The Corporate Social Responsibility Business - AIChE

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TheBusinessCase forPROCESSSAFETYCorporate SocialResponsibilityBusiness FlexibilityLoss Prevention4th EditionSustainable GrowthLeadershipExcellence

SINCE 1985, The Center for Chemical Process Safety (CCPS) has helpedmanufacturers, insurers, government, academia, and consultants work togetherto improve process safety. CCPS and its members are committed to protectingemployees, communities, and the environment by developing engineeringand management practices to prevent or mitigate catastrophic releases ofchemicals, hydrocarbons, and other hazardous materials.Copyright 2018Center for Chemical Process Safety of the American Institute of Chemical Engineers120 Wall St., 23rd Floor, New York, NY 10005All rights reserved. No part of this publication may be reproduced, stored in a retrieval system,or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, orotherwise without the prior permission of the copyright owner. AIChE and CCPS are trademarksowned by the American Institute of Chemical Engineers. These trademarks may not be used withoutthe prior express written consent of the American Institute of Chemical Engineers. The use of thisproduct in whole or in part for commercial use is prohibited without prior express written consent ofthe American Institute of Chemical Engineers. To obtain appropriate license and permission for suchuse contact the Center for Chemical Process Safety at 1.646.495.1371 or ccps@aiche.org.CENTER FOR CHEMICALPROCESS SAFETYAMERICAN INSTITUTE OFCHEMICAL ENGINEERS120 Wall St, 23rd FloorNew York, N.Y., 10005, U.S.A.TEL: 1.646.495.1371E-mail: ccps@aiche.orgwww.ccpsonline.org2It is sincerely hoped that the information presented in this document will lead to an even moreimpressive safety record for the entire industry; however, the American Institute of Chemical Engineers(AIChE), its consultants, the AIChE’s Center for Chemical Process Safety (CCPS) Technical SteeringCommittee and the Project 285 Subcommittee members, their employers, their employer’s officersand directors, and Scott Berger and Associates LLC and its subcontractors do not warrant or represent,expressly or by implication, the correctness or accuracy of the content of the information presentedin this book. As between (1) the AIChE, its consultants, the CCPS Technical Steering Committee andSubcommittee members, their employers, their employer’s officers and directors, Scott Berger andAssociates LLC and its subcontractors, and (2) the user of this document, the user accepts any legalliability or responsibility whatsoever for the consequence of its use or misuse.

What separates the top-performing chemical,oil, gas, and related companies from the rest?IN ONE WORD, SUSTAINABILITY. Without sustainability, a company may have astreak of strong quarter-over-quarter growth. But that ultimately ends, sometimesspectacularly. Financial decline is also precipitated by causes other than processsafety incidents. However, declines frequently involve the same kinds of leadershipand management system failures that precipitate process safety incidents.Sustaining a high level of process safety performance leads to numerous benefits.Benefits appear in top line revenue, bottom line profit, cash flow, companyvaluation, and stock price. This requires leadership – the kind of strong, felt,leadership that benefits other business areas as well.THE BUSINESSCASE FORPROCESSSAFETY“We have seen process safety benefitour business in many ways. It madeus competitive and it certainly hashelped our bottom line.”ARNEL SANTOSSVP OperationsNOVA Chemical CorporationThis, in short, is the fundamental Business Case for Process Safety. A company whichintegrates strong leadership and management of process safety into the heart of itsbusiness reaps numerous benefits.This finding originated from a study conducted by the Center for Chemical ProcessSafety (CCPS) between 1999-2002. Incidents since that time have only providedfurther evidence for this conclusion, leading to this 4th edition of the publication.QuantitativeBased on recent industry experience, process safety benefits companies in fiveways. All these benefits make it indispensable for companies of all sizes to achievemanufacturing excellence and increase profitability and shareholder value.Cost ReductionValue CreationLoss PreventionSustainable GrowthThe Five Benefits ofProcess SafetyQualitativeLeadershipExcellenceCorporate SocialResponsibilityBusiness Flexibility3

THE BENEFITSOF PROCESSSAFETY“I commend CCPSfor this work becauserecent incidentshave shown aneven stronger linkbetween process safety excellence andsustainable growth. We have seenprocess safety benefit our business inmany ways. Process safety excellenceenabled us to be actively sought afterand become a partner of choice. Itmade us competitive and it certainlyhelped our bottom line. Process safetyis a fundamental tenet of everysuccessful business.”ARNEL SANTOSSVP OperationsNOVA Chemical CorporationA BUSINESS CASE for process safety should not be necessary. The need to protectworkers, the community, and the environment is as obvious as the need to protectmarket share, provide & protect shareholder value, and make payroll. But withthe many daily demands of business, the obvious can sometimes be left behind.When a company leaves process safety behind, they miss significant financial andorganizational benefits described in this publication.This benchmark survey of CCPS member companies, combined with data fromother sources, provides conclusive evidence that methodically implementingprocess safety delivers five benefits that help the company to sustainability. Thesebenefits range from quantitative to more qualitative, and from value creation tocost reduction.The Benefits1. Corporate Social ResponsibilityProcess safety helps make a company more attractiveto employees, communities, governments, insurers andinvestors. This opens the door to the second benefit 2. Business FlexibilityCompanies considered welcome by communities andgovernments can expand and evolve with fewer socialor political barriers. Equally important, major incidentscan sap human and financial resources that couldotherwise be focused on growth. Process safety helps givecompanies the ability to determine their own future byavoiding them.3. Loss PreventionAny major process safety incident results in an obvious direct financial loss. However, losses can extend beyond onsite and offsite damage and injuries. Especiallywith severe incidents that cause property & environmental damage, companiescan suffer adverse financial losses including cash shortfalls, sometimes forcing assetsales often at significantly below their value.4. Sustainable GrowthProcess safety requires that processes be well-controlled and reliable, and thatevery person in the organization fulfills their process safety responsibilities faithfully.This results in increased productivity and quality.5. Leadership ExcellenceProcess safety requires heartfelt and involved leadership,as well as rigorous management to ensure responsibilitiesare carried out consistently and reliably. These practicescarry over to all other business areas.4

PROCESS SAFETY is a management system which controls a wide range ofoperational, cultural, and technical activities essential for preventing incidentsinvolving hazardous materials. It applies wherever chemicals, oil, gas, orcombustible dust are produced, handled or used.There are process safety management systems (PSMS). Some are based onregulations, some on guidelines or standards, and others internally developedby companies. All require the basic features identified in the CCPS Risk BasedProcess Safety Management System approach.Companies should implement a PSMS to ensure that its processes meet thecompany’s predetermined risk criteria. The PSMS identifies the operational,technical, and cultural barriers necessary to help prevent process safetyincidents. Leaders then implement & sustain the PSMS to ensure that all barriersremain effective.WHAT ISPROCESSSAFETY?“We make electricity,so it would be easyto think that processsafety doesn’t applyto us. But we haveprocess hazards like any chemicalplant or refinery. Our respect for thosehazards and the potential releasescenarios is paramount as we developpolicy and process. Our deliberate,determined approach to manageprocess safety is driven by our beliefthat all accidents are preventable.This in turn drives our passion forprocess safety excellence.”MARK C. McCULLOUGHExecutive Vice President, GenerationAmerican Electric Power(Figure Courtesy of D Guss, Nexen, Inc.)5

Sustainable companies are socially responsible.Process Safety plays a leading role.PROCESS SAFETY helps make a company more attractive to investors, employees,communities, governments, and insurers. Maintaining a strong process safetycommitment over time tells critical stakeholders that you care about them andyour employees, and that you are managing the company well.BENEFIT 1CORPORATESOCIALRESPONSIBILITY“Process safety is acore element to safe,efficient and resilientproduction. Ourglobal process safetystandards provide the framework forthe safe construction and operationof our plants and therewith forthe protection of people and theenvironment. So, it is fair to say thatprocess safety essentially contributesto our sustainable business growthand our social responsibility.”These benefits reflect directly in the primary measurement of a company’svaluation – share price. A review of 12 recent major accidents in 4 countries and 4industry sectors shows the impact of these accidents on share price.1 In all cases,after accidents, share price immediately begins to drop relative to the market andmay continue for a year or more. Following the Bhopal disaster in 1984, UnionCarbide’s stock dropped continuously relative to the market for 15 years.The decrease in share price includes losses well beyond the tangible losses alone.The difference, simply put, is shareholder perception. Nearly every stock is priced wellabove the value of its tangible assets. This premium reflects the confidence of investors in the company’s ability to manage, control risk, innovate, and continue to growsustainably. Practices for showing this premium on balance sheets vary. In some cases,terms such as Intangible Assets or Goodwill reflect all or a portion of this premium.This shareholder confidence premium is built – or destroyed – by factors directlylinked to process safety:nnnnnActual risk and perceived risk.Corporate image.Support for the company in the communities in which it operates.Employee engagement and attitudes: is the company a preferred place to work?Trust in the company from investors, politicians, regulators, activists, and the press.BEATE EHLEPresident Environmental Protection,Health & SafetyBASFIncidents occurring in Germany, India, Japan,and USA. Normalized to the applicable country’sstock market sector index (chemical, petroleum,pharmaceutical, or utilities, as applicable).16*Share price compared to month-end before incident, normalized by the relevantmarket index to eliminate gross market trends.

Process safety removes barriers to growth.COMPANIES that manage process safety effectively earn the flexibility to freelymanage their businesses and grow profitably, while satisfying all stakeholders;local communities, the public, regulatory authorities, governments, investors,and customers. Business flexibility results from earning the trust of the public andespecially of the local community. It is your company’s license to operate.This analogy is complete in the sense that, as with any license, those whoaward it can also revoke it.Every incident represents a lost opportunity, because, the company must divertresources to investigation, clean-up, and recovery, as well as legal and regulatorychallenges. These resources could otherwise be focused on growth.Major incidents can also significantly drain available cash. This can force companiesto sell valuable assets, often at a fraction of their value - another lost opportunity.Moreover, in many cases it can lead to the loss of the company and the livelihoodsof every employee.Flexibility benefits a company by:n Allowing managers to focus on growth and productivity, rather than damagecontrol and recoveryn Protecting cash flow from unexpected disruptionn Proving your worthiness to hold a license to operaten Strengthening and maintaining good relationships with the local community;andn Helping you obtain approvals for expansion permits or new facilities morequickly – a critical strength when implementing the new projects needed tocompete effectively.A major incident can also weaken a company’s ability to respond to competitors’business actions. A company in a weakened state may also become subject to anundesirable takeover.BENEFIT 2BUSINESSFLEXIBILITY“Excellence in processsafety enables us toenter markets andmanufacture productsfaster, and it makesus even stronger in terms of reliability,which has been a historical Eastmanadvantage. As a specialty materialscompany, speed and reliability areintegral to the success of our overallcorporate strategy.”DAVID GOLDENSenior VPChief Legal & Sustainability OfficerCorporate SecretaryEastman Chemical CompanyAdditionally, significant incidents can & have lead to new regulations. This impactsthe company and everyone throughout the industry.7

Process safety helps your company reducerisk and avoid loss.COMPANIES that have the operational discipline to implement effective processsafety programs receive a windfall benefit every year. This gain shows up on thebottom line in the savings from incidents that did not occur.BENEFIT 3LOSSPREVENTION“PETRONAS hasbenefitted greatlyfrom integratingour process safetymanagementsystem into our principles ofoperational excellence in drivingbusiness sustainability. We focus onimproving operational discipline andasset integrity across the group toprevent major process safety events.Continuous improvements are vital.By leveraging on collaborations withour stakeholders, we can raise the barof Process Safety Excellence in allthat we do.”DZAFRI SHAM B AHMADVP, Group HSSEPetroliam Nasional Berhad(PETRONAS)Some companies may avoid major incidents for a time through luck alone. Buteven then, the costs of smaller incidents and near misses continue to add up. Andluck eventually runs out.A strong PSMS, coupled with strong process safety leadership, is the only way tosustainably avoid large and small incidents alike. Loss prevention benefits include:n Lives saved and injuries prevented: Painful personal and financialimpacts of human lossn Reduced property damage loss: Major incidents cost an average of 330million each2n Reduced business interruption loss: Business interruption losses typicallyrange from 2 – 3 times the property damage loss and can be as much as 11times greater2n Protected market share: After an incident, market share may be lost,and regained only slowly after production has been restored. Companies thatsell direct to consumers may also see market share lost until the company’sreputation is restoredn Reduced fines and litigation costs: For major incidents, fines can be inthe millions of dollars. The costs of lawsuits brought by victims and affectedcommunities can be significantly greater. And in recent years, laws around theworld allow senior executives to be tried criminally for serious accidentsn Reduced regulatory attention: A major incident usually results in increasedregulatory inspections, which can lead to additional fines and tie up resourcesn Reduced remediation costs: Environmental clean-up costs can besignificant and may go on for yearsMany of these costs can put a smaller company out of business, due to asignificant stress on cash flow. If the company does not have sufficient cash toaddress the capital and sales losses, it may be forced to sell valuable assets atdistressed prices, resulting in a significant loss of shareholder value.28Marsh, The 100 Largest Losses 1974-2015, London, 2016

Process Safety Leadership and ManagementSystems lead the way to operational excellence.COMPANIES around the world have learned that when they implement robustprocess safety management systems, their productivity and quality increase whilecosts decrease. The reasons should be obvious. Process safety leadership requiresyou to:Understand your process better – normal operation and what can go wrongImprove process development and front-end engineering designFollow procedures rigorouslyKeep equipment, piping, and controls maintained and in good operationalintegrityn Manage change thoroughlyn Stop safely when the process goes out of control, andn Learn from investigating incidents and near-missesnnnnThese can lead to:n Greater uptime and longer periods between unplanned and plannedshut-downsn Improved yield and productivity; andn Improved quality and reduced reworkMoreover, participating in cooperative efforts to promote process safety morebroadly across the industry also brings real value:n Suppliers and customers: Helping them improve process safety helpsassure materials supply and uninterrupted sales for your companyn Contractors: Maintaining open communication can help bring in bestpractices learned elsewheren Standards, guidelines, and regulations: Helping develop theseexposes you to external knowledge and experience, and allows your inputto be clearly heardEmbracing process safety as an essential part of the way you do business allowsyour company to measurably increase revenues and reduce costs. The valuecreated can be substantial. The companies that participated in this study reportedfinancial returns from their investment in process safety from:BENEFIT 4SUSTAINABLEGROWTH“At Reliance, safety isboth a core value anda priority. As a keyelement of our groupstrategic framework ithas been a prerequisite in and enablerof our value creation journey. We aredeeply committed to the operatingphilosophy that safe operationoverrides all production targets. Itis our firm belief that good ProcessSafety and Operations Excellence gohand in hand and I am happy thata culture of “safety first” has becomedeeply ingrained in the DNA ofReliance.”KV SESHADRIGroup Head – Safety andOperational RiskReliance Industries Limitedn Increased Productivity and Decreased Downtime: Due to increasedreliability of equipment and risk-based maintenance.n Decreased Production Costs: Due to increased efficiencies.n Decreased Maintenance Costs: Due to improved design and maintenancemanagement.n Increased Capital Efficiency: Due to improved front-end engineering anddesign to risk criteria.9

Process safety requires — and develops —strong leaders.COMPANIES increasingly organize their operations management and leadershipactivities in an integrated management system called, among other names,operational excellence. A closer look at these management systems shows thatoperational excellence depends on executing the core principles of process safetywith dedication and professionalism.BENEFIT 5LEADERSHIPEXCELLENCE“Process safetyhas been a keyelement of mypersonal leadershipdevelopment and isnow an element of new leader reviewsat Arkema. In today’s environmentwhen “safe enough” cannot supporta sustainable business model, it’sexcellence in leadership that developsresilient organizations to move us tothe next level.”PAUL LEONARDVice President HSEArkema Group10In an ever more competitive global business environment, companies needvisionary leaders who rigorously manage the details. Process safety requireseveryone to actively lead, which helps prepare employees for future leadershiproles. And since process safety touches so many operational and technical roles, ithelps produce an ever-growing cadre of leaders and managers to drive the futureof the company.Just as process safety protects the company against losses from major incidentsthat can threaten the sustainability of the company, it can also offer protectionagainst other losses – of efficiency, trust, environmental quality, product integrity,and many more.Process safety role dimensionLeadership skill requiredand developedSet meaningful risk reduction targets,communicate, and obtain buy-inVision and inspirationEstablish risk criteria and metrics totrack progress.Showing the wayImplement and ensureperformance of barriersMaintaining disciplineProvide needed tools and resourcesand authority to use themEmpowermentShow visible support and engage regularlyin process safety-related activitiesMotivationExecute role and duties with professionalism.Expect the same of the organization.AccountabilityAppreciate bad news, convert intoopportunity for improvementWalk the talk

PROCESSSAFETYVISION 20/20VISION 20/20, developed by CCPS, looks into the not-too-distant future todemonstrate what excellence in process safety will look like when it is championedby industry. Vision 20/20 is driven by five tenets and four societal themes.For more information, including a spreadsheet assessment tool, 0.TenetsSocietal ThemesCommitted CultureEnhanced Stakeholder KnowledgeVibrant Management SystemsResponsible CollaborationDisciplined Adherence to StandardsHarmonization of StandardsIntentional Competency DevelopmentMeticulous VerificationAs the personaccountablefor drilling andcompletions atChevron, I makewell control my primary processsafety focus. I must understandand prioritize the process safetyrisks that exist throughout myorganization. I must be familiarwith the safeguards in place tomitigate these risks, and I must havea high degree of confidence in thecompetency of my organizationthat we have put the necessarycritical safeguards in place andmanage the details effectively. Mydedicated assurance organizationworks directly for me. This teamindependently verifies the qualityof well design/plan, rig certificationand execution which includescritical safeguards at all our drillinglocations by Chevron. Process safetymust be lived. It can’t be only abinder on a shelf.KIMBERLY MCHUGHVice PresidentDrilling & CompletionsChevronEnhanced Application and Sharing ofLessons LearnedFor more information, including a spreadsheet assessment tool,see https://www.aiche.org/ccps/resources/vision 202011

THE BUSINESSCASE FORPROCESSSAFETYIn summary, the business case for process safety is like the business case forany other aspect of the business. A robust process safety management systemoperating in a robust culture will enhance your business in five ways, all drivingimproved profitability and shareholder value:n Corporate Social Responsibility builds the image of your company, adding toshareholder value through increased goodwill, while helping make yourcompany a preferred place to work.n Business Flexibility removes barriers to growth and enables your company tofocus on innovation and market development.n Loss Prevention prevents damage to assets and the broader destruction ofshareholder value that accompanies incidents.n Sustainable Growth boosts productivity and quality, while helping to keep yourcompany at the forefront of management systems and technology.n Leadership Excellence drives leaders to hone their skills and helps developfuture leaders.Influence of the Business Case Elements on Corporate Financial Performance12

THE PATHFORWARDRealize the BenefitsNine steps to achieving business excellence through processsafety management:DoingLeadership Action Checklist Assign responsibilities at the corporate, business, and facility levels forcoordinating and executing the process safety management system.“At Chemours, webelieve it’s notenough to considersafety a priority—even a top priority.The stakes are too high. Safety mustbe an obsession—something we thinkabout, teach about, and preach aboutevery day. Whether it’s process safetyor driver safety, safety must come first,everywhere, at all times.”Build or strengthen a strong process safety culture basedon core values and clear performance expectations.MARK VERGNANOPresident and CEOChemours CompanyCommit and take accountability among your company’sleadership and board of directors.Establish risk criteria and ensure barriers are implemented andmaintained sufficiently to meet these criteria.Build or close gaps in your process safety management system.Ensure competency in process safety appropriate to all levels.Implement goals and lagging and leading metrics to trackthem to drive performance improvement.Visit your facilities to reinforce the importance of process safety.Learn from incidents and near misses.This is not a one-time set of activities. To be sustainable, this commitment mustalso be sustained. Revisit these steps periodically and implement improvementsbased on lessons learned.13

ABOUT THEARTWORKMedia DescriptionThe artist, Julia Eve Dubin, used watercolor to depict bright, sunny, natural scenesrepresenting safety and health – of workers, the environment and the bottom line.The Business Case for Process Safety should become as natural as these scenes.Image DescriptionsCorporate Social Responsibility: This imageshows a prospering community living in harmonywith the plant. When companies collaborate with theiremployees and their communities, all benefit.Business Flexibility: A boy is repotting a growingsapling, representing an operating site that wishes togrow, into a larger pot. Its roots now unconstrained, thetree – and the site – can now expand, strengthen, andprosper.Loss Prevention: This image illustrates preventingthe loss of a newly planted tree by staking it up.Following the themes of the previous two images, thecompany (hardhat) cooperates with the community (nohat) to protect the tree (site).Sustainable Growth: The tree (the manufacturingsite) continues to grow. Having protected the tree in itsearly years and having removed its barriers to growth, thetree now provides an increasing diversity of opportunity.Leadership Excellence: Process safety requireseveryone to work together cooperatively to reach thetop goal of preventing accidents. While not everyone willbe at the same place at the same time, everyone plays acritical role.14

CCPS offers more than a dozen courses and more than 100 books addressingall aspects of process safety. Some resources useful to business, operations, andtechnical leaders include:HELPFUL CCPSRESOURCESn Vision 20/20: A Guiding Vision for Process Safetyn Courses and Workshopsn CCPS Leadership Workshopn Process Safety Boot Campn Foundations of Process Safetyn Recognizing Catastrophic Incident Warning Signs Workshopn Booksn Process Safety: From the Boardroom to the Frontline (early 2019)n Essential Practices for Creating, Strengthening, and Sustaining ProcessSafety Culturen Guidelines for Risk Based Process Safety (2007)n Guidelines for Integrating Management Systems and Metrics to ImproveProcess Safety Performance (2016)For more information, and a complete listing of courses and books, visitwww.ccpsonline.org or call 1.646.495.1371If your company a CCPS Member?n You are encouraged to engage and benchmark with fellow members to helpeach other realize strong process safety programs.n You are also encouraged to join project teams to help shape future guidelines,another way to bring other companies’ experience into your efforts.If your company not a Member?n Please contact CCPS@AIChE.org or 1.646.495.1371 for more informationCENTER FOR CHEMICAL PROCESS SAFETYAMERICAN INSTITUTE OF CHEMICAL ENGINEERS120 Wall St, 23rd Floor, New York, N.Y., 10005, U.S.A.TEL: 1.646.495.1371 E-mail: ccps@aiche.org www.ccpsonline.org15

The revisedCCPS study showsthat the benefitsgo even deeper.The Business Case forPROCESS SAFETY“(Process safety) has made us competitive and it certainly helpedour bottom line ”“Process safety excellence enabled us to be actively sought afterand become a partner of choice ”“Excellence in process safety enables us to enter markets andmanufacture products faster, and it makes us even stronger interms of reliability ”“As a key element of our group strategic framework (process safety)has been an enabler of our value creation journey ”“Process safety essentially contributes to our sustainable businessgrowth and our social responsibility ”“(We have) benefitted greatly from integrating our process safetymanagement system into our principles of operational excellencein driving business sustainability ”“Process safety is a core element to safe, efficient and resilientproduction.”“(Process safety) must be an obsession—something we thinkabout, teach about, and preach about every day ”CENTER FOR CHEMICAL PROCESS SAFETYAMERICAN INSTITUTE OF CHEMICAL ENGINEERS120 Wall St, 23rd Floor, New York, N.Y., 10005, U.S.A.TEL: 1.646.495.1371 E-mail: ccps@aiche.org www.ccpsonline.orgCCPS thanks all the committee members and other member company representatives who contributed tothis study. CCPS also thanks author Scott Berger, President, Scott Berger and Associates, LLC, and his teamincluding Julia Eve Dubin - Artist, Cindy Geist - Designer, Israel Dubin - Editor, and Allison Berger - Researcher. AIChE 2018 3433 18

further evidence for this conclusion, leading to this 4th edition of the publication. Based on recent industry experience, process safety benefits companies in five ways. All these benefits make it indispensable for companies of all sizes to achieve manufacturing excellence and increase profitability and shareholder value.

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