KFC and CSR Issues - Case Study Example

KFC and CSR Issues KFC has faced a number of specific CSR issues in recent years, which are perhaps unavoidable consequences of the nature of its business. As a large chain of fast-food restaurants, of which about 80% are operated by franchisees or licensees (AOL Finance, 2009), KFC must address issues related to health, animal welfare, labour conditions and standards, environment concerns, and cultural considerations. Some of the specific CSR problems KFC has encountered include: Accusations of Labour Violations: In China, KFC (along with McDonald’s) has been accused of paying part-time workers less than the legally-required minimum hourly wage. (NEWSGD.com, 2007) A Lawsuit about Cooking Fat: In the US, KFC was sued by the Center for Science in the Public Interest, which accused the company of using cooking oil high in cholesterol-causing trans fat. The suit aimed to force KFC to either change the type of cooking oil used in its restaurants, or provide consumers with warning of the health risk of its products. (Business Respect, 2006) Accusations of Animal Cruelty: KFC has long been targeted by the People for the Ethical Treatment of Animals (PETA) for inhumane treatment of the millions of chickens that are supplied to the company’s restaurants each year. The PETA campaign against KFC is well-funded and well-organised, and has attracted the support of noted celebrities in the US and the UK. (O’Connor, 2008) Reviewing the information published by KFC and its parent company Yum Brands on their websites and a variety of news articles leads to the conclusion that KFC manages CSR in two ways. First, there is a basic CSR strategy that is reflected in the company’s normal operations. Second, there is specific action that is taken to address particular CSR problems such as the examples given above. From an operations perspective, the fundamental strategy is more important, and is designed as much as possible to anticipate problem issues that may arise. When special attention has to be paid to problem issues, the steps taken reflect the fundamental strategy although they are, obviously, not normally part of day-to-day activities. KFC’s CSR strategy focuses on four main areas (KFC.com, 2009): Scholarship Assistance: KFC operates a foundation to provide high school student-employees with financial assistance to attend college. (Kentucky Fried Chicken Foundation, 2009) Social Diversity: KFC has program to monitor and improve the racial and gender diversity of its workforce. Supplier Code of Conduct: KFC enforces a Supplier Code of Conduct developed by Yum Brands that obliges its US suppliers to abide by all applicable laws and regulations, fair labour practises, and to submit to periodic audits of their operations to ensure compliance. There is not a similar code mentioned for international suppliers, but all of KFC’s franchised or licensed operators in the US and elsewhere are held to similar standards as part of their operating agreement. (KFC.com, 2009) Animal Welfare Program: KFC maintains an extensive animal welfare program to ensure humane treatment of the chickens it uses; at least as far as is possible considering that the birds have to be killed to be useful. Separate sets of standards are detailed for the farms where the birds are produced and the processing operations where they are prepared. To oversee the program, KFC has formed an advisory council of six people not employed by the company, who review animal welfare issues and advise the executive management accordingly. The biggest problem in the CSR issues KFC has encountered are not necessarily the issues themselves – although the company generally does seem to regard them with due seriousness – but in the harm to the company’s public image the issues may cause. In the cases of the labour complaints in China and the lawsuit concerning the composition of the cooking oil in the US, KFC took both operational and public relations steps to resolve the problems successfully. The issue about animal welfare has proven more difficult to resolve, and is a continuing problem. In the China case, the area manager for KFC in the city of Guangdong, where the wage complaint was first made, quickly responded to the accusation by reiterating KFC’s commitment to observing the law. He pointed out, however, that the workers in question were not covered by the existing regulations on minimum wage. While that may have been true, it seems a poorly-chosen point to make publicly, and was in fact sharply criticised by the local prosecutor and the media. (NEWSGD.com, 2007) The situation was resolved when the prosecutor in the city of Shanghai found no violation of the law, and in addition, KFC announced that the company would permit employees in China to join the labour union. The entire situation points out the need for a consistent policy with regard to managers’ and employees’ making public statements about operational matters. The lawsuit over the cooking fat was handled much better than the problem in China. While fully defending itself in court against the lawsuit, KFC took steps to review its ingredients and remove any questionable products, and reiterated to the public its commitment to providing full nutritional information to any concerned customers. The lawsuit was dismissed by a judge, who found that even though some of the offending ‘trans fat’ oil might have been present, the plaintiff being represented by the Center for Science in the Public Interest could not show that he had actually been harmed by it. (Business Respect, 2006 & 2007) These two situations illustrate a good strategy for dealing with CSR issues. First, reassuring and consistent public information should be given. Second, operations should be reviewed to remove any legitimate problems that could cause a CSR issue, and prevent new problems from arising. KFC has employed both these strategies in facing the animal welfare issue. To ensure consistent, positive communication the company engaged a new public relations firm specifically to address the issue. (O’Connor, 2008) When animal-welfare problems in one of KFC’s suppliers were brought to the company’s attention, KFC acted quickly to correct the improper actions and prevailed upon the supplier to terminate the offending employees. (McNeil, 2004) Although the PETA organisation has maintained its campaign against KFC, the company’s strategy seems to be working; boycotts of the business called for by protestors have not materialised, and publicity about the issue has waned in the past couple years. References “KFC Colonel’s Scholars”. (2009) Kentucky Fried Chicken Foundation. . “KFC wins trans fat lawsuit”. (2007) Business Respect, 3 May 2007. . “McDonald’s, KFC allow unions in China”. (2007) MSNBC, 10 April 2007. . “McDonald’s, KFC under fire for labor rights violations”. (2007) Guangzhou, China: NEWSGD.com, 30 March 2007. . McNeil, Donald G., Jr. (2004) “KFC Supplier Accused of Animal Cruelty” The New York Times [Internet], 20 July 2004. . O’Connor, Clare. (2008) “FRONT PAGE: KFC bid to clean up image after high-profile attacks”. PRWeek, 19 June 2008. . “Social Responsibility”. (2009) KFC.com. . “US: KFC faces suit over cooking fats”. (2006) Business Respect, 15 June 2006. . “YUM BRANDS INC Profile”. (2009) AOL Finance. . Read More