Reasons for Corporate Social Responsibility - Apple, Adidas and Starbuck Coffee Company - Case Study Example

REASONS FOR CORPORATE SOCIAL RESPONSIBILITY Name Institution Professor Course Date Executive Summary Corporate Social Responsibility is becoming normal as avant-garde firms embed sustainability into their major business operations to establish shared value for society and business. Although shareholders in firms opposed implementation of CSR, effective CSR strategies helps firm in winning competitive advantage, increase profitability and productivity. Based on a thorough literature review and information from companies such as Apple, Adidas and Starbuck Coffee Company, this report highlights the reasons why firms implement CSR despite opposition from their shareholders. The report focuses on forms and motives of CSR, benefits and costs linked to CSR. The report recommends that firms should honestly communicate their CSR strategies, mainstream it in their corporate strategies and link to their core business policies. Table of Contents 1.0 1.0 Introduction Every organization in the contemporary world strives to sustain a lead in its area of business. Business organizations employ scores of strategies directed into enhancing their performance, profitability and gaining the trust of the public. These strategies are integrated in a firm’s corporate social responsibility. CRS is a code of action and conduct beyond what is needed by laws, trade rules or regulations. Corporate social responsibility entails a business practice that involves taking part in activities that benefit the society (Gasper, Risa, Bierman, Hise & Kolari 2013, p.170). CSR is becoming normal as avant-garde firms embed sustainability into their major business operations in order to establish shared value for society and business. CRS can include anything from a firm’s taking measures to function in a clean, environmental friendly manner, to ethical and social educational programs, to diverse community involvement and charitable endeavours (Graafland & Corrie 2012 p.379).Firms still implement CSR despites opposition from their holders for competitive advantage, sustainability, productivity and profitability. The report draws information from multinational companies such as from Adidas, Apple and Starbucks Coffee Company. 2.0 Adidas and Starbucks Coffee Company Ltd Adidas is German multinational company that manufacturers and designs sports clothing, accessories and shoes. The company has several stores in the United Kingdom with its head office located at Pepper Road, Stockport. Aside from sports wear, the company also produces products such as watches, shirts, bags and other sports and clothing linked products (Rhee2012, p.24). Adidas is the biggest sportswear producer in Europe and the second largest in the globe after Nike. The company was established in 1949 by Dassler Adolf. Adidas is ranked among companies with good corporate social responsibility. Starbucks Coffee Company UK Ltd, on the other hand, is an American global coffee and coffeehouse chain. It is the biggest coffeehouse firm in the world with 21, 160 stores in 63 territories and countries including 793 stores in the United Kingdom. The company’s head office in UK is located at building 4 Chiswick Park, 566 Chiswick High Road, London (House of Common 2012, p53). In 2011, Starbucks was named the firm with the worst corporate social responsibility and the most unethical coffee company in the UK. 3.0 Corporate Social Responsibility 3.1 Forms and Motives of CSR According to Graafland and Corrie ( 2012 p.379), CSR is the conscious direction of business actions towards establishing value in 3 aspects in the longer term, not only with respect to financial-economic factors, but also in social and ecological sense. Corporate social responsibility helps firms in establishing goodwill. A constructive attitude towards a firm may trigger augmented sales volume, external interest in a firm stock and loyal customers. Weimar (2005, p.67) asserts that although corporate social responsibility instigates novel responsibilities which can force internal shifts, it reap rewards in the longer term. With short-term interests, corporate social responsibility can be at odd thereby leading to tensions within some stakeholders in a company. Corporate social responsibility is a practice and policy of corporate responsibility for the common good. As a result, CSR can take the form of environmental responsibility, donations and socially related investments. According to Ruth (2010, p.241), corporate social responsibility can be an in-house policy concerning all the HR ( Human Resources) of a firm, making them a portion of common good through treating them fairly. Treating employees in a respectable manner represents the most fundamental form of respectable ethics and corporate responsibility. Firms can establish their competitive advantage via corporate social responsibility and initiatives through crafting a distinct strategy that aligns their business strategies with CSR programs. Mullerat (2010, p.140) asserts that CSR assist a firm in developing a reputation as a responsible firm and as a good corporate citizen. Most consumers in the contemporary world prefer to make purchases from responsible and ethical businesses. Firms also favour suppliers who show responsible policies as this assist in lowering the dangers of any damage to their own image. Investors prefer investing in firms with social sensitivity because good CSR give investors a kind of ethical guarantee. Corporate social responsibility improves the sustainability of firms and ensures that these firms comply with regulatory and legal requirement. For instance, reducing emissions and waste does not only benefit the environment but the entire society besides helping firms to save money. Good CSR helps in developing a positive image of a firm, increased market share, employee commitment and motivation, profitability and business sustainability (Katamba 2012, p, 1). 3.2 Benefits of Good CSR Adidas has continued to grow and most people love the company’s brand. According to Lee and Rhee (2012, p.24), Adidas demonstrates environmental leadership via its apparent intent to guarantee that its commodities are produced in environmentally responsible manner. In so doing, Adidas address stakeholder concerns, preserve the environment and manage operational risks in its endeavours to do good for planet, profit and people. Adidas’ approved suppliers undergo engagement and technical evaluation with the firm. The company has well established performance indicators aimed at further lowering environmental impacts. Adidas sustainability programs hold four pillars which include partnership, planet, product and people. With respect to the people pillar, the firm supports local communities’ projects financially and through providing employee volunteers. For instance, in 2013, the company supported more than one thousand local community projects (Adidas Group 2014). The company also treats its employee with due respect with a clear understanding that employees are the backbone of the company. With respect, to product, Adidas uses sustainable cotton to manufacture its products and plans to source 100% cotton in all its product categories through Better Cotton Initiative. Water is Adidas’ major focus area. Through integrating DryDye fabric, the company saves fifty million litres of water (Adidas Group 2014). . As regard the planet, Adidas makes some products from recycled materials an aspect that allows numerous tonnes of polystyrene waste not to be deposited in landfills. With respect to partnership, Adidas sponsors social activities such as sporting activities. For instance, the company was the official sponsor, outfitter and Licensee of the 2014 FIFA World Cup in Brazil (Adidas Group 2014). The company has continued to be a dynamic participant in the taskforce of SAC (Sustainable Apparel Coalition). Adidas corporate social responsibility includes sustainable usage of materials, labour rights and environment issues. Although embedding corporate social responsibility strategies in a firm’s business strategies is costly, the benefits overwhelm the costs. Fields (2010, p.133) confirms that although adherence to CSR principles comes with enormous benefits such as increased profitability and productivity, employees’ retaining, positive reputation, increases sales and easy employees’ recruitment, CSR incurs costs. In the contemporary business world, it is necessary for firm in the pursuit of increased profits to be reactive to consumer and act in a social responsible manner. Maintaining good corporate social responsibility has helped Adidas to attain a competitive edge and become the second largest sportswear in Europe and the second biggest sportswear after Nike. People have gained confidence and trust in the company’s products and practice aspects that have helped the firm to retain customers and attract more. Despite opposition from shareholders, CRS promotes the image of a firm and increases brand’s reputation which instigates improved sales for the firm’s products. The idea of sustainability regards making profits while not hurting prospective generations. In this regard, CSR entails thinking of future generation and continuity of the firm. Other companies such as Apple have also maintained a competitive edge through corporate social responsibility directed to the environment, community and people. Apple is the most valuable brand in the World according to Forbes. Nike has also maintained its leading position in sportswear’s production because of its good corporate social responsibility. The cost of not practicing CSR for Nike was too high but after adopting CSR, Nike was able to develop a positive brand reputation that has placed it in the lead. According to Peng (2010, p.571), Nike is a more responsible corporate citizen in 2010 than it was in 1990, hence its leading position in the sportswear industry. 3.3 Costs of Lack of CSR With respect, to employees, a firm with good corporate social responsibility can easily recruit employees. Workers also basically stay longer, lower cost and disruption of retraining and recruitment with good CSR. Good CSR also improves the motivation and productivity of employees. Mullerat (2010, p.140) reports that employees are greatly looking past benefits and pay checks and are seeking out firms whose philosophies and operating policies correspond with their values. As indicated earlier corporate social responsibility does not only involve the environment and community, it also includes employees, customers and other stakeholders. Starbucks in 2011 was ranked the worst company because of its position on worker’s rights. This negative publicity and lack of corporate social responsibility negatively affected Starbucks reputation and image. The firm use of GM growth hormone in its milk as well as the company’s attempt to prevent Ethiopians efforts to enhance the livelihood of coffee farmers jeopardised the image and the market share of the firm. Lack of CSR does not only jeopardise the image of a firm, but also its market share, productivity and profitability. Starbucks failure to pay and treat its employee well cost the firm over 100 million dollars into its low-wage staff accounts in California. This is an indication that failure to uphold CSR practices incurs increased to a firm (Vijayara 2011). In 2014, Apple Inc image was tarnished for using underage people in its worldwide supply chain for iPads and iPhones. The fact that Apple failed to evaluate and uphold the wellbeing of workers in its supplying firms in China almost tarnished the Apple brand. However, its position on employees’ welfare where the firm places a 60 hours workweeks and its responsibility towards employees helped the firm to redeem its public image (Shayon 2014). In this regard, although shareholders oppose CSR policies, firm still implement these policies for productivity and profitability. 4.0 Conclusion Today the world experiences an intricate set of social and ecological issues that need to be addressed. Government establishments at both international and national level face structural and serious difficulties in addressing these concerns. This has triggered an interest in corporate social responsibility for attaining public goals. CSR is comprehended as an idea where firms integrate environmental and social concerns in their business practises and in their interactions with stakeholders beyond compliance to legal and mandatory requirements. Organisational conduct is a crucial aspect in attainment of its goals and those of the society. Drawing from Adidas, Starbuck Coffee Company and Apple Inc, CSR helps firms to attain a positive image, win a competitive edge, increase sales and profit besides improving employees’ morale. On the other hand, lack of CSR in a firm leads to tarnished image that in turn affects the image, profitability and productivity of a firm. Despite shareholders oppositions, firms still implement CSR polices because these policies increases shareholder value or profitability, promote good reputation, increases market share and sales, increases employees commitment, lower absenteeism and reduce costs such as energy costs when using sustainable energy and to uphold ethical standards in the firm. 5.0 Recommendations To ensure transparency in implementation of CSR besides preventing opposition from shareholders, firms should communicate their CSR plans honestly to their shareholders. Secondly, firms should mainstream the CSR policies in their corporate strategies particularly their portfolio decisions through replacing non-sustainable goods with more sustainable ones. For corporate social responsibility to yield the greatest effects, corporate leaders should tie it to the core policies of the firm and integrate it in their organisations’ culture. 6.0 Reference List Adidas Group 2014. Adidas Group present 2013 sustainability progress report-Fair play. 16 April 2014.Ethical Performance. Available from http://ethicalperformance.com/reports/view/931 [9 March 2015]. Fields, G 2012. Working hard, working poor: a global journey. UK: Oxford University Press. Gasper, J, Risa, A, Bierman, L, Hise, R & Kolari, J 2013. Introduction to global business: Understanding the international environment & global business functions. UK: Cengage Learning. Graafland, J & Corrie, M 2012,’ Motive of corporate social responsibility. De economist, Vol.160, no.4, pp.377-396 House of Commons 2012. HM revenue and customs: Annual report accounts 2011-2012, Nineteenth report of session 2012-2013, report, together with formal minutes, oral and written evidence. UK: The Stationary Office. Katamba, D 2012. Principles of corporate social responsibility (CSR): A companion for students and practicing manager in developing and emerging markets. UK: Strategic Book Publishing. Mullerat, R 2010. International corporate social responsibility: The role of Corporations in the Economic order of the 21st century. Netherlands: Kluwer Law International. Peng, M 2010. Global business. UK: Cengage learning. Ruth, W 2014. Empowering organisations through corporate social responsibility. UK: IGI Global. Shayon, S 2014. Apple redeems its public image with improvements in supply chain and sustainability. Brand Channel. Available from http://www.brandchannel.com/home/post/2014/02/14/140214-Apple-Supply-Chain-Report.aspx [ 9 March 2015]. Vijayara, A 2011. Starbucks most unethical coffee chain in the UK. 4 March 2014. Justmeans. Available from http://www.justmeans.com/blogs/starbucks-most-unethical-coffee-chain-in-the-uk [9 March 2015]. Weimar, I 2005. Corporate social responsibility: A Dutch approach. Netherlands: Uitigeverij Van Gorcum. Read More