately 85,000 children from 800 schools in Argentina, Brazil, Chile, Colombia, Mexico, Peru, and Venezuela; the conclusions were recorded in the White Book and will form the basis for the development of future educational initiatives. Ten principles that constitute the golden rules on advertising have been defined and are included in the Agencies Evaluation Model and are applied as part of the contractual conditions with these agencies. *Employees*: The ongoing initiatives have led to an improvement in the Employee Satisfaction and Commitment Index, bringing it up to 69%, three percentage points more than in 2007 and with participation in questionnaires equal to 70.4%. Progress has been made in dissemination and implementation tasks across the internal areas that will constitute the future Diversity Committee. The *Telefónica* Group work accident analysis procedure was developed to establish a set of common criteria to analyze the working conditions in all companies that belong to the *Telefónica* Group. *Providers: Telefónica* has more than met its 2008 target of assessing the risks of the value chain of 1,000 suppliers and carrying out 50 audits, reaching figures of 1,100 and 55, respectively. *Community:* Nearly 107,602 children were introduced to primary schools in 2008, doubling the previous year, in Latin America. The *EducaRed*39 model was used to provide teachers, pupils, and families with the technological tools necessary to guarantee access to learning processes and teaching quality. Progress has been made in the following areas covered by the Accessible *Telefónica* Plan: accessibility of *Telefónica* mobile phones, ease of the integration process in the workplace, accessibility of procurement procedures, web accessibility, accessibility in stores, accessibility of digital TV, and accessibility of hardware. In addition to these results, communication actions and consolidation of the network of collaborations have been launched with other interested parties as well as constant support for innovation initiatives. At this point, it appears essential to analyze the strategic system of *Telefónica*; corporate responsibility is considered an integral part of its objectives for the group and how it conducts its activities is based on doing business in the "right way." Its initiatives are in the correct balance between positive and negative effects to prevent the adverse impacts affecting the value chain for each stakeholder. *Telefónica*'s vision is to *"improve people's lives and business performance, as well as the advancement of the communication technologies in which it operates, offering innovative services based on information and communication technologies" (ICT).* The objective of the strategy is to contribute to the sustainability of its business in the long term through the implementation of policies in favor of ethics and honesty, which in turn contributes to improving the satisfaction of customers, employees, shareholders, and, above all, the community, as summarized in the diagram below (**Figure 6**).

The philosophy of *business excellence*, that is, doing business in the "right way," is the key principle of *Telefónica*'s CR policy and underlies the whole context of its

<sup>39</sup> This program, sponsored by the Fundación *Telefónica*, aims to encourage the use of the Internet as a tool for innovation and pedagogical training for teachers, parents, and students of primary, secondary, high school, and intermediate training cycles. To do this, for 10 years, it has operated through a dedicated portal signed by more than 12,000 Spanish centers and holds an international congress every 2 years with an influx of thousands of teachers.

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

#### **Figure 6.**

*Reference framework for the management of social impacts in Telefónica. Source: Adaptation from the Corporate Responsibility Report 2008, Telefónica S.A.*

strategy. The company uses various indicators to measure its degree of implementation in these dynamics: in addition to the Customer *Satisfaction Index*, there is the *Employee Satisfaction Index* and the *RepTrak*™40, further highlighting the need to keep the focus on excellence, keeping the commitments made with customers. *"Honesty and transparent management aimed at minimizing the negative impact of the value chain, through a commitment to ethics and honesty."* This represents the basic set of rules set out in the *Business Principles*, aimed at generating policies and regulatory frameworks necessary for the fulfillment of these objectives. The following graph better defines the role of corporate responsibility in the public and social aspects together with the economic and environmental impacts in a dynamic framework of variables. It must be emphasized that *Telefónica* tends to underline these objectives in its annual report precisely to highlight and guarantee its maximum transparency. *Telefónica* contributes to progress by maximizing the positive impact of its business and thus offering a contribution to improving the lives of people and other companies with which it enters a relationship. Educational programs for the use of ICT also have a positive impact on the environment and the productivity of businesses due to their ability to help reduce the consumption of natural resources and promote the fight against climate change. Social and cultural activities reinforce the impact of

<sup>40</sup> The tool is used by the Reputation Institute to measure the reputation among stakeholders, interested countries, and industry. The Reputation Institute is involved in an ongoing effort to measure and monitor the corporate reputation of companies around the world. The Global Pulse project measures the overall reputation of the world's largest companies by capturing consumer data in 27 countries using the core of the RepTrak™ model. In 2006, the RI did a multicenter, national study to understand how reputation had evolved over the previous decade.

#### **Figure 7.**

*Interrelations between public and private aspects with the economic prospectus. Source: Adaptation from the Corporate Responsibility Report 2008, Telefónica S.A.*

social action, allowing anyone, regardless of social position or cultural condition, to enjoy the benefits of progress. These activities are carried out through the Fundación *Telefónica*, ATAM41, the politics and sponsorships of *Telefónica* Europa, the Proniño project42, EducaRed, and other important initiatives such as *Telefónica Voluntarios*, *Debate y Conocimiento*, and *Arte y Tecnología*. Improving the benefits of CSR through initiatives of transparent communication and constructive dialog with stakeholders in *Telefónica* helps to define a guide and an economic, technological, and social progress force. The Spanish group publishes annual reports on CSR in 17 countries where it operates, which are compiled using the GRI standards, with 12 of these reports also being screened by the AA1000AS standards. In contrast, social and cultural action is evaluated with the LBG standards. To ensure that the initiative keeps pace with stakeholder expectations, an ongoing dialog with these interest groups is essential. The general objective is to move away from a mono-stakeholder strategy to implement a multi-stakeholder approach, which allows the company to develop a closer understanding of the interests of all these groups and to identify the most significant aspects and existing criticalities (**Figure 7**).

<sup>41</sup> State non-profit association, declared to be of public utility, with the agreement of the Council of Ministers, adopted at the meeting of 09/12/1977. Its purpose is to coordinate and support disability prevention efforts and protect the rights of disabled people by providing resources whose primary objective is the social integration of people with disabilities. It focuses its activity based on the following approach: *"... to be the first prestigious reference in the world on disability, as an institution that provides complete assistance for people with disabilities, to offer our beneficiaries a personalized, professional, efficient continuous and fully satisfactory, throughout their life path."*

<sup>42</sup> The social action program of the *Telefónica* Group, managed by its Foundation with the mobile phone operators of 13 Latin American countries, contributes significantly to eradicating child labor in the region. The program is aligned with the regional objectives of the Organización Internacional del Trabajo (OCT), seeking to eliminate the worst forms of child labor by 2015, and all child labor by 2020.
