A Correlation between the CSR Practices and Brand Value of Unilever - Case Study Example

Impact of CSR policies on the brand image of an organisation: a case study of Unilever Background of the study: In order to deal with the immense competition of the market, the companies have focused on innovative marketing policies. The marketing policies adapted by the firms have helped to attract more customers and increase the revenues. In this regards, Benezra (2006) mentioned that for maintaining sustainability, the organisations are required to achieve profits at a constant basis. On the other hand, for surviving in the hugely competitive market, maintaining a strong customer base has become a mandatory objective for the firms. Most of the firms fail to keep up the growth due to the inability of retaining the existing customers. In this context, Keller (2006) cited that preserving the existing customers plays a vital role in the success of any business. Moreover, for acquiring the new customers, the companies need to incur a huge amount of cost in the promotional activities. Thus, preparing the strategies for upholding the existing customers is an important concept of the business For reducing the switchover rate of the customers, the concept of brand image has evolved. Kotler and Lee (2005) identified brand image as an impression of the company among its potential customers. A good brand image of the company influences the purchasing behaviour of the customers. In addition, brand image or brand value of a firm creates a loyalty factor among the customers. As a result of that the customers like to stick on to a single company. Due to the brand image a company it can nullify the effect of price war of the market. Developing the brand value of an organisation is a slow growing process. It gradually develops and stimulates the perception of the customers. Therefore, the companies have been developing on the strategies that can improve the brand image. Profit maximisation was the sole goal for the companies over the last few decades. The companies have emphasised only on boosting up the net profits through offering products and services to the customers. However, with the changed of the business environment, the concept of profit maximisation has also modified. In this regards, Lai et al., (2010) cited the profit maximisation policies of the companies as the short term goals of the firms. In order to improve the brand image the firms have decided to participate in the Corporate Social Responsibility (CSR). The concept of CSR has indicated that apart from making profits, the firms can also view the business from a broader perspective. CSR has guided the firms to contribute a certain portion of the profits for the welfare of the society. Moreover, CSR also ensures that a company can maintain its business without hampering the balances of the society. The sustainable business policies have also been considered as part of CSR practices of the company. With active CSR policies, the companies have been able to improve its brand image. A survey conducted by the Cone communication has revealed that almost 75% of the customers prefer to buy products and services from a company that participates in the CSR activities. Moreover, active participation in the CSR activities has also improved the image of the company to the Government. In other words, it can be inferred that CSR practices of an organisation have a significant impact on its stakeholders. In the early 90’s the CSR practices has been performed by the companies with compulsion from the Government. Gradually, the firms have started to realise the impact of CSR activities on the brand image and business performance of the company. CSR incurs a certain amount cost from the point of view of the companies. Moreover, for the active participation of the CSR, the companies are also required to manpower. Thus, it is important for the companies to determine the impact of the CSR activities on its brand image and business performance. In the context of the current business environment, investment in the CSR has become an integral part of the organisation. Thus, based on the situation of the market place, the topic related to the assessment of the effectiveness of CSR policies and practices is a relevant one to be studied. For the purpose of the study, the case of Unilever will be taken. Unilever is one of the most renowned global companies from the consumer goods domain. The brand has its presence in more than 190 countries (Unilever, 2015). Over 400 brands are owned by Unilever and it is headquartered in Rotterdam. The brand has focused on CSR activities and designed the business policies in such a manner that encourages sustainable business practices. In the current study, the impact of the CSR policies adapted by Unilever will be investigated. The main aim of the study will be to draw a correlation between the CSR practices and brand value of an organisation. Research objectives: Based on the above discussion, the objectives of the research have been selected as: To find out the factors that can improve the brand value of an organisation. To understand the impact of CSR policies on brand image of the companies. To evaluate the current CSR practices of Unilever and its impact on the companies’ image. To recommend suitable strategies for improving the current CSR practices of the companies. Research questions: The following research questions have been set for the proposed research: What are the factors that can improve the brand image of a company? How does the CSR policies of an organisation influence brand value of an organisation? How does Unilever contribute in the CSR activities? How do the current CSR practices of Unilever help the company to improve its brand image? How can Unilever improve its CSR policies? Literature review: In this portion of the study, the theories and concepts regarding the brand image and CSR policies have been discussed. The relation between the brand image and CSR activities have been shown with the arguments of the authors. It can be stated that the literature review enables the researcher to guide the research in a proper way. Moreover, the selection of data collection method can also be determined by reviewing the literature on the concerned topic. In the literature review portion, the current CSR policies of Unilever have also been evaluated. Brand image and its impact: Brand image is the perception of the customers regarding a particular company. As mentioned by Lai, Griffin and Babin (2009), brand image is the process that builds with the values offered by the companies through its products and services. A good brand image enables a company to achieve huge responses from the customers. On the other hand, due to poor brand image the companies lose the trust of the potential customers. A company can build its brand image primarily by offering the best quality of products and services. Companies like Apple Inc. have created a brand image by providing the most innovative products to the customers at a constant basis. On the other hand, some companies like Costco have created a brand image by providing the quality products in the most reasonable prices. Although, brand image is a long lasting aspect associated with the companies, any deviation from the set standards can affect the brand image. In this regards, Levy (2009) mentioned that retaining the brand image of a company can be considered as the most difficult tasks for the managers. The impact of the brand image on the business performance of an organisation is discussed as under: Competitive advantage: A sound brand image improves the acceptability of the company to the customers. Petrick and Quinn (2001) mentioned that brand image increases the awareness of the company among the potential customer base. Thus, it can be inferred that with the sound brand image the companies can enjoy a competitive image over the rival companies. Supporting this concept, Porter and Kramer (2002) mentioned that brand image enables the firms to cancel out the effect of the competition. A good reputation of the companies helps to neglect the impact of price war among the peer companies of the same industry. Increases sales figure: Brand image of a company is directly related to the revenue. Most of the consumers prefer to buy the products from a transparent brand (Raman, Lim and Nair, 2012). Brand image of the company helps to reduce the cost of promotion. The word of mouth effect ensures that the information of the products and services of the company’s reaches to the consumers effectively. Retaining the customers: Brand image enables the company to retain the existing customers for linger tenure. As mentioned by Turker (2009), cost of retaining the existing customers is lower compared to acquire new customers. With the help of sound brand image, the companies can create brand loyalty among the customers. Therefore, the chances of switchover to the other brand reduce. The concept of CSR: CSR is an approach followed by the companies for contributing towards the society. As, the companies take huge amount of resources from the society, the companies also feel to return it back to the society. However, the concepts of CSR have become popular from the late 1990. Before that period, the companies were more focused on maximising profits. According to Valor (2005), the concept of CSR and profits may contradict with each others. Earlier 1990, CSR has only been limited to a target that is required to be fulfilled as prescribed by the Government. However, in recent days, CSR has been seen as a compulsory task needs to be performed by the companies. CSR can be performed by donating funds for the welfare of the society. In addition, the sustainable business practices of the companies can also be considered as a part of CSR. On the other hand, Wu (2011) mentioned CSR as a process for maximising the benefits for the stakeholders. The most popular model of CSR has been proposed by Carroll. The model has been discussed as follows: Carroll’s model of CSR: According to the Carroll’s CSR pyramid a business needs to be conducted in such a manner that is economically profitable, maintain all the legal parameters, ethical and socially supportive. Thus, based on this model the main facets of CSR have been derived as Economic, legal, ethical and philanthropic. Economic responsibility: According to the Carroll’s model, the economic responsibility of a firm is to conduct the business processes in such a manner that can bring sufficient profits for the firms. Thus, it can be inferred that the by accomplishing the economic responsibility, a company can provide significant return to its shareholders. In order to achieve the economic goals, the companies focus on innovating the products and services at a constant basis. It enables the firms to cater the demand of the customers in the best possible way and ensure high profits. Moreover, the companies also provide job opportunities for the young people of the society and help the economic growth of the society. Legal responsibility: The legal responsibility of the companies include that the business operates in such a process that maintain all the legal parameters. In this context, Levy (2009) identified that by obeying the legal norms as prescribed by the Government, the companies can earn trust of the customers and the investors. However, in most of the cases, maintaining the legal parameters and at the same time achieving profits may not be a feasible one for the business. On the other hand, by not obeying the legal norms, the companies may face a huge penalty. For example, Microsoft, a software giant of USA, has faced anti-trust case for conducting monopolistic competition and creating disadvantage to the competitors. The case has incurred a huge amount of money for settlement purpose. Ethical responsibility: Apart from the legal and economical issues, the model has stressed on maintaining the ethical parameters. It includes managing waste products, recycling the process and reducing the consumption of the natural resources. In most of the cases, the local or central Government regulates such issues. However, in some cases, the companies conduct such practices voluntarily to create an impact on the stakeholders. On the other hand, ethical business practices of the organisation also represent on providing full information to the customers through the advertisements. Ethical responsibility of the companies also monitor on investigating the treatment of the employees and offering right wages. Maintaining the safety parameters of the employees can also be included in the ethical responsibility of the companies. Philanthropic responsibility: Carroll’s model also considers philanthropic responsibilities of the companies. As mentioned by Levy (2009) philanthropic responsibility of the companies promotes the welfare activities that can be done for the stakeholders. By donating funds in the charitable purposes, the companies can fulfil its philanthropic obligations. For an example, Xerox has conducted a program that encourages its employees to contribute funds for higher education. PepsiCo has invested over $2 million in the World Food Program USA to increase the awareness of providing foods to the vulnerable communities. Impact of CSR on brand value of an organisation: In present times CSR has been considered as the process of recuperating the business performance of the company by improving the brand image. As stated by Petrick and Quinn (2001), the CSR policies of the organisations help to provide profits on the long term basis. The impact of CSR policies on the brand image and business performance of an organisation have been mentioned as follows: Relationship with the Government: CSR practices of the organisations enable to maintain a sound relationship with the Government. By conducting the business in a transparent way, the companies can claim appreciation from the Government. Moreover, in most of the cases, the companies conduct the social programs with the association of the Government. Conducting programs such as blood donation camp serves a good purpose for the welfare of the society. Due to the other obligations and funding problems, the companies may not be able to conduct programs for the society. Thus, it can be assumed that the CSR activities of the organisation ensure sound bonding with the Government and improve the brand value of the organisation. Increased media attention: Participating in the CSR activities allows the companies to draw a higher media attention. According to Wu (2011), in order to improve the business performance, the companies are required to increase brand awareness.CSR activities of the organisations are highlighted in the media pages. As a result of that the customers become aware about the activities of the firms. In most of the cases, the products, services and activities of the organisations get unnoticed by the customers due to the lack of exposure. Therefore, it reduces the revenues of the companies. In order to deal with such situation, the companies incur huge amount of costs as in the promotional activities. On the other hand, active participation in the CSR helps the firms to get the media coverage without additional costs. It improves brand image of the company and returns back as the form of higher profits. Increased transparency: CSR activities of the company enable the firms to improve transparency among the customers. In this context, Levy (2009) cited that the purchasing behaviour of the customers influences by the CSR activities. Most of the customers want to make relationship with the brands that contribute to the society. Thus, it can be assumed that the CSR activities of the company have a direct impact on improving the sales figure. As present the consumers have started to measure the performance of the brands in terms of its social obligation and products and services. For example, the companies like Infosys or Tata group have cratered a brand recognition for the continuous involvement in the CSR programs. Motivation for the employees: CSR activities of the organisation help the firms to create a motivation factor among the employees. Valor (2005) mentioned that most of the staff like to be associated with the brands that fulfils social responsibilities through CSR. It improves the performance level of the staff and also reduces the employee turnover rate. Retaining brand image: CSR activities also help the companies to retain the brand image. Due to the issues related to the products and services, the companies may loss its brand image. However, in most of the cases, the companies have been able to retain its image through the CSR activities. In this regards, the example of BP Plc. can be considered. After the oil spill incident, a negative impact was created about the company. However, with the initiatives of the recovery programs and concentration on balancing the ecological parameters, the company has been able to regain its brand image. Similarly, the initiatives of Wal-Mart in the CSR activities have helped the brand to cope up with the issues such as low wages of the employees. Challenges of the CSR: The companies face severe problems in implementing the CSR activities. The challenges faced by the organisations at the time of incorporating the CSR activities have been discussed as under: Too much focus on short term goals: The companies provide too much concentration on maximising profitability for the short term basis. It narrows down the vision of the companies. In this context, Wu (2011) mentioned that lack of long term prospective of the companies is the biggest challenges in CSR performance. Immense competition of the market does not allow the managers to think the broader aspect of the business. Thus, in most of the firms, CSR remains as the voluntary jobs rather than proactive initiatives. Moreover, the companies only perform CSR due the compulsion from the Government. Lack of awareness: The limited awareness about CSR also prevents the companies to show interest in the CSR. Most of the companies are not aware about the impact of CSR on the business performance. In addition, CSR activity of the companies are only limited in the HR department. The lack of involvement of all the employees also protects the firm to participate actively in the CSR programs. Improper strategy: The CSR activities of the firms cannot get the desired result due to the improper strategy. Levy (2009) mentioned that most of the companies fail to participate in the CSR due to the lack of funds. The managers cannot implement the proper strategy that can maintain the profitability and CSR activity at the same time. Moreover, due to the lack of proper planning, sometimes the allocated funds for CSR cannot be used in a proper way. Current CSR initiatives of Unilever and its impact: Unilever is the one of the most popular brand in the FMCG sector. The brand has expanded its operation in almost 100 countries and generates sales of €56.5 billion in 2014 (Csrwire, 2015). The brand has provided immense focus on offering the best quality of the products and services to its customers. The primary aim of the company is to maximise the profitability and operating the business in such a manner that causes the least amount of impact on the environment. Therefore, the brand has intended to procure minimum amount of resources during the manufacturing process. Sustainable living is the main goal of the company over the years. The brand is committed on improving the health of the consumers and increasing the awareness of the consumers regarding the nutrition and hygiene related issues (Unilever global company website, 2015). Moreover, the company has initiated programs to help 1 billion people by taking proper action in terms of the health and well being by the year 2020. In order to implement the CSR activities in a systematic way, Unilever has prepared sustainable living plan and 50 other time-based programs. Unilever has identified three major areas that need to be improved through its sustainable business programs such as deforestation, sustainable agriculture and sanitation. In order to stop the climate change, Unilever has concentrated on eliminating the deforestation. On the other hand, to improve the livelihoods of the farmers, the company has focused on increasing the food yields. Unilever has discovered that in the rural areas, people suffer from the health issues due to the improper drinking water and unhygienic sanitation. Therefore, the company has initiated to arrange the safe drinking water and sanitation for the rural areas in the countries in which it operates. During the launch of the Lifebuoy hand wash program, the company offered free products to the school children for increasing the awareness among the children regarding hygienic issue. The initiatives of the brand have provided huge impact on the mind of the customers. It has improved the brand value of the company. Thus, the practice of the company has hugely influenced the customers to purchase the products of Unilever. Moreover, the CSR practices of the company have also influenced the investment decision of the company. The CSR practices of the company have hugely been recognised by the concerned authority. For example, Unilever has topped in the Sustainability World Indexes for the last 14 consecutive years. The recognitions have improved the brand image of the company and also increased the sales figure. Recommendations to improve the current CSR policies of the companies: The following strategies can be incorporated by the firms for improving the CSR performance: A proper strategy: In order to perform the CSR activities in a significant way, the companies are required to develop a proper CSR strategy. Supporting the fact, Wu (2011) mentioned that a synchronised approach in CSR enables the firm to accomplish the CSR goals effectively. Making profits and meeting the CSR targets can be difficult options for the managers. Thus, the companies are required to allocate funds for the CSR in the budgets. A certain percentage of the retained earnings can be donated for the CSR purposes. Moreover, the companies can allocate funds separately based on the different domain of participation in CSR. Increasing awareness: In order to achieve a satisfactory CSR performance, the managers of the companies are required to involve the maximum number of staff in the CSR activities. In this context, Valor (2005) mentioned that most of the CSR initiatives of the companies fail to attain the desired result due to the lack of awareness among the employees. Therefore, the managers are required to explain the concepts of CSR and its impact on the society and business to the employees. It may help the employees to get interest in the CSR activities. The organisations can also conduct the CSR program in an effective way. The consequences of climate change or deforestation can also persuade the employees in the sustainable business practices. Partnering with the NGOs: For conducting the CSR activities effectively, the companies can make partnerships with the local NGOs. As, the NGOs are associated with the welfare activities, the companies can donate funds in the NGOs and also collectively work with the NGOs for directing CSR activities in a right direction. Monitoring the CSR activities: The managers are required to evaluate the CSR activities of the firms at a regular basis. Due to the lack of monitoring, the funds allocated for the CSR activities may be misused. Based on the evaluation a detailed CSR report can be published by the managers. The report can be assessed by the board of directors who decide the policies regarding CSR. Research Methodology: For conducting the research in a proper way, the researcher needs to select proper methods. Brannen (2009) mentioned that for meeting the objectives of the research, the selecting right methodology is important. Research methodology reduces the gap between the research objectives and data analysis planning. Types of investigation: The methodology of the research can be selected based on the two major aspects: tactical and application. Tactical part of the research helps the researcher to select the research paradigms. On the other hand, the application part of the research deals with the sampling methods. In the current research, the researcher will select positivism philosophy, deductive approach and descriptive research design. In the research, both the primary and secondary data will be analysed. At the time of assessing the primary data, the researcher will conduct both quantitative and qualitative analysis. Research philosophy: Research design: Research approach: Data collection method: Sampling methods: Ethical issues: Ethical issues deal with the acceptable and non acceptable matters in a study. In order to ensure ethical issues in the current research, the researcher will present the data without any manipulation. The researcher will not force any respondents to provide comment. The respondents will not be asked any personal questions such as question related to the caste, religion or gender. The information provided by the respondents will not be shared and will be used only for the purpose of the current research. The researcher will take prior information from the managers for taking the interview. Time table and resource allocation: Reference List: Benezra, K., 2006 .Cause and effects marketing. Brandweek, 37(22), pp. 38-41. Keller, K. L., 2006. Conceptualizing, Measuring, and Managing Customer-Based Brand Equity. Journal of Marketing, 57, pp. 1-22. Kotler, P. and Lee, N., 2005. Corporate Social Responsibility: Doing the Most Good for Your Company and Your Cause, New Jersey: John Wiley & Sons. Lai, C.S., Chiu, C. J., Yang, C. F., and Pai, D. C., 2010. The Effect of Corporate Social Responsibility on brand Performance. Journal of Business Ethics, 95, pp. 457- 469. Lai, F., Griffin, M., and Babin, B. J., 2009. 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