Corporate Social Responsibility - Coursework Example

Running Head: report Corporate Social Responsibility of the of the of the Table of Contents Introduction…………………………………………………………………..…..…………3 Overview of The Body Shop (TBS)……………………………………………..…………4 CSR @ The Body Shop…………………………………………………………..…………4 No to animal testing………………………………………………………………...…………5 Supporting community trade…………………………………………………………………5 Promoting eternal and true beauty through well being………………………...……….5 Defender of Human Rights……………………………………………………………….….5 Environmental sensitivity……………………………………………………………..……..6 CSR as a Relationship Marketing Tool @ TBS………………………………….………6 Benefits and importance of CSR accrued to TBS…………………………..……………6 Gaining sustainable growth through relations……………………………………………7 Superior financial performance…………………………………………………..…………7 CSR leads to competitive advantage and sustainable development………………..…..8 Stakeholder management and CSR: a critical review with respect to TBS…………….8 CSR facing internal pressures…………………………………………………….…………9 CSR facing external pressures……………………………………………………………….9 Governmental and regulatory pressures……………………………………….…………10 Pressure from NGOs and other alliances…………………………………………………11 Applying Power-Interest matrix on TBS to assess its stakeholder management success………………………………………………………………………………………11 Conclusion……………………………………………………………………………….…12 Appendices………………………………………………………………….. ……………..13 References…………………………………………………………………………..………16 Introduction Ethics and social responsibility is one emerging topic which has caught the attention of both the academics and the practitioners. Corporate social responsibility (CSR) in particular has gained immense prevalence and significance amidst globalization and blurred cross boundary activities. CSR in its essence is about promoting and building sustainable businesses through a three-pronged approach of environmental, social and economic welfare and contributions to the overall betterment of the society and the planet we live on (ASOCIO Policy Paper 2004). Scholars are of the opinion that CSR counts a lot in exercising effective leadership and promoting healthy business practices at work. It also involves the element of transparency in business-society communication and adhering to the relationship marketing approach (What’s Relationship marketing? n.d) for the involved stakeholders like investors, consumers, government, communities and partners (Appendix 1). Nowadays, CSR is being acknowledged as a valuable tool in gaining competitive and sustained advantage over rivals and also a promoter of sound financial performance for companies that operate globally. This is so because CSR adds value to business propositions by bridging the communication gaps between company and its stakeholders and also anchors the vested interests of business towards society and development in the long run (McKinsey Global Survey Results n.d). To illustrate the concept of CSR and to prove the practical significance of CSR importance, the Body Shop is taken as the organization where CSR concepts have been applied and different perspectives have been tried to be developed. While CSR has worked as a strategic marketing and competitive advantage tool for Body Shop, it has also attracted a fair share of criticism for the company. Overview of The Body Shop (TBS) The Body Shop is the brain child of Anita Roddick who is a Human Rights Activist. She wanted to work differently from the stereotypic business practices for which she established Body Shop- a cosmetic company and beauty products store which used natural ingredients as its raw materials. Being a Human Rights Activist, Anita Roddick supported social activism which is reflected from the business practices of TBS (Purkayastha & Fernando 2007). Since the first store of TBS opened in UK in the year 1976, it has witnessed tremendous growth and now registers its presence across 62 nations with a fleet of 2500 stores (The Body Shop n.d). Apart from traditional brick-and-mortar presence, TBS also enjoys a strong online presence. Its core philosophy has been to take care of not only the directly involved shareholders, but also indirectly related stakeholders who have some sort of interest in the organization. CSR @ The Body Shop TBS is acclaimed worldwide for its pioneering work in the field of CSR despite being a cosmetic and beauty product store which is always in hype for animal testing and use of non-natural ingredients. Contrasted to these, the mission statement of TBS itself portrays the ethical and caring stance of TBS in all its practices and the way it serves its stakeholders (Appendix 2). Apart from its CSR initiatives, TBS is known for being one of the first firms to publish its social responsibility reports, audit reports and also Green Book containing its environmental statements (Purkayastha & Fernando 2007). The ingrained values at TBS account for its social responsibility and their accumulation in the form of environmental, social and economic sensitivity (Appendix 3). Commendable CSR initiatives by TBS are (Purkayastha & Fernando 2007): No to animal testing According to TBS, animal testing in beauty products is completely inhumane and should not be encouraged. It even implemented a supplier monitoring system intact of Against Animal Testing features which was audited and certified also. Several campaigns against use of animal testing in cosmetic industry have been led by TBS in nations like UK, Japan and Germany. Supporting community trade TBS has also been providing financial support to community traders by purchasing natural ingredients from them. It not only ensures a sustained earning for these community traders, but also helps TBS in developing new products through long term relationship and trust (The Body Shop, Australia n.d). Through the efforts of TBS, the community traders were able to gain better access to other prospective markets. Promoting eternal and true beauty through well being TBS had never advertised extra slim models to flaunt the sale of its products. Rather it has always accounted on overall wellbeing and comfort of its customers through well informed messages. As an extended effort of its marketing function, TBS also initiated campaigns against domestic violence and women and children abuse which further helped it garner a strong public image. Defender of Human Rights Anita Roddick herself being a Human Rights Activist cannot forget this value from the list. TBS values its internal customers also and has provided for the security and growth of its employees by means of job security, privacy, healthy working conditions and adherence to labor laws (Amis, Brew & Ersmarker 2005). It also conducts regular checks on its suppliers so as to keep the production line in sync with its ethical missions. Environmental sensitivity For TBS, environment is the biggest stakeholder group having impact on the business practices. It favors recycling, waste management and minimizing packaging to ensure that cosmetic industry is not condemned for its irresponsible environment behavior. Apart from such efforts, TBS is also actively engaged in various charity functions, labor conditions, harvesting natural herbs and overall animal and environment welfare. CSR as a Relationship Marketing Tool @ TBS Entire CSR efforts of an organization could go in vain if its initiatives are not communicated to the people involved with the business. Marketing serves as an integral component of CSR activities within a firm as it aligns the interest of both the parties and makes them aware of the happenings of each other (Gummeson 2008: 329). TBS’s genius of CSR is through its relationship marketing exercise (Schuman 2009: 18) whereby as soon as a purchase is made, its customer is made its active partner and the relationship transcends beyond financial bonds (Appendix 4). Customer retention and loyalty directly flow from relationship marketing (The Evolution of relationship marketing n.d). The concept of relationship marketing is based on creating maximum value for the customer in return of his investment. Such value arises from the components of quality, reducing gap between customer perception and expectation and monitor the relationship even after sales (Best practices for relationship marketing n.d). TBS has well applied this logic in its marketing practices because the core philosophy of TBS revolves around its stakeholders and their welfare. Benefits and importance of CSR accrued to TBS From a once-in-a-year operation, CSR is fast gaining the status of a mainstream activity in most of the businesses. This is because of the numerous benefits and enhanced relations secured by businesses with different stakeholders and establishing a reputable and respected image in the minds of the end users who now favor social bonds with companies, more than financial or transactional ones. Gaining sustainable growth through relations Large firms register sustainable growth in the competitive arena by means of using differentiated practices and caring for the welfare of the society through positive actions. CSR ensures the long term commitment of firms towards their role for the society and something which surpasses their profit maximization philosophy (Pohle & Hittner 2008). Apart from Porter’s value chain, CSR holds a separate value curve of its own which starts with firm’s compliance to the legal and regulatory obligations and progresses through the alignment of social and charitable issues with their core activities (Appendix 5). One stark observation in this regard is the inability to gauze the customer CSR expectations due to distanced and immature relationships with their stakeholders. Information exchange in its preliminary stages might only be of containment or formal procedure but when taken under the aegis of CSR, it takes the form of stakeholder engagement in the company’s processes and decision making authority (Appendix 6). Customers stay at the focal point of such relationships and the only way to secure fructifying business activities is through interactive and informed practices with two-way communication with the involved entities. Superior financial performance In the span of 30 years of CSR emerging as a hot topic, its relationship with financial performance has been established as a positively correlated one (Japan Productivity Centre for Socio-Economic Development n.d). While CSR tends to be a responsibility, financial performance is the actual result of adhering to that responsibility. In this regard, CSR accounts for a superior financial performance of organizations because if increased trust and confidence of investors and stakeholders in the activities pursued by the company (The importance of corporate responsibility 2005). CSR leads to competitive advantage and sustainable development The triple bottom line (TBL) approach in CSR aims to give due attention to the stakeholder and principal-agent theory. Shareholders of a business already hold the power to vote and have a say in the day-to-day activities of the business. But the other three perspectives namely the societal, economic and environmental need to be given equal weightage as the involved stakeholders in these categories fall into explicit agreements with the company (McWilliams & Seigel 2001). A firm’s responsibility is also towards the communities and groups which are indirectly affected by its products and services. This way, companies which are able to nurture relations with all its stakeholder groups stand at a favorable position to differentiate and lead in the industry (Hogg & Gabbott 1998: 55). Lack of social and environmental consciousness and greater focus on financial motives might give transient results and soaring profits, but the road to sustainable development and competitive advantage emanates from incorporating CSR initiatives in the core strategy of the firm. Stakeholder management and CSR: a critical review with respect to TBS The social responsibility of businesses assumes greater coverage when they turn large scale. Initially, the business might not be in a position to discharge its social responsibility due to high costs but in the long run, the antennae of the business gets opened up for public opinion where reactions and responses of a number of entities are needed in order to build a sustainable and social image. These drivers of CSR include internal and external customers namely the employees and the end users respectively, investors, governments and other non-governmental organizations. How TBS has tried to manage these influential drivers in the discourse of its corporate social responsibility and ethical practices depicts how ‘enlightened consumption’ (Haigh & Jones n.d) has promoted the philosophy of CSR within TBS. CSR facing internal pressures CSR initiatives prove significant and continue as long as profit motives and personal expectations of senior managers are fulfilled. As obvious, nothing of value comes free and this applies in strict sense with CSR too. CSR implementations come coupled with personal motives and remuneration attractions of managers. If financial performance of the company is good and overheads are apportioned appropriately, then only managers seek to consider social welfare and consider ethics as a driver to success and sustained advantage. As in the case of TBS, its CSR focus is on one stakeholder group which is towards environmentalism and human rights sustainability of its business proposition. TBS was a first mover in using cleaner ingredients in cosmetic products and thus, onus of CSR practices fell high on it because other competitors might imitate the practices considering it to be the precursor to market positioning. TBS has been criticized of its low wages and not acknowledging the organization of trade unions to let them bargain for their working conditions and other labor problems (Fontaneau 2003). As such, this stakeholder group is not much channelized and TBS holds complete control of employees and labor in its hands. On supply side too, TBS is accused of limiting its trade with a few key suppliers, thereby not promoting free and fair trade practices (Williams 2010). This necessitates the proposition of bringing out a fundamental and positive change in the CSR momentum by altering the basic DNA of business that is the employees and not just societal or environmental factors. CSR facing external pressures The marketing and promotion of CSR initiatives by a firm also give rise to an equal amount of communication and information exchange by the firm to its consumers. In the absence of such an occurrence, the firm might be inflicted with the notion of opportunism using green consumerism (McSpotlight n.d) and CSR backing as a means to purposely gain a greener image. This might also lead to cynicism, low switching barriers and high exit choices on the part of consumers. As for example, TBS has deployed a large number of loyalty programs and initiatives for its consumers but little awareness is generated by TBS to its consumers regarding what plans or programs it has in store for them (Saren 2006: 23). Its advertising has also been criticized of portraying insecure and flawed images of beauty and making people conscious of their body so as to flaunt the sale of its cosmetic products. It has also always responded aggressively to the critics and intimidated them by use of lawsuits and allegations which has gone against the clean and people friendly image of TBS. Governmental and regulatory pressures In respect of proper CSR adherence, government regulations and policies act supplementary promoter for large business firms. If there are high costs of compliance levied on business firms, more impetus will be on profit agenda and CSR will get secondary attention due to negative competitiveness of firms in international markets. Also from the part of government to act strict on social and environment regulations, it needs to provide states and capitals with increased autonomy in securing financial capital (Moon 2004). The operating nation for TBS- United Kingdom is one of those nations which consider CSR as one of the most important and advanced constituents of a social welfare state. After 1980s, UK culture has focused on the principles of diversity, consensus, persuasion and communication (Hamm n.d). Regular interaction and reinforcement of CSR policies regarding partnerships and duties in respect of local and international trade are facilitated by both public and private actors in the UK economy (Appendix 7). As such, these circumstances and policies place increased pressure on TBS to comply with the rules set by the hybrid governance model of UK economy. Its sell-out to L’Oreal was criticized on the grounds of selling its ethical stance to a cosmetic partner who has never been associated with any kind of CSR activities. Pressure from NGOs and other alliances The biggest and the most fearful pressure faced by organizations in their CSR activities is that from Non-government organizations and other informal alliances who safeguard the interests of a particular social section or community. As for TBS, it was criticized for use of petrochemicals in its products and falsely marketing its products to be natural when they are actually synthesized. Its deal with L’Oreal was also alleged on the grounds of tying hands with a partner who is associated with the claims of animal testing. L’Oreal’s connections with Nestle also gave rise to furore as Nestle is again condemned of promoting baby milk powder. Such alliances with anti-CSR activist firms had led to serious repercussions for TBS and even to the extent of boycotting its products. People have refused to shop again at Body Shop because it no longer supports ethical consumerism. Applying Power-Interest matrix on TBS to assess its stakeholder management success Power-interest matrix is a useful tool in determining the extent of control exercised by different stakeholder groups in the functioning of a business (Appendix 8). With its help, business can also prioritize its strategies according to various stakeholders. In case of TBS, foolproof and two-way communication has been the cornerstone to its CSR implementation. In the matrix, power refers to those groups who have direct control over the function such as investors and employees. On interest side, it refers to communities and groups who do not have any direct benefit but the operations of the business do impact them. TBS has always concentrated on the interest axis of its stakeholder groups and retained a high level by keeping them informed and managing them closely. This is clear from the supplier monitoring and relationship strategies undertaken by TBS. Specially with industries like oil and gas, cosmetics and airlines, influence of interest groups is much more than power groups. This is so because interest groups here is formed by environmentalists, sectionals and other social communities which help build or tarnish your public image through their critical views and opinions. Because of its informed strategies, TBS had been able to gain a loyal and huge customer base which is constantly climbing up the ladder of loyalty (Peck et al 1999). In this respect, the CSR activities of TBS deserve a huge applause as they have helped create a positive image of the company in the interest stakeholder group of TBS which actually accounts for its success. Conclusion Despite continued criticisms and revealed flaws in its practices, TBS still is counted amongst firms which have set an example of how to care for the environment and social groups while traversing the traditional way of business doing and registering sustained growth and profits (Cosmetics International 1994). After all, any new breakthrough in an industry is criticized first and then acclaimed and recognized which is the case with TBS. It was the first to defy the practices of animal testing and use of synthetic ingredients in cosmetic industry which gained much critic attention. However, continuing on its CSR activities, TBS has a promising future ahead because of its structural bond formation with its customers and other interest stakeholder groups (Khandwalla 2009: 133). Appendices Fig. 1 Fig.2 Fig.3 Fig. 4 Fig. 5 Fig. 6 Fig. 7 Fig. 8 References Amis, L, Brew, P & Ersmarker, C 2005. Human Rights: It is Your Business. International Business Leaders Forum. 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