Corporate Social Responsibility at Sainsbury PLC - Essay Example

CSR at Sainsbury PLC Introduction Corporate social responsibility (CSR) has become a necessity for organisations for their long term sustainability and survival. Wood (1991) has explained that CSR framework has been developed on the notion that business and society are not distinct entities; instead, they are strongly interlinked and interdependent. Business has been considered as an inseparable and important member of a society as it is the main source of employment, investment and wealth. Every action of a business has certain direct and indirect impact on the society and as a result, business is also a social entity. Business enterprises are primarily responsible for generating profit and creating wealth but being a social entity, it has certain responsibility towards the society. The societal responsibilities that are pursued by companies comprise development of social equity and taking measures for environment safety and sustainability. Another contribution of business towards the society is developing better quality of life and standard of living for people. However, in this regard, mass scale debate has been observed between social and economic benefits of a business (Weber, 2008). The paper discusses convergence of social and economic benefits with respect to various CSR theories. Alongside, the implication of CSR has been evaluated in organisational framework of Sainsbury. In the critical discussion, the social, ethical and environmental contribution of the company will be analysed and also the concept of ‘greenwashing’ will be explored and examined in perspective of Sainsbury. Company background Sainsbury PLC is one of the leading retailers in the United Kingdom food industry and over the time, the company has diversified in other non-food sector such as banking and financial services as well. Sainsbury is presently a world renowned brand having more than 1200 stores. The company operates by means of its convenience stores, online stores and the UK based supermarkets. The food business of Sainsbury has been diversified to accommodate other offerings such as clothing and general merchandise. The company also operate in property development sector by means of joint ventures (Sainsbury, 2014a). Sainsbury is a renowned brand in the UK and conducts its operation through 592 supermarkets and 611 local convenience stores. It was determined that the corporation generates more than £1 billion revenue from its online sales. The company operates with more than 2100 food suppliers and 1300 non-food suppliers for serving consumers with large variety of groceries and other products at every budget and high quality. The prominent suppliers of the company exist mostly in Britain and Asian countries such as India, China, Bangladesh and Hong Kong. Sainsbury has been enjoying continuous profit and market growth as a result of high quality offerings along with value and services to consumers. Sainsbury is not only concerned about making profit but also about consumer preference and social responsibilities. The company has been involved in responsible sourcing of food products such as meat and vegetables from various British farms and thereby supporting the local agricultural industry (Sainsbury, 2014a; 2014b). The company employs more than 161000 employees in all its stores and supermarkets. Sainsbury’s ability to offer high quality merchandise at relatively low cost can be considered as one of its critical success factors. Quality and transparency in its business activities along with committed resources have been considered as source of success for the firm. Sainsbury’s commitment towards excellence in value and service has helped the company to survive successfully in the increasingly competitive retail industry of the UK. Among various long term strategies of Sainsbury PLC, development of new business is an essential strategy. The company is currently investing in pharmaceutical and telecommunication business. With respect to company background, it is important to evaluate economic or financial performance indicators of the organisation as economic position of a company plays an important role in company’s CSR performance. It was observed that in past 5 years the retail sales of the company has grown from 2.7% to 25.3%. The operational margin of the company has also improved significantly along with the firm’s gross and net profit margin. However, the trading intensity of the company has declined moderately owing to economic slowdown worldwide. The non-financial performance instruments of Sainsbury are primarily focused on its sustainability programs. CSR reporting was adopted by the company in 1996 to reflect its moral obligation towards the society and environment. Numerous initiatives have been adopted by the corporation to ensure that CSR is an integral part of its business. The company not only pursued sustainability but also integrated its external and internal stakeholders in its sustainability effort. In the following section, sustainability of effort of Sainsbury has been discussed in detail (Sainsbury, 2014a; 2014b). CSR strategy of company The CSR approach of Sainsbury is multifaceted comprising of a number of things in an integrated manner. The primary responsibilities of the company are to provide its consumer with quality food and other products in exchange of a fair price and to purchase raw material from suppliers by applying a fair purchasing policy. The CSR policy of Sainsbury is driven by five values, namely, best for food and health, sourcing with integrity, respect for environment, making positive difference to the society and creating a great workplace. Another important aspect of Sainsbury’s corporate citizenship is ethical trading (Sainsbury, 2014c). Ethical trading Ethical trading implies the trading code of conduct in terms of employment practices that the organisation expects from its domestic as well as international suppliers. The primary reason behind undertaking ethical trading practices is to maintain consumer confidence regarding the company’s products. Present day consumers are largely interest in ethics and responsibility that are pursued by a company. Sainsbury ensures that none of its products has been procured or developed under situations such as unsafe and unhealthy work environment and labour exploitation. The concern has implemented strong code of conduct for its suppliers and also operates with low risk suppliers. The company has invested in capacity building, auditing, training and tracking so as to ensure ethical practice is pursued by its suppliers (Sainsbury, 2014d). Best for food and health Sainsbury was determined to be a major supermarket that introduced nutrition labelling by its health department. The company is making maximum effort to help consumer make informed choice regarding food. Other efforts comprise minimisation of quantity of salt, fat and sugar and saturated fat in products. The company is also making effort to increase sale of lighter alcoholic drinks with reduced average alcohol content. In 2014, Sainsbury introduced calorie labelling on wines and consultation services by in-store pharmacists (Sainsbury, 2014c; 2014e). Sourcing with integrity Sainsbury has an independent standard by which it manage sustainable sourcing of various essential commodities and raw materials. The company is committed towards ensuring that its products do not contribute towards deforestation and all its food products such as fish and seafood undergo sustainable sourcing process. Sainsbury ensures that food products that are sold by it are independently certified for sustainability. It was determined that the company has achieved £1 billion sales by fair trading of products. The company has also contributed in escalating UK’s revenue from farming activities (Sainsbury, 2014c; 2014e). Respect for environment The environmental responsibilities of the company include waste management and recycling. The facts suggest that the company is planning to reduce consumption of packaging material by half by 2020 compared to its consumption in 2005. Sainsbury is also planning to minimise its operational carbon emissions by 2020 absolutely by 30 percent and relatively by 65 percent compared to 2005. Robust water stewardship can be considered as one of the important aspects of Sainsbury’s sustainability program. The company is responsible for ensuring sustainable supply chain in vulnerable areas. Positive difference to the society The community is essential for survival of the company and its operations. Hence, it is one of the primary aims of the company to bring about positive changes in the society. It was determined that since 2005, the company has invested more than £150 million for donating sport and cooking equipments for kids. Presently, 51000 clubs and nurseries are registered for Sainsbury’s active kid equipment scheme. Between 2005 and 2014, the company has invested around £40 million in community development by raising fund from its consumers, suppliers and employees. Among the net fund, £6.5 million is spent on sport relief, £2 million for local charities and £4.5 has been donated to local charities. The taxation policy of the company is strongly integrated with its corporate values so that its shareholders value is protected while the taxes are paid as per regulation (Sainsbury, 2014c; 2014e). Creating a great workplace Sainsbury explains that the success of the organisation depends significantly on its employees as they provide high quality services regularly to numerous consumers. Motivated employees make large scale positive difference in organisational growth and consequently, the company provides sufficient opportunities to its employees so that they can make maximum utilisation of their skills. The strategic approach of the company in this regard is to create an inclusive workplace where people can make maximum utilisation of available opportunities in safe, respectful and healthy environment. The company make continuous contribution towards work life balance and training and development for employees. Employees of different age group and experience level are employed at Sainsbury so that employment is created. However, they are provided with right amount of training so that consumers are never dissatisfied. Employee engagement is an important aspect of Sainsbury’s human resource management strategies and it was determined that in 2014 the company distributed above £80 million among its employees as bonus. The efficient retention program of the firm has resulted in having more than 15000 employees with work experience above 20 years (Sainsbury, 2014c; 2014e). Since the paper aims at exploring one particular CSR aspect of Sainsbury with respect to various theories and notions related to CSR, environmental aspect was considered most appropriate. In the following sections, CSR theories have been discussed followed by their practical relationship with Sainsbury’s strategies. CSR- overview and theories CSR is not a recent concept and is in practice for a long period of time. Various authors have defined CSR and its purpose differently and also it has received significant amount of criticism in context of economic role of a business. Authors such as Tavitiyaman, Qu and Zhang (2011) posited that CSR can take different forms such as woman empowerment, local development, education, responsibility sourcing and health development and result in consumer engagement, innovation and competitive advantage. Cases related to CSR suggest that corporate citizenship plays an important role in every business sector such as human resource, marketing, public relation and finance. An organisation’s involvement in CSR is also useful for building market reputation. However, this notion has often been misused by organisation to create sustainable market image, which is also referred as greenwashing (Weber, 2008). Juholin (2004) explained that CSR is a holistic concept and include organisational openness and business transparency. The author appended that for achieving optimum performance, an organisation needs to merge its business interest with its social interests because the differentiating line between social benefits and economic benefits is highly blurred and these benefits are often overlapping. Many authors have argued that corporate responsibility was favoured by Aristotle as well. Solomon (2004) articulated that Aristotle never supported financial or business motive of business organisation and his view was that firm should deliver real value that involve financial and non-financial component. In this regard, Friedman (cited in Carroll and Shabana, 2010) was strongly against role of CSR in business activities. It has been gathered that Friedman’s views were heavily drawn on those by Levitt. Both academicians suggested that business should only focus on profit maximisation and not on social impact (Friedman, 2009; Levitt, 1958). With respect to CSR, two prominent theories have been highlighted: CSR pyramid by Carroll and Triple Bottom Line approach by Elkington. CSR pyramid CSR pyramid has been proposed by Carroll (1991) where he related comprehensive corporate responsibility with four layers namely economic aspect, legal aspect, ethical aspect and philanthropic aspect. In economic aspect, the author posited that financial stability by means of profit and revenue generation is essential for pursuing CSR because corporate citizenship involves certain level of financial investment. The legal aspect suggests that an organisation should be a law abiding entity as a number of regulation such as environment protection laws promote sustainability. The ethical aspect of CSR pyramid indicates that an organisation should adopt ethical measures towards the society only when it successfully maintains organisational ethics such as healthy workplace and workplace equality. Philanthropic responsibilities embody responsibility towards the society by means of non-profit activities. Triple bottom line approach One of the most pronounced contemporary theories of CSR is the TBL approach and was proposed by J Elkington. The TBL approach is similar to the CSR pyramid to a great extent and emphasis not only on economic value of a firm but also its positive and negative implication on the external environment. Elkington has emphasised on seven sustainability factors under the approach, such as, market, transparency, time, value, partnership, technology life cycle and governance with every factor playing necessary role in the sustainability process. The author appended that an organisation need to integrate all these factors in the organisational policies for developing sustainable business ecosystem. In this regard, it is noteworthy that TBL is not only implemented in organisational processes but also in the corporate value chain (Elkington, 2004). Greenwashing Greenwashing is referred to corporate malpractice of covering unsustainable organisational behaviour by using environmental themes. Greenwashing primarily comprises misleading marketing campaigns that promote environmental benefits of an organisation’s product, services and technologies. According to Forbes (2012), the concept of greenwashing has been developed recently in the light of misleading environmental proclamations by a number of corporations for being a part of the green bandwagon. Under greenwashing, widely used misleading terms are organic, eco-friendly, natural and green. In the following section, corporate responsibility practices of Sainsbury has been evaluated in the light of the above discussed theories and also the notion of greenwashing has been examined in context of the subject firm. Developing linkage between CSR theories and Sainsbury’s practices CSR Pyramid The company has integrated CSR pyramid in its organisational structure in an innovative manner. Sainsbury has developed long term relationship with more than 2200 local farmers so as it emphasise more on sustainable agriculture. The company stoutly values the role of environment in organisation’s growth and sustainability. Sainsbury contribute significant amount of its earnings towards environmental stewardship. In 2004, 2.2 million trees were planted by the company as a part of its CSR activities. It was determined that external as well as internal members are heavily involved in the company’s CSR practices. From legal perspective, sustainable seafood programme and carbon disclosure projects have been undertaken by the corporation. The company invested £250, 000 for undertaking sustainable cotton production project. Other significant projects of Sainsbury comprise water stewardship program and green labelling (Sainsbury, 2014c; 2014e). Sainsbury plays an important role in developing the agricultural industry of the UK. The company make significant investment in responsible sourcing of all raw materials for food and non-food products. The corporation has received a number of community awards for its input towards animal welfare. Sainsbury donated £1 million to British farming grant for establishing agricultural apprenticeship scheme. The ethical practices of the corporation resulted in more than 50 percent reduction in operational carbon emission. Additionally, measures have been adopted by the firm for power generation through recycling waste. Waste management programs of Sainsbury have also contribution towards limited landfills (Sainsbury, 2014c; 2014e). Triple bottom line Triple Bottom Line approach merges three major aspects of an enterprise, namely, economic, social and environmental aspects. In Sainsbury, all these aspects have been developed in a structured manner. Economic aspect: The economic aspect of Sainsbury suggests that the company has witnessed strong financial growth in recent years despite economic slowdown and recession. The growth is not only reflected in firm’s revenue but also in shareholders’ value. The dividend per share was observed to improve from 14.2 pence in 2009-10 to 17.3 pence in 2013-14. The company spent around £40 million for community development after raising fund from all its internal and external stakeholders. Social aspect: Community development, responsible sourcing, contribution towards development of the UK’s agricultural sector and donation of equipments for kids can be considered under the purview of social development by Sainsbury. The company is not only concerned about its external stakeholders but also invest consistently for development of its employees. More than £370 million has been distributed among employees as bonus and considerable amount of investment has been done by the corporation for training and development. Environmental aspect: Waste management and recycling and water stewardship are important environmental considerations undertaken at Sainsbury. In past five years, carbon footprint has been minimised significantly and the company has also reduced its water consumption. The company is presently making continuous effort towards sustainable sourcing so that the environment is not affected by its practices (Sainsbury, 2014c; 2014e). Greenwashing It was determined that the company is not involved in greenwashing practices as it maintained clarity and transparency in its practices and reporting. Conclusion In recent years, CSR has witnessed revolutionary development in domestic and international organisations partially due to pressure from various external stakeholders such as consumers, social and regulatory bodies and other interest groups. The paper is a critical analysis of CSR practices and theories in organisational context. CSR has been defined differently by different authors and no single definition is sufficient to explain its contribution in organisational development and success. Several theories have been proposed in favour and against of CSR and some of these theories are stakeholder theory, TBL approach and CSR pyramid theory. Using the aforesaid theories, the paper examines Wood’s view (business and society are interlined and interdependent) with respect to Sainsbury’s CSR practices. The paper also examines whether greenwashing is practiced at Sainsbury. It was gathered from the assessment that Sainsbury is strongly committed towards sustainability and corporate responsibility has been imbibed in the company’s corporate values. Additionally, it was also observed that the firm maintain transparency in its business and sustainable practices and greenwashing is not practiced by Sainsbury. Overall, it was determined that Sainsbury consider society and environment as important contributors in its business success. Reference List Carroll, A.B. and Shabana, K.M., 2010. The business case for corporate social responsibility: a review of concepts, research and practice. International Journal of Management Reviews, 12(1), pp. 85-105. Carroll, A.B., 1991. The pyramid of corporate social responsibility: toward the moral management of organizational stakeholders. Business horizons, 34(4), pp. 39-48. Elkington, J., 2004. Enter the triple bottom line. The triple bottom line: Does it all add up, 7(1), pp. 1-16. Forbes, 2012. 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