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Corporate Social Responsibility Report 2007Corporate SocialResponsibilityReport 2007CORPORATE COMMUNICATIONS54, rue La Boétie 75008 Paris - Francewww.alcatel-lucent.comRA DD couvder GB.indd116/05/0818:30:06

UNITED NATIONSGLOBAL COMPACT—Alcatel-Lucent is a longstandingsignatory of the United NationsGlobal Compact, an internationalinitiative that brings companiestogether with the UN agencies,labor and civil society to supportuniversal environmental, ethicaland social principles.Alcatel-Lucent is committedto integrating the 10 principlesof the Global Compact into itsstrategy, corporate culture andday-to-day activities.Loan Nguyen—“Staging her pictures, LoanNguyen takes on the part of anactress in scenarios where likelyreconciliations between natureand culture are played.However, as we move fromone scene to the next, we donot uncover any narrative; ofher, nothing is said. She showsno intention of drawing up aself-portrait, only that of givingherself the means to accomplisha heartfelt interpretation of thelandscapes. As a result, theypenetrate the sphere ofintimacy, becoming innerlandscapes. Far from any formof anthropocentrism, theenvironment and its inhabitantare given the same attention,no domination of one over theother ever being felt. As a partof a whole, man recovers hisrightful place, and discovers hisown existence at the same timeas the world’s. Subtle pictorialsuggestions, for as manyaesthetic visions.”Raphaëlle Stopin/Courtesy GalerieEsther WœrdehoffRA DD couvder GB.indd2Alcatel-LucentCorporate Communications54, rue La Boétie75008 Paris – Francewww.alcatel-lucent.comCover“Dents de Vesivi,” 2007from the “Mobile” seriesPhoto: Loan NguyenCourtesy Galerie Esther WœrdehoffMost of the photos usedto illustrate this report areof Alcatel-Lucent employees.The photo essay entitled“People at Work” was madeby William Daniels at thebeginning of 2008 atAlcatel-Lucent sites in China,France, India and the USA.Back Cover“Village de montagne,” 2005from the “Mobile” seriesPhoto: Loan NguyenCourtesy Galerie Esther WœrdehoffWe sincerely thank all theemployees who agreed to bephotographed and especiallythose whose photos appear here.Design and productionLowe StratéusContentAlcatel-Lucent CorporateCommunications,Editech, Ascribe.Photos Alcatel-Lucent, all rightsreserved. William Daniels,Raphaël Dautigny/Luce,Peter Allan, Thierry Albrand,Anne Roos-Weil, Raghu Rai/Magnum Photos.THE TEN PRINCIPLESHuman rights1 Support and respect theprotection of universallyproclaimed human rights.2 Make sure that thereis no complicity in humanrights abuses.Labor standards3 Uphold the freedom ofassociation and the effectiverecognition of the right tocollective bargaining.4 Uphold the eliminationof all forms of forced andcompulsory labor.5 Uphold the effective abolitionof child labor.6 Uphold the eliminationof discrimination in respect toemployment and occupation.Environment7 Support a precautionaryapproach to environmentalchallenges.8 Undertake initiatives topromote greater environmentalresponsibility.9 Encourage the developmentand diffusion of environmentallyfriendly technologies.Anti-corruption10 Work against all forms ofcorruption, including extortionand bribery.logoimprimeura venirThis document is printed onMagno Satin coated paper,which is chlorine-free,PEFC-certified and produced byEMAS- and ISO 9001-certifiedfactories. The pulp used toproduce this paper is sourcedfrom trees that come fromforests that meet environmentalstandards.16/05/0818:30:13

Alcatel-LucentProfileContentsAlcatel-Lucent provides solutions that enableservice providers, enterprises and governmentsworldwide to deliver voice, data and videocommunication services to end users.02 Message from the CEO04 Key EventsAs a leader in fixed, mobile and convergedbroadband networking, IP technologies,applications and services, Alcatel-Lucent offersthe end-to-end solutions that enable compellingcommunications services for people at home,at work and on the move.With operations in more than 130 countries,Alcatel-Lucent is a local partner with globalreach. The company has the most experiencedglobal services team in the industry, and one ofthe largest research, technology and innovationorganizations in the telecommunications industry.Alcatel-Lucent achieved revenues ofEuro 17.8 billion in 2007 and is incorporatedin France, with executive offices located in Paris.06 —— 17Foundations ofour CSR Approach08101216GovernanceEthics and ComplianceStrategyResearch and Innovation18 —— 59Our Commitmentsin Action2028404652Valuing PeopleCaring for the EnvironmentResponsible PurchasingDigital InclusionFoundation and CorporateSponsorship60 —— 67MeasuringProgress62646667CSR ManagementCSR IndicatorsCorporate CSR ObjectivesIndependent VerificationStatement68 Glossary01 —— Alcatel-LucentCorporate Social Responsibility Report 2007RA DD 01a69 GB.indd116/05/0818:51:44

Alcatel-LucentMessage from the CEOCorporate social responsibilityhas become a businessimperative. For Alcatel-Lucent,CSR is not merely a setof policies: it is a keycomponent of the company’sbusiness strategy.Patricia Russo – Chief Executive Officer02 —— Alcatel-LucentCorporate Social Responsibility Report 2007RA DD 01a69 GB.indd216/05/0818:51:44

CSR:A BUSINESSIMPERATIVEpersonal integrity can we achieve and sustain long-term business excellence. Thiscommitment is the foundation of our Statement of Business Principles and is overseenby our Chief Compliance Officer.includes in-depth CSR assessments of theirpractices—in cooperation with our Auditdepartment. Success requires the activeinvolvement of our purchasing communityand diligence in reporting on our progressto stakeholders.Human resources: Throughout ourCorporate social responsibilityis part of who we are and howwe do business every day. As aresponsible corporate citizen andleader in the telecoms industry,Alcatel-Lucent works to enrichpeople’s lives—by transformingthe way the world communicatesand connects, and by acting infull recognition of its social andenvironmental responsibilitiesas a company. Alcatel-Lucent alsorecognizes the important rolethe telecommunications sectormust play in the global effortto address environmental issuessuch as climate change.Corporate social responsibility has in recentyears become a business imperative forAlcatel-Lucent. Our stakeholders—including customers, investors, partners andemployees—have increasingly high expectations of our company and how we operate.CSR has become a selection criterion intenders alongside more traditional criteriasuch as price and quality, and is shapingthe expectations we have of our ownsupply chain.For these reasons, we strengthenedour commitment to CSR in 2007 througha wide range of initiatives. Our efforts, including conforming to the 10 principles ofthe UN Global Compact, were recognizedwith a listing in the Dow Jones Sustainability Index and the awarding of 2008 SAMSilver Sustainability Recognition.Ethics & compliance: As a global telecommunications leader, Alcatel-Lucent iscommitted to ethical business conduct.We understand that only by upholdingthe highest levels of business ethics andglobal organization, we have made ‘socialinnovation’ an integral part of our CSRapproach. We pursue this internally byusing best-in-class human resources practices, processes and tools—creating foremployees a global workplace that fosterscontinuous learning. We cultivate opportunities for international and functionalmobility and work continuously to ensureour diversity. At the same time, to remaincompetitive we must be flexible andadaptive. We are in the midst of a globalworkforce reduction plan, which we arecommitted to carrying out in a fair andbalanced way.Environment: Environmental considerations are central to our CSR strategy.We are dedicated to eco-sustainability—particularly climate change—and to meetingour customers’ demands for eco-efficientproducts and solutions. In line with thesecommitments, we became a signatory in2007 to the UN Global Compact’s“Caring for Climate” initiative and areresolved to reduce our carbon footprint.We have developed corporate strategies and practices to reduce the environmental impact of our products andoperations, leveraging our research teamsto produce environmentally friendly andenergy-efficient technologies. The companyactively engages with its key stakeholders, including customers and suppliers,to address eco-sustainability and climatechange issues throughout the entiresupply chain.Responsible purchasing: Our partnersand customers have high expectations ofus when it comes to CSR, and we havethat same level of expectations for thecompanies in our worldwide supply chain.We view CSR as an active partnershipand have adopted a purchasing approachthat engages suppliers in our efforts. ThisDigital inclusion: As a world leader intelecommunications, we draw on ourexpertise in innovation to bridge the digital divide—creating opportunities foreconomic and social development inemerging economies through the use ofcommunications technologies. Our Digital Bridge Initiative involves close partnerships with local players to ensure thesolutions we bring forward are appropriate, lasting and reliable.Philanthropy: As a corporate citizen,we engage in philanthropic and charitable activities through our Alcatel-LucentFoundation. The Foundation focuses oneducation and youth development in thecommunities where our company’s employees live and work, supporting corporateprograms and encouraging volunteering.CSR reporting: In 2007, we compiledsocial and environmental data to reporton some 60 CSR indicators from acrossour merged global organization. This datacreated a solid baseline of the new company’s current CSR status, which will enhanceour ability to make accurate decisions forthe future. Our objective is to manage ourreporting process effectively, optimizeopportunities, minimize our risks, andcomply fully with rules and regulations inthe CSR domain.In this report we have summarized ourCSR commitments and outlined theactions we took in 2007 to fulfill them.Going forward we will continue to evolveand strengthen CSR within our companyto meet our customers’ and other keystakeholders’ expectations. This willrequire the full support of managementand employees throughout our company.I am confident of our ability to deliver onthis commitment.03 —— Alcatel-LucentCorporate Social Responsibility Report 2007RA DD 01a69 GB.indd316/05/0818:51:46

Alcatel-LucentKey Events2007KEY CSREVENTSAlcatel-Lucent madenumerous strides in CSRin 2007. The newcompany pursued a widerange of CSR initiatives,establishing key organizational structures, advancing in areas that includethe environment,employee programs andreporting, and receivingbroad recognition for itsachievements.04 —— Alcatel-LucentCorporate Social Responsibility Report 2007RA DD 01a69 GB.indd416/05/0818:51:46

Alcatel-LucentCSR Steering CommitteeFEBRUARY 2007The CSR Steering Committee held itsinaugural meeting in February 2007.This monthly gathering bringstogether representatives from differentdepartments involved in all CSRdomains: CSR and Foundation,Environment, Health and Safety, CTO,Digital Inclusion, Public Affairs, HumanResources, Office of Business Conduct,Investor Relations, Marketing, Purchasing,Audit, Risk Management, and Legal.It sets the company’s CSR goals,implements action plans and measuresprogress (see page 63).UN Global CompactReporting on CSRJULY 2007In July 2007, the United Nationsconvened the world’s largest and mostsignificant event ever on the topic ofleadership and corporate citizenship.Alcatel-Lucent attended the meetingat the Palais des Nations in Geneva,Switzerland, demonstrating itscommitment to the 10 principlesof the Global Compact, which areenshrined in the company’s Statementof Business Principles (see flap cover).NOVEMBER 2007In 2007, the CSR Department undertookthe massive task of compiling data to reporton some 60 CSR indicators coming from36 different locations and legal unitsthroughout the entire merged globalorganization. That effort demanded thecreation of a specific protocol and a fourmonth reporting process that relied on adedicated reporting tool (see page 63).The CSR ChampionsAwards ProgramAlcatel-Lucenton the DJSIMAY 2007Open to all employees, this awardsprogram recognizes individuals and teamsthat have made a significant contributionin the area of CSR. The eight projectsrewarded last year were selected by acommittee of CSR Europe, an independent non-governmental organization.Each CSR Champion received a grant fordonation to a non-profit organization ofthe team’s choice (see pages 39, 45, 51and 58).SEPTEMBER 2007In 2007, Alcatel-Lucent remained on theDow Jones Sustainability World Index(DJSI), a listing of the companies thatrank in the top 10 percent for CSRperformance based on thorough analysisof their CSR practices and policies inspecific industry sectors (see page 62).The First Alcatel-LucentCSR ReportMAY 2007The freshly merged Alcatel-Lucent issuedits first Corporate Social Responsibilityreport in May 2007, articulating thecompany’s commitment to being sociallyresponsible and building upon each ofthe two former companies’ achievementsin the key areas of CSR (download thereport at www.alcatel-lucent.com).CSR AchievementsHonoredSEPTEMBER 2007Alcatel-Lucent was designated “SAMSilver Class” in the CommunicationTechnology Sector of the SustainabilityYearbook 2008 for the company’sachievements in CSR. This yearbookis the world’s most comprehensivepublication on corporate sustainability.Only the top-scoring 15% of bestperforming companies in CSR, outof the world’s 2,500 largest companieslisted in the Dow Jones Index,are chosen for this honor (see page 62).Enhancing ComplianceNOVEMBER 2007Consistent with its Statement of BusinessPrinciples, Alcatel-Lucent published threeadditional global policies in 2007: a “HumanRights Policy”, an “Environment, Healthand Safety Policy” and a “CSR in Purchasing Policy”, enhancing its dedication topromoting CSR within its supplier base.Joining the UN GlobalCompact “Caring forClimate” InitiativeDECEMBER 2007On behalf of Alcatel-Lucent, CEO Patricia Russosigned the “Caring for Climate” initiative, avoluntary action platform for UN GlobalCompact participants seeking to demonstrateleadership on climate issues. Signatoriessuch as Alcatel-Lucent pledge to set goals,implement relevant strategies and practices toreduce carbon emissions, and publicly discloseemissions (see page 30).Launch of theVolunteering ProgramDECEMBER 2007Alcatel-Lucent employees have a solid historyof being engaged in community service.The company recognizes the benefits this kindof program can provide to teambuilding andimproving the communities where it operates,and to that end launched a volunteeringprogram last December (see page 55).First Board Meeting of the Alcatel-Lucent FoundationJANUARY 2008The Alcatel-Lucent Foundation is the philanthropic organization that leads the company’s charitable activities. With a focus on educationand volunteerism, the Foundation supports the commitment of Alcatel-Lucent to social responsibility by supporting the communities whereits employees and customers live and work (see page 54).05 —— Alcatel-LucentCorporate Social Responsibility Report 2007RA DD 01a69 GB.indd516/05/0818:51:49

Foundations of ourCSR Approach06 —— Alcatel-LucentCorporate Social Responsibility Report 2007RA DD 01a69 GB.indd616/05/0818:51:52

06 —— 17Foundations ofour CSR Approach08101216GovernanceEthics and ComplianceStrategyResearch and Innovation“Cercle,” 2002, from the “Mobile” seriesPhoto: Loan NguyenCourtesy Galerie Esther Wœrdehoff07 —— Alcatel-LucentCorporate Social Responsibility Report 2007RA DD 01a69 GB.indd716/05/0818:51:56

Foundations of our CSR ApproachGovernanceManagementCommittee *Patricia F. RussoChief Executive OfficerCindy ChristyPresident Americas RegionÉtienne FouquesSenior Executive Vice-PresidentResearch, Technology, Strategyand Corporate MarketingClaire PediniSenior Vice-PresidentCorporate Human Resourcesand CommunicationsHubert de PesquidouxChief Financial Officerand President EnterpriseBusiness SegmentMichel RahierPresident Carrier BusinessSegmentFrédéric RosePresident Europe,Africa and Asia RegionAndy WilliamsPresident Services BusinessSegment—Janet DavidsonManagement Committee SecretaryChief Compliance Officer,IT and Integration Program08 —— Alcatel-LucentCorporate Social Responsibility Report 2007RA DD 08a09 GB 200508.indd120/05/0813:04:37

Board of DirectorsSerge TchurukChairman of the Boardof DirectorsPatricia RussoChief Executive Officerand DirectorDaniel BernardIndependent DirectorChairman of ProvestisW. Frank BlountIndependent DirectorChairman and ChiefExecutive Officerof JI Ventures Inc.Jozef CornuIndependent DirectorChief Executive Officerof Agfa-GevaertLinnet F. DeilyIndependent DirectorEdward E. HagenlockerIndependent DirectorJean-Pierre HalbronIndependent DirectorSylvia JayIndependent DirectorVice-Chairman of l’OréalUK LtdKarl J. KrapekIndependent DirectorDaniel LebègueIndependent DirectorChairman of the Institut Françaisdes Administrateurs (IFA)Henry B. SchachtIndependent DirectorJean-Cyril SpinettaIndependent DirectorPresident and Chief ExecutiveOfficer of Air France-KLM—Robert E. DenhamIndependent DirectorPartner of the law firmMunger, Tolles & Olson, LLPJean-Pierre DesboisBoard ObserverEngineer withAlcatel-Lucent FranceResponsibilities ofCommittees of the Boardthe Board individuals who arequalified to hold the positionof Director and serve oncommittees, to develop andrecommend to the Board a set ofcorporate governance principlesapplicable to the company,and to oversee the evaluationsof the Board and its committees.The second responsibility ofour Corporate Governance andNominating Committee is toexamine the succession plansfor the Chairman of the Board,the CEO and our Group’s othersenior executives.Audit and Finance CommitteeThe Audit and FinanceCommittee’s role and operationmeet the requirements ofthe American Sarbanes-OxleyAct and follow the keyrecommendations of thevarious reports on corporategovernance. Its main areas ofactivity concern the company’saccounts, internal controls,financial position and relationswith our Statutory Auditors.Corporate Governanceand Nominating CommitteeThe first responsibility ofour Corporate Governanceand Nominating Committee,as defined by the Board ofDirectors’ Operating Rules,is to review questions related tothe composition, organizationand operation of the Boardof Directors and its committees,to identify and propose toLeft to right: Hubert de Pesquidoux,Janet Davidson, Andy Williams,Étienne Fouques, Patricia Russo,Claire Pedini, Michel Rahier,Cindy Christy, Frédéric Rose.Compensation CommitteeThe role of our CompensationCommittee, as defined by theBoard of Directors’ OperatingRules, is to study and makeproposals to the Boardregarding compensation ofthe Directors, the Chairman,the CEO and the key seniorexecutives, to reviewpolicies related to the grantof stock options and bonusshares to senior managersand employees, and toexamine proposals to increasethe company’s capital in theform of an issuance of sharesreserved for employees.Thierry de LoppinotBoard ObserverLegal Counsel at AlcatelLucent’s Head Office—Pascal Durand-BarthezSecretary to the Board of DirectorsNathalie TrolezDeputy Secretary to the Boardof Directors—Audit and FinanceCommitteeRobert E. Denham,PresidentJean-Pierre HalbronDaniel LebègueKarl J. KrapekHenry B. SchachtJean-Cyril SpinettaCompensationCommitteeEdward E. Hagenlocker,PresidentLinnet F. DeilySylvia JayJean-Pierre HalbronStrategy andInvestments CommitteeSerge Tchuruk, PresidentJozef CornuEdward E. HagenlockerHenry B. Schacht—Corporate Governanceand NominatingCommitteeStatutory AuditorsDeloitte & AssociésRepresented byAntoine de RiedmattenDaniel Bernard, PresidentW. Franck BlountLinnet F. DeilyErnst & Young et AutresRepresented byJean-Yves JégourelStrategy and InvestmentsCommitteeThe role of our Strategyand Investments Committee,as defined by the Board ofDirectors’ Operating Rules,is to review our Group’sproposed strategic direction andinvestments, all related internalrestructuring activities, allproposed investments andsales of assets, and in particular,to monitor, on the Board’sbehalf, the integration ofhistorical Alcatel and Lucentand the creation of synergies.This committee’s role isto ensure that our financial andhuman resources are allocatedas efficiently as possible inorder to achieve the growthand profitability objectivesestablished by the Board.Our Strategy and InvestmentsCommittee reviews the annualstrategic plans presented toit by management. These plansinclude an analysis of themarkets that are relevant forthe company, their expectedevolution and the company’spositioning in these markets(market share, financial results).These plans include proposedcommercial and R&D initiativesand any legal or otherconstraints that may apply, andtake into consideration otheravenues available to us in theform of internal development,cooperation agreements andbusiness acquisitions or salesof businesses.Our Strategy and InvestmentsCommittee reviews the proposeddecisions that the CEO mustsubmit to the Board of Directorsfor prior approval.It also examines the Group’sannual budget and annualinvestment plan.* Outgoing members ofthe Management Committeein 2007 and 2008F. D’Amélio and M. Quigley weremembers until August 2007.J.-P. Beaufret was a memberuntil November 2007.J. Meyer was a memberuntil January 2008.Appointment of membersto the ManagementCommittee in 2007 and 2008C. Christy, H. de Pesquidoux,M. Rahier and F. Rose becamemembers in November 2007.A. Williams became a memberin January 2008.09 —— Alcatel-LucentCorporate Social Responsibility Report 2007RA DD 08a09 GB 200508.indd220/05/0813:04:40

Foundations of our CSR ApproachEthics and ComplianceETHICS ANDCOMPLIANCEEthics are key to establishing trustand integrity and to achievingsustainability and long-termsuccess. Ethical business conductis a fundamental commitment forAlcatel-Lucent and a cornerstoneof the company’s business practices.In 2007, Alcatel-Lucent established a robust global ethics andcompliance system consistingof a comprehensive compliancegovernance structure, as well asa framework of internal controls,processes and principles that worktogether to provide reasonableassurance of compliance byAlcatel-Lucent with applicablelegal and regulatory requirements.Last year’s efforts were supportedby extensive, continuous internalcommunication with allemployees worldwide.Guided by principleOne of the key organizations involved inoversight and management of the company’sethics and compliance program is the Office of Business Conduct. The Office ofBusiness Conduct (OBC) provides strategicdirection, expertise and leadership for ethicsand compliance throughout the company.The OBC is overseen by the Chief Compliance Officer, who reports to the ChiefExecutive Officer of the company. TheChief Compliance Officer supervises theimplementation of the company’s compliance program in keeping with applicableinternational laws, standards and appropriate business practices worldwide.By the end of the first quarter of 2007,Alcatel-Lucent had established and documented a robust compliance governancestructure for embedding ethics andcompliance accountability into its business. The Office of Business Conduct, theAlcatel-Lucent Ethics and ComplianceCouncil and the company’s OperatingUnit Compliance Council are all keyelements in that structure.comprehensive global compliance risk assessment in 2007. Paralleling the ongoingdeployment of policies for the company’s 18key compliance program areas, this riskassessment benefited from the input andguidance of Corporate Audit Services’ findings, past and pending litigation information, regulatory guidelines and knowledgeof compliance risks specific to each OperatingUnit. The assessment process identifiesthe nature and scope of potential compliance risks facing Alcatel-Lucent, allowingthe company to implement avoidance andmitigation strategies.Promoting compliance, enablingresolutionsSuccess in compliance and ethical conductdemands clear, two-way communicationbetween the company and its employees. Inthe first quarter of 2007, Alcatel-Lucentdeveloped and deployed a range of communication vehicles for this purpose, includingan Office of Business Conduct web site, aCompliance Alert system and all-employeemessaging. The web site is especially important, gathering essential resources in onelocation and facilitating continuous reinforcement of the company’s commitments.Compliance Alerts are issued periodicallyto ensure that all employees are informed ofimportant compliance requirements, releaseof compliance policies and related learningopportunities.Throughout 2007, the Office of BusinessConduct of Alcatel-Lucent was engagedin developing a comprehensive Code ofConduct that is based upon the “Statementof Business Principles”—deployed on Day 1of the new company—explaining eachprinciple set forth in the document. Thecompany has also developed a related onlinereview and certification tool to supportdeployment of the global review and certification process. In addition, Alcatel-Lucentestablished procedures for developing,approving, promulgating and updatingcompliance-related policies. This work fellunder the rubric of the Office of BusinessConduct, which meets monthly with Compliance Program Owners.Alcatel-Lucent developed a ComplianceResolution Process in 2007 and deployed itto each region to address conduct that isinconsistent with company policy or otherapplicable requirements. This process ismanaged by Human Resources (with support from the Alcatel-Lucent Ethics andCompliance Council). Regional and country Compliance Resolution Work Groupswere established to handle local issues, witha clear escalation path to the Ethics andCompliance Council as necessary.Assessing the risks: Knowledgeas a strategic foundationAll in it together: The AlcatelLucent compliance hotlineIn addition to the annual risk assessmentconducted by Corporate Audit Services, theOffice of Business Conduct carried out aIn 2007, the company began deploying anall-employee Compliance Hotline. By theend of the year, 58 countries in Europe,Clarity through communication10 —— Alcatel-LucentCorporate Social Responsibility Report 2007RA DD 01a69 GB.indd1016/05/0818:52:03

North and South America had ‘gone live’.Consistent with regulatory requirementsand local law, employees can use theHotline to report compliance issues, concerns, violations or suspected violationsof law or company policy. The initiativesupports the efforts of all employees whocan report, in good faith, suspected unethical business conduct or any dishonest,destructive or illegal actions. The Hotlineis operated by a third-party vendor, available 24 hours a day, seven days a week,and supports virtually any language.Deployment of the hotline to the remaining countries will continue in 2008, inline with local laws and regulations.Sharing responsibility:The Ethics andCompliance CouncilCommitted to trainingThe Alcatel-Lucent Ethics and ComplianceCouncil ensures cooperation among thevarious corporate functions involved in thecompany’s compliance system. The Councilincludes the Chief Compliance Officer, aswell as senior-management representativesfrom Law, Human Resources andCommunications, Information Technology,Corporate Audit Services, Finance,Procurement, Transformation Office andthe Office of Business Conduct. Meetingmonthly, the Council directs and overseesthe design and implementation of thecompany’s ethics and compliance system.Operational responsibility for compliancerests with individual operating units.The Operating Unit Compliance Council—consisting of business segments, regions,and corporate functions—was convenedin March 2007.Throughout 2007, Alcatel-Lucent initiatedethics and compliance training activities.The company created a ComplianceTraining Roadmap to prioritize trainingneeds across 18 compliance program areas,and launched both the National SecurityAgreement (NSA) and Anti-CorruptionTraining Programs together with subjectmatter experts in these areas.The Office of Business Conduct is alsoresponsible for overseeing the coordinationof overall compliance training andeducation for all employees, as wellas specialized training for defined targetaudiences based on job function.These audiences include corporateexecutives (some 400 senior leaders) andemployees determined by operating unitcompliance leaders based on guidancefrom Compliance Program owners.Alcatel-Lucent Compliance Governance StructureChief Compliance OfficerBoardof DirectorsAudit& FinanceCommitteeAlcatel-LucentCEOOffice of Business ConductAlcatel-Lucent Ethics & Compliance CouncilOperating Unit Compliance CouncilOperating Unit Compliance Work GroupsEurope,Africa & Asia(EAA)AmericasCarrierRegionsEnterpriseBusiness SegmentsServicesITSupply ResourcesCorporate Centers11 —— Alcatel-LucentCorporate Social Responsibility Report 2007RA DD 01a69 GB.indd1116/05/0818:52:04

Foundations of our CSR ApproachStrategyKey figuresWhile the long termprospects of ourindustry remain good,the macroeconomicenvironment has createduncertainty in our marketsin the last few months.Our latest projectionsfor 2008 indicate that theglobal telecommunicationsequipment and relatedservices market shouldbe flat at constantEUR/USD rate. With this inmind, we will continue toexecute against our threeyear plan. The ongoingimplementation of a moreselective pricing approachas well as a product costreduction program shouldenable us to improve ourgross margin.33%Europe17%Asia-Pacific32%North America18%RoWBreakdown of revenuesby geographical areaFollowing the business combination withLucent, the Group is evenly distributedgeographically between North America,Europe, Asia-Pacific and the rest of theworld, including an array of emergingcountries. This bal

Corporate social responsibility has become a business imperative. For Alcatel-Lucent, CSR is not merely a set of policies: it is a key component of the company's business strategy. Patricia Russo - Chief Executive Offi cer 02 —— Alcatel-Lucent Corporate Social Responsibility Report 2007 Alcatel-Lucent Message from the CEO

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