Ethical Practice and Corporate Social Responsibility of United Kingdom Supermarkets - Term Paper Example

REPORT ON ETHICAL PRACTICE AND CORPORATE SOCIAL RESPONSIBILITY OF UNITED KINGDOM SUPERMARKETS INTRODUCTION Ethical practices in business are associated with various industry issues. The manufacture and marketing of environmentally safe products is known as green marketing. According to Herbig (1998, p. 279), it is the marketing of products and services that are “environmentally friendly and that make their marketers environmentally responsible”. This report on corporate social responsibility is in relation to green marketing and fair price issues by supermarkets. The main ethical lapses of United Kingdom supermarkets are their failure to address environmental impacts caused by excessive use of packaging, and concerns about the treatment of suppliers in relation to compensation and fair wages. At the same time, increasingly ethical and green consumerism makes it imperative for businesses to adopt corporate social responsibility in all the processes involved in the production of goods and services. Thesis Statement: The purpose of this report is to examine the problems and possible solutions in implementing corporate social responsibility by U.K. supermarkets. GREEN, ETHICAL PRACTICE: CSR Corporate Social Responsibility and Ethical Practice Corporate social responsibility (CSR) encompasses the relationship between corporations or other large organizations such as supermarkets and the societies with which they interact. CSR also includes all the responsibilities which are a part of these relationships, for both the organizations and the societies. All stakeholders and constituent groups that have an interest in the organization’s operations are included in CSR’s wide and multiple-level definition of society. Corporate social responsibility can be defined as “the broad concept that businesses are more than just profit-seeking entities and therefore also have an obligation to benefit society” (Werther & Chandler, 2006, pp.6-7). For long-term benefits to the organization, CSR should be made a part of the firm’s strategic perspective and operations. Corporate social responsibility (CSR) refers to a company including in its decision making and operations, ethical values, employee relations, compliance with legal requirements, transparency, and overall respect for the communities in which they operate. CSR goes beyond community service action, “it is a corporate philosophy that is the driving force behind strategic decision making, selection of partners or collaborators, hiring practices and ultimately brand development” (Werther & Chandler, 2006, p.8). CSR includes how businesses manage the impact that they have on the environment and society: particularly how organizations interact with their employees, customers, suppliers, and the communities in which they operate. Also significant is the extent to which they attempt to protect the environment, and solve new corporate problems such as the exploitation of child labour occurring thousands of miles away for raw material production or manufacturing activities (Crowther & Green, 2004). “Corporate social responsibility encompasses the range of economic, legal, ethical and discretionary actions that affect the economic performance of the firm” (Werther & Chandler, 2006, p.10). This includes legal or regulatory requirements faced in day-to-day operations. Being socially responsible and adhering to the law is an important aspect of any ethical organization. However, legal compliance is only a basic condition of CSR; strategic CSR prioritizes ethical and discretionary concerns that are less precisely defined and for which there may be no consensus from society. Both Thomas Hobbes’ theory of corporate social contract and Locke’s opposing theory of rights such as entrepreneurism need to be incorporated for implementing corporate social responsibility. Thomas Hobbes’ concept of social contract regards corporate activity as morally good if it maximises human welfare, with collective welfare taking precedence over individual welfare (King, 1993). According to the idea of social contract, citizens would give absolute power to a sovereign power in order to avoid anarchy. This includes the fact that citizens give up their individual rights including control of liberty, possible life and property, and is termed as utilitarianism. On the other hand, Locke’s idea of rights denotes a distinctly individualist position, an example of which is entrepreneurialism. According to Locke, rights to property, to profits from business activities and other similar claims to ownership were justified as natural rights and one of the central functions of the state was to protect such rights as natural and private, justified by natural law (Olssen et al, 2004). The Requirement for Green and Ethical Marketing The concept of green marketing is related to environmental sustainability in which environmental quality and the conservation of nature’s assets are of prime importance. From the wise use of resources for the sake of future generations, the concept of sustainability evolved to include a focus on nature preservation for intragenerational distribution of nature’s bounty. Sustainability is a continuing process that needs careful planning and implementation to confront the problems facing “modern agriculture, natural resource management and land use” (Gunning & Holm, 2005, p.129). Sustainability takes into account the human factors of production, manufacture and use along with environmental and ecological concerns such as global warming, acid rain, deforestation, ozone depletion and other occurrences (Strong, 1997). Green and ethical marketing along with ethical consumerism forms an important part of companies’ corporate social responsibility policies; and the extent of incorporation of strategies towards green marketing differs between companies. Some of the green initiatives are: changing the position of existing products while product composition remains the same, modifying existing products to be environmentally less harmful, developing new companies that manufacture only green products, or companies forming a strategic alliance with an environmental group for increasing effectiveness in green marketing activities (Mendleson & Polonsky, 1995). In the United Kingdom, 50 % of baby food sales are now organic and financial newspapers have reported that the sales of Fair trade products have grown at the rate of 40 to 50 percent per year, for the last five years. There are 108 Fairtrade coffee brands and 364 different products on offer. An example is the Fairtrade hot drinks company Cafédirect has retail sales of over 23.5 million pounds, and is the fourth largest coffee brand in the United Kingdom. “According to the Ethical Consumerism Report the market for ethically produced goods and services is growing four times faster than household expenditure in the United Kingdom” (NEF, 2007, pp.9-10), which denotes an unprecedented increase in ethical consumerism. The U.K. public overwhelmingly supports the concept of ethical purchasing and socially responsible corporate actions. 53 % of United Kingdom consumers have considered changing their brands due to issues of corporate social responsibility. 19 % have actually purchased on the basis of a company’s ethical reputation. According to the 2005 Ethical Consumerism Report 58 % of U.K. consumers have avoided purchasing a product because of the company’s reputation. Additionally, 70 % of survey respondents were found to consider ethical issues in deciding where to shop (NEF, 2007). Therefore, with continuing integration of ethical consumerism with the mainstream companies are offering ethical options in almost all areas of consumer goods: “from food to cotton, and shoes to cosmetics” (Doonar, 2005, p.24). The drive for corporate social responsibility forms a social movement. Institutions concerned with ethical or socially responsible investment such as the Social Investment Forums and Friends of the Earth in the U.K. persuade the government to formulate new regulatory requirements for companies to reveal the social and environmental impacts of their business activities (Harrison et al, 2005). Ethical Consumerism Supports Green and Ethical Marketing During the 1980s, purchasing habits became increasingly ethical due to increase in environmental awareness on the part of consumers, development of green products and the availability of green consumer guides (Doonar, 2005). Consumers are expressing their concern for the environment in several ways through their purchasing behaviour. This is indicated by increasing research evidence which reveal that consumers choose particular products and avoid others based on their impact on the natural environment (May-Plumlee & Little, 2006; Rios et al, 2006). D’Souza et al (2006) found that there are consumers who will buy green products even if their quality was comparatively poorer, but looked for sufficient environmental information on the labels, in order to make informed purchasing decisions. A section of consumers are willing to pay more for environmentally friendly products since they strongly believe in ecologically favourable purchasing behaviour (Laroche et al, 2001). Green consumerism has developed further into ethical consumerism over the last few decades. Ethical consumers are similar to green consumers in general environmental issues; however, ethical consumers have an additional concern for issues with more extensive influence such as fair trade and working conditions of labourers. Thus, the difference between ethical and green consumerism is important. Moreover, ethical concerns are on-going and not easily solved, state Shaw and Shiu (2002). Solutions in Implementing Corporate Social Responsibility U.K. supermarkets are in the process of undertaking various measures to ensure green marketing of their products. Green products have low content of raw materials, contain re-usable and recyclable material, have non-toxic content, are non-polluting during the process of manufacture, do not involve unrequired animal testing, have no impact on protected species, require low energy consumption during production, use, disposal, have minimal packaging, and have a long, useful life with upgrading and re-manufacturing capabilities (Herbig, 1998; Crane, 2001). Green consumerism is being taken into consideration by manufacturers to help their businesses thrive in the competitive world of marketing, besides the requirement to operate according to governmental regulations and market forces (Stahl & Grigsby, 1997; Baker, M.J., 2002). Companies are now undertaking radical changes in their marketing processes in order to move beyond eco-efficiency to reduce environmental harm (Charter & Tishchner, 2001). Also, for green marketing to be adopted more widely, companies need to add more emotional value to green products, to strengthen the general public’s perceptions regarding the benefits of green consumerism (Hartmann & Ibanez, 2006). For marketing to contribute increasingly towards environmental sustainability, the market should operate within a society where sustainability is not only adopted as a public policy goal, but is “actively pursued through policy implementation in terms of taxation, education, industrial policy, and public spending and investments” (Peattie & Crane, 2005, p.369). The growing environmental problems need to be addressed urgently, to ensure that sustainable progress is made. The Organization for European Cooperation and Development (OECD) governments give high priority to corporate social responsibility in their policy agenda. Besides being a vehicle for economic growth, business fosters social cohesion both alone and in partnership with the government. For helping firms become more socially responsible by confronting the challenges posed by society, government can design incentives and provide the infrastructure that businesses require to operate and grow (Nourick, 2001). The two sides of the debate that underline corporate social responsibility are: “greater societal intervention and government control of corporate action” versus “greater corporate autonomy and the free market economic model” (Crowther & Rayman-Bacchus, 2004, p.13). The former group find greater accountability and transparency to support their view, and suspect ecological and social cheating to some extent by the latter corporate team. They also object to a free market economy having a positive influence on society. According to the latter group, the global spread of capitalism is the evidence for economic growth leading to social well-being. Companies recognize that corporate responsibility brings reputational risks and opportunities, hence it is an ongoing business priority for these companies to align corporate behaviour with stakeholder expectations. In the practice of corporate responsibility, however, communication is an important factor that remains a missing link. Though many companies are practising responsible corporate behaviour, they are not getting full credit for their efforts, because of lack of communication of information to a range of opinion leader and mass stakeholder audiences. Some of the significant challenges in practising corporate responsibility are “scepticism towards company messages and potentially hostile reactions from the media, campaign groups and others” (Dawkins, 2005, p.108). Further, certain communication challenges are also posed by the varied information requirements of different stakeholder groups. Therefore, a clear strategy is essential for effective communication of corporate responsibility in which both opportunities and risks to the brand are taken into account, and which tailors messages to different stakeholder groups. An approach which integrates corporate responsibility messages into mainstream communications, is found to be effective. Further, research evidence suggests that the company’s reputation for responsibility among its key stakeholders can be enhanced by improved internal communication (Dawkins, 2005). . Companies becoming more ethical helps them to increase their profits and also to have a sense of righteousness in their position and the part they play in business. Putting people first, with concern for ecological and environmental factors as well as sustainability for future generations helps businesses to develop due to consumers’ support. The ethical market has been developing steadily, including “free range eggs, fair trade coffee, and companies such as the Body Shop” (Doonar, 2005: 27). In the United Kingdom, fair trade coffee now forms 15 % to 20 % of the roast coffee market. Advertising Ethics and Corporate Social Responsibility The advertising ethics of a company is impacted by increased ethical consumerism. The setting of standards and norms for advertising ethics is based on the “notion of meaning making as a psychological principle” (Hackley, 1999, p.37). In the United Kingdom, a self-regulatory system is observed to operate, in maintaining the standards of advertising ethics. The simple approach of how advertisements impact the minds of consumers is insufficient when determining the ethics of advertisements. Hence, a wider approach using the concept of social constructivism which deals with shared ideas and communications, is found to be more suitable for evaluating advertising ethics in its “local, mediated, indeterminate and socially constructed character” (Hackley, 1999, p.37). How advertisements work or how they mean is central to its ethical level. “While ethical companies and options exist in all industries now, there is no uniformity in promotion” (Doonar, 2005, p.25). Various companies adopt different strategies, such as apparel businesses which advertise themselves as “sweatshop-free”, and the Cooperative Bank which informs customers about its easy service rather than its ethical investments of money. It is also observed that traditional companies sometimes do not advertise their ethical initiatives, such as Unilever does not publicise its sustainable fishing methods used. This detracts from the benefits that these organizations could potentially reap from their ethical behaviour. Further, those companies that announce their commitment to social concerns but do not take any action towards introducing social responsibility, find that this backfires on them since consumers today are increasingly aware of company policies and their implementation, through the media. For instance, French retailer Carrefour has been at the receiving end of consumer mistrust because of its unsubstantiated claims of social responsibility. The corporate social responsibility activities of Nike helps the brand by giving it a stronger foundation. The organization through its self-projection as a moral actor engaged in important relationships and attached to specific moral values, gives a narrative account of its past activities, current work and future plans concerning community and social concerns. Descriptions of work practices, environmental sustainability initiatives, community consultation programmes, and others are generally represented in the records as part of the corporate social responsibility initiatives, and are proof the organization’s commitment to “do the right thing” in its practices. It has been quoted that “Nike exists to pursue opportunity and enhance human potential” (L’Etang & Pieczka, 2006, p.51). The company’s personal and social relationships, principles of ethics and morality, and the method of projecting the brand helps to conceptualize a particular lifestyle, values, cultural beliefs and emotions. The connection is observed to be strong between branding language and public relations which develops ethical relationships between an organization and its consumers (Klein, 2000). It is quoted from the company’s corporate social responsibility agenda that “As a citizen of the world, Nike must Do the Right Thing – try to be transparent about what we are doing right, and about what we are doing wrong; embrace diversity; drive sustainability”. Here there is an interesting shift from Nike’s “Just Do It” culture to a “Do the Right Thing” culture, which is a change from the “abstractly amoral to the explicitly moral speech act” (L’ Etang & Pieczka, 2006: 53). Through an integration of marketing, branding and corporate social responsibility policies, Nike company’s ethics and moral goodness are sold to the public. Fair Trade Practices: “Fair traded products are those purchased under equitable trading agreements, involving cooperative rather than competitive trading principles, ensuring a fair price and fair working conditions for the producers and suppliers” (Shaw & Shiu, 2002, p.286). Ensuring fair prices and a regular income for growers and producers is the underlying principle behind the concept of fair trade. The increasing awareness of Third World issues on a global scale, shift towards concern for its sustainable development, growing availability of information about fair trade principles, greater media coverage and expansion in the number of fairly traded products, are the main factors behind increasing spread of fair trade values. Fair trade consumerism gives rise to competitive advantage for socially and ethically aware organizations as it is a traditional aspect of green consumerism. It is a marketing concept in the initial stages of development in the United Kingdom (Strong, 1997: 32). The chief concerns of fair trade involve suffering to people, impact on their culture, and adverse effects on communities and indigenous populations, all of which are equally significant. Secondly, fair trade also focuses on ecological issues, beyond pollution control to encompass occurrences such as degradation of natural resources, sustainable use of raw materials, different communities and cultures. Thirdly, charitable contributions are not included in the concept of fair trade, which stresses on trade and not aid. Also, the aspect of charitable contributions is replaced by factors such as “equitable trading policies, equal distribution of profit and the development of cooperatives amongst Third World producers” (Strong, 1994, p.34). Fair trade aims to be holistic in nature, focusing on the complete range of trade principles. Fair trade practices are improving because of caring and aware consumers, support for fairer trading practices with Third World countries from pressure groups, increasing focus on fair-trade issues by the media, greater corporate responsibility, increasing number of suppliers in the marketplace. A combination of the above factors have resulted in higer availability of fair-trade products, and the high quality and performance of alternative fair traded products. “An integrated self-perpetuating model” is formed by the features contributing to the growth of fair trade, as represented diagramatically in Figure 1. below (Strong, 1997). Figure 1. (Strong, 1997, p.33) Sustainable Development Achieving sustainable development through societal and environmental concern is the main goal of corporate social responsibility. The concept defines economic development in which environmental quality and the conservation of nature’s assets are of prime importance. Earlier, sustainability took into account only the wise use of resources for the sake of future generations. The concept evolved to include a focus on nature preservation, and an “intra-generational justification to the distribution of goods”. In recent times the range of issues related to sustainability has increased, thus resulting in a wide concept. Sustainability is a continuing process that needs careful consideration and application towards achieving the goal; and is “not a readily prescribed cure for the problems facing modern agriculture, natural resource management and land use” (Gunning & Holm, 2005, p.129). When including sustainability as an important part of company ethos, it impacts planning and policy formulation with clear choices. When concerns are presented within a framework of sustainability, company policy is supported by society as a whole, thus enabling stakeholders to have interaction with a broader audience. To sustain the environment, the human factor of production, manufacture and use must be included along with environmental and ecological concerns such as global warming, acid rain deforestation, ozone depletion and other occurrences. Consumerism is the main factor which contributes to the global concerns about sustainability. The decision making power of every consumer impacts long-term sustainability; and ethical consumerism is facilitated by the wide availability of environmentally friendly products. Further, “fair-traded products offer consumers the added benefit of contributing to the sustainability of the human element of environmental concern” (Strong, 1997, p.33). The Importance of Cause Commerce Approach in Corporate Social Responsibility Consumers expect corporations to practice social responsibility in the form of high level of ethical behaviour, community concern and customer care. The cause commerce approach integrates “public opinion research, media relations, strategic philanthropy, marketing strategy and editorial services” (Densen, 2007, p.89). The mission of cause commerce is to improve the prosperity of businesses and also to improve the conditions in the world in all aspects. The approach is based on the concept that if the organization helps their customers to understand more fully particular issues that matter to them, and helps them to deal with the issues, the consumers will be loyal to the organization and reward it with their business. This correlates with the fact that contemporary businesses are increasingly approaching consumer social responsibility as an opportunity to allay the fears, apprehension and cynicism of consumers towards products and companies. By the organization acting in the interest of the consumers, they are confident of “grabbing attention and market share than those that hide in the shadows” (Densen, 2007, p.89). The cause commerce approach differs from the traditional affinity marketing approaches which relate worthy causes with companies, but the causes may not coincide with their businesses. In short, the contemporary concept of cause commerce refers to actively and consistently interacting with consumers with conviction and concern about socially meaningful business issues. The customer and the issue are the priority, and not the product that the company is trying to sell. This advocacy is seen to positively impact customer loyalty to the product and to the company. CONCLUSION This paper has highlighted the problems and solutions to implementing corporate social responsibility by U.K. supermarkets and other organizations. Corporate social responsibility and ethical marketing practice, the requirement for green and ethical marketing, and how ethical consumerism supports green and ethical marketing were examined. Solutions to implementing corporate social responsibility were investigated, including: advertising ethics, fair trade practices, emphasis on sustainable development, the cause commerce approach, and other important factors such as improving communications within the organization and public relations with external bodies, improving ethical relationship with the consumers by acting in their interest, and including ecological concerns in business activities. Supermarkets and various organizations in a global environment play a significant role, beyond the creation of employment and wealth. Business has an increasing role in social and economic development, therefore, corporations need to fulfill three bottom lines: economic growth, social responsibility as well as environmental sustainability. Corporate social responsibility is a holistic concept. 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