Corporate Social Responsibility - Essay Example

Corporate Social Responsibility By: Presented of Submission] Corporate Social Responsibility The rise of the era of environmental and human rights awareness and anti-corporate activism brought about a shift in business attitudes. Major international boycotts of companies such as Barclays Bank and Nestle in the 70s and 80s essentially gave birth to CSR. Companies that were pure capitalists began exploring social and environmental issues and how to remedy the very commercialism approach to running a business (Ethical Consumer, 2007). What is CSR? CSR stands for corporate social responsibility and construes the principle that companies should make a beneficial contribution to society. It implies the engagement of companies in the management of its social, environmental and economic repercussions, acknowledging stakeholders by being respondent and complying with a set of moral and ethical values (as opposed to law). Examples of CSR can be donations to charity, environmental clean-ups and reductions in chemical emissions among others (Ethical Consumer, 2007). CONSULTANCY ADVICE Being a consultant of the multinational company, Unilever, I would start by showing the general gains from CSR and presenting a couple examples of renowned companies working for society and gaining its benefits. Why engage in CSR? Companies do so because engaging in social activities boosts profit margins by benefiting their corporate reputation, goodwill and staff and consumer loyalty (Ethical Consumer, 2007). Evolution of corporate responsibility continues as consumers are becoming more and more interested in what the companies do as a service to humanity and the planet besides the products and services offered (Nielsen, 2013). Today, what the company stands for as a corporate body is of more importance than what it produces or sells. A research conducted by a New York based private global consulting firm, Reputation Institute, proved the willingness of consumers to opt for companies as regard to their perceptions of the company by 60% and only 40% by their perceptions of its products. Kasper Ulf Nielsen, Reputation Institute’s executive partner, says, “CSR speaks to who the company is, what it believes in and how it is doing business. Companies that are able to get recognition for the softer sides of their business are on the right path to building a sustainable business for the future.” (Smith, 2012). Examples of Successful CSR. According to a recent study, the Washington-based giant, Microsoft, beats all other companies and lands as the no. 1 company with the best CSR reputation. The effects of their continuous efforts to improve society are paying off. As of 2012, the company’s revenue was reported to increase by $3.76 billion from the previous year. According to Microsoft’s Senior Director of Citizenship and Public Affairs, Dan Bross, this growth is definitely a resultant of multiple factors, but the underlying factor is that consumers tend to engage with those companies that they respect and trust. Microsoft gained this trust by its CSR efforts which has in turn contributed to its success (Smith, 2012). Another example is of a firm that was responsible long before CSR ever became fashionable. The reputable business, known for its anti-animal testing, The Body Shop, was one of the first companies to publish a full CSR report. It has been practicing fair trade for over 20 years. The results? They have bred a loyal customer base for themselves. Secondly, in accordance with their CSR goals, showing a softer, human side to consumers can never harm sales (Fenn, 2013). Haagen-Dazs, producer and leader of all-natural ice cream, runs an awareness campaign and donates to protect the lowering number of honeybees. This is beneficial for them. Firstly, they require honey. Secondly, they inspire consumers and gain sales. Consumers are willing to pay more for products linked with CSR (Fenn, 2013). About Unilever. A renowned multinational giant with sales in over 190 countries, Unilever is one of the world leaders in supplies of products related to food, home and personal care. With annual sales being €49.8 billion in 2013, the company works with 174,000 global colleagues. The company held 57% in 2013 in fast growing, developing and emerging markets. They claim to work towards a better future by ‘helping people feel good, look good and get more out of life’. A chunk of the world’s best known household names are included in Unilever’s portfolio as their brands. They include Knorr, Dove, Sunsilk, Hellmann’s, Lipton, Lux, and Magnum amongst plenty others (Unilever, 2015). CSR Policy and Principles. To double the size of business whilst reducing overall footprint on the environment and increasing the spread of positivity through their operations and products is the ambition of Unilever. The company claims to be working on the basis of their nine defined pillars derived by targets enclosing social, environmental and economic areas (Unilever, 2015). CSR Plan. The CSR or sustainability plan of Unilever, known as the Sustainable Living Plan revolves around the concept of bringing improvements to consumer life quality and yet maintaining environmental stability. Unilever’s sustainable living plan is to inspire people worldwide in taking small actions that would add up to make a big difference in the world we live in (Unilever, 2015). Corporate Purpose. "To succeed requires the highest standards of corporate behavior towards our employees, consumers and the societies and world in which we live." –Unilever’s Corporate Purpose (Unilever, 2015). This is the creation of long-term value and sustainable growth. The Corporate Purpose is established on the company’s Code of Business Principles (Unilever, 2015). Code of Business Principles. The Multinational operates on a Code of Business Principles that provides internal as well as external guidance on conduct. It promotes honesty, integrity, openness and compliance with laws of the various countries the giant operates in with respect to protecting the human rights and interests of employees and other stakeholders (Unilever, 2015) Recognition for CSR activities. Recognized for 14 consecutive years in Dow Jones Sustainability World Indexes, included in the FTSE4Good Index Series and FTSE4Good Environmental Leaders Europe 40 Index, being named sector leader for three consecutive years of CDP’s Forest program and leading the list of Global Corporate Sustainability Leaders for three years now, Unilever has been known to be working hard for the benefits of the society at large. In addition, in 2013, the company was LinkedIn’s third most sought after employer worldwide (CSR Wire, 2014). CSR in Unilever. Unilever focuses to create a positive effect on the society through its brands, operations and commercial relationships. It seeks to bring about a change through its continuous community efforts. Its long-term goal of developing a sustainable business is worked towards by improvements in the management of the company’s impacts on environment. (Unilever, 2015) Among an extensive variety of socially responsible activities and beliefs, Unilever believes in resolving the issue of food security and has been actively participating to contribute towards the cause. Unilever’s activities based on this include their CEO Paul Polman attending the G20 Heads of State and Government business meeting (Unilever, 2015) Unilever has not just been upholding the philanthropic ways of doing business to create a bigger and respectable image for themselves. Their sustainability plans have actually increased their profits and growth. It satisfies the concept that doing well generally is good for business. However, how has the multinational giant achieved this growth? They have saved money by being responsible (packaging, energy consumption controls, etc.), have gained consumers through doing this and continue to inspire people by their actions (Fenn, 2013). CRITICAL DISCUSSION ON CSR POLICY Unilever did not see the short-term when investing in their sustainability plans. They saw the bigger picture and are now working towards achieving it year by year. The CEO explains that Unilever will continue to focus on making fundamental changes and step up their roles as benefactors to the society in order to combat major global challenges (CSR Wire, 2014). Changes brought about by the actions of Unilever following its CSR policy are as follows: Deodorant producing brands under Unilever saved 25% CO2 per can and 40% female deodorants sold in the UK are now compressed. A campaign by Lifebuoy helped encourage children to wash their hands long enough till the color of the soap bar changes, to protect them from germs. Cholesterol lowering activities taken place in villages successfully where 89% out of the 500 people who took the challenge lowered their cholesterol. These are behavioral changes brought about by the company which not only lead to a better and safer environment but also shapes better lives of its consumers in the long-run (CSR Wire, 2014). Apart from the positive effects on the environment and the profit margin growth of Unilever as a resultant of acting responsibly towards the society, there are certain accusations that it has to face. The concept of greenwashing has changed the once ‘all positive’ view of consumers and the public in general. Unilever claims to work towards a better future by ‘helping people feel good, look good and get more out of life’. This is a vexed statement which implies two problems. Firstly, it can raise controversial comments on the view of feeling good and leading a better life ‘by looking good’. Second, it is imprecise and untraceable. Another claim is to be working on the basis of nine defined pillars derived by targets enclosing social, environmental and economic areas. These pillars are very much undefined. This claim, too, is vague. Ambiguity is what gives birth to doubt and accusations of a possible greenwash. What is Greenwashing and its effects? Greenwashing is misleading consumers of the company’s environmental practices or benefits of their products or services regarding the environment (Sins of Greenwashing, 2013). Businesses exaggerate their claims of working environmentally friendly to make their company seen as part of the ‘green’ movement when in reality, they do not do much (Andrew, 2011). This condition, the lack of honesty and transparency on the business’ part has led to the rising concerns of consumers. Greenwashing has made consumers and investors lose confidence in firms, even though they produce green products and are environmentally responsible. The risk and possibility of greenwashing is what compels worried consumers to demand high transparency (The Huffington Post, 2014). Consumers now are no longer falling for greenwashing. If they feel misled, the companies will see quite a negative effect coming their way (Andrew, 2011). Increased awareness has made consumers well acquainted with the tricks and cleverness of firms in hiding behind false claims of going green. Also, encouragements from media to voice problems spreads negative comments in a flash. Lost reputation leads to lost consumers and in turn, a major financial loss to firms. Also, the ever growing market in terms of availability of similar products by competitor firms gives a greater chance of consumers switching firms and brands. Negative reactions seen by Unilever. After the scandal of Enron, investors are becoming more mobilized and demand transparency in every aspect. Also, they require strong corporate governance and ethics. Health awareness today is like never before. People constantly worry about their health and the environment, which drives them to protest where they see something wrong (Kliksberg, 2007). Social media encourages people to raise their voice. Amongst a sea of appreciation, such a voice was constantly raised against Unilever on the case of palm oil. Unilever is a major buyer of palm oil for numerous uses in its enormous range of products, ranging from margarine, ice cream, soaps and shampoos. Around 1.5 million tons of palm oil is purchased annually, making up 3% of the world’s population (CSR Wire, 2014). In order to extract palm oil, and of that amount, imagine the vast forests that are cut out for Unilever specifically. In Southeast Asia, the company supported the destruction of rainforests. As a result, orangutans kept dying in the name of palm oil’s sustainability for Unilever. With today’s insane network of news and awareness chain, Unilever cannot hide behind doors of green washing (SumOfUs, 2015). From protector to a violator of animal and forest protection- that is how fast consumer perceptions change as an effect of mistakes done by companies. It took Unilever a considerable amount of time to regain trust of its consumers by reacting to the above accusations. Part of the Tropical Forest Alliance, Unilever proclaimed that by the end of 2014, all its palm oil will be traceable to known origins (CSR Wire, 2014). Project Sunlight, a new campaign run by Unilever, has seen mainly negative results. It is astutely vague. Like all similar adverts, it does no more than arouse sentiments. A digital strategist and professor of social media, Rachael Post, told the Guardian, “The Project Sunlight video reminded me of conversations with industry friends about favorite ways to increase TV ratings. Put a pregnant woman and her unborn child in danger, and ratings rise. Viewers want to see what happens–it’s a primordial event.” (Pelley, 2013). Suggestions. Given the above scenarios, my suggestion to Unilever would be to continue to reply back severely to negative accusations (deserving or otherwise) to remedy the image of the company as a whole. I would never suggest that Unilever gives up on even a part of CSR. The benefits the firm achieves will be more worthy than the negativity faced. I am certainly not saying the firm should stop caring. That would ruin the image even more. Unilever ought to remedy lost reputation and work harder to win the hearts of consumers. It should, however, pay more attention to not release ambiguous statements that would give an impression of greenwashing. The benefits of CSR are too many to be given up. It is a way to benefit the company as well as the society. In my view, what a professional such as Unilever should do when faced with varied responses from consumers is to embrace corporate social responsibility even more. A couple reasons are: Innovation. Unilever used the ‘lens of sustainability’ to bring forth new products such as a hair conditioner that consumes less water. Without CSR beliefs, this would never have been possible (Epstein-Reeves, 2012). Cost savings. Packaging and less energy consumption leads to reduced cost. Win-win (Epstein-Reeves, 2012). Long-term benefits. Companies focus on the impact of their decisions on financial as well as social results down a decade (Epstein-Reeves, 2012). Differentiation. By default, a company practicing CSR is differentiated. Although, neither company (responsible or not) will be able to see major differentiation, diminishing returns on brand differentiation suggests that CSR is more than just a fad (Epstein-Reeves, 2012). Unilever itself has witnessed these effects. Paul Polman, CEO, believes that, “…businesses that address both the direct concerns of citizens and the needs of the environment will prosper over the long term.” (Roth, 2013). His stance lies justified as the stock price of Unilever has seen growth of approximately $20 per share since his role inducted in 2009. Unilever is gaining market growth and increased profits, which can be predicted to go on in the long-term (Roth, 2013). Forgiveness. Consumers react harshly towards a firm falling short on expectations. They spread negativity, switch companies and in severe cases, are ready to boycott the firm altogether. But recent studies show that the level of forgiveness from consumers increases if a company happens to be a donator of their favorite charity. Authors Jeff Joireman (Washington State University), Dustin Smith (Webster University), Richie Liu (Washington State University) and Jonathan Arthurs (Oregon State University) write, "When firms support good causes, they accrue moral capital and a reservoir of goodwill. This leads consumers to resist negative information regarding a firm. Offering customers a choice of their favorite good cause is a true win-win-win solution to the inevitable service failure." They conclude, "Customers win, firms win, and society as a whole wins." (Science Daily, 2015). Unilever call themselves a purpose-driven company and state that their purpose today is to create sustainable living a run-of-the-mill. They state that they cannot close their eyes on the innumerable problems the world is having to face today. The challenge faced is that, despite their purpose and vision being underpinned by CSR, they are a firm that is widespread beyond words. Majority of the effects of the entity’s operations fall out of the boundary of direct control. Unilever, thus, engages with governments to help create an environment that contributes towards counteracting the sustainability challenges faced globally (Unilever, 2015). The company saw a 5% rise in environmental impact during the last four years, the reason being the acquisition of new brands. This leads to an increased emissions per consumer. "Two thirds of our value chain GHG impacts are in consumer use, primarily heated water for showering and bathing, which is more difficult for us to influence," a report states. "External factors such as decarbonizing energy grids and effective carbon pricing will play a critical role in reducing GHG emissions, as well as product innovation and consumer behavior change." (Shankleman, 2014). But despite this, Unilever continues to make an effort to reduce carbon emissions and is applauded by green groups as well as its consumers for it (Shankleman, 2014). CONCLUSION Businesses practicing CSR gain more. They allure talent, have increased productivity and are reputable in the economy by being competitive as well as economically sound. Pearlstein (The Washington Post) says it perfectly, “The real choice of the corporate elite is clear, not only in the United States but also in Europe, Japan, and Latin America. The members of the business community that produce an improved social contract are those that are able to manage competitive businesses while at the same time guaranteeing that the profits of globalization are going to be distributed more equally, or they will have to face the almost certain possibility that angry voters could be eager to reverse globalization.” (Kliksberg, 2007). This sums it up. Mobilization of investors, small or institutional, has put companies under pressure to report with high levels of transparency and work with integrity. Despite all the positive aspects of CSR, practicing companies face criticism due to greenwashing. How well they tackle such accusations determines their power, image and success. Sustainable companies- those practicing and playing a part in socially responsible activities, gain more market share and see better growth. They create a soft spot in the hearts of consumers who have a care in the world, the number of which are enormously increasing every day. This kind of growth is comparatively stable and is long-term. Companies do not seek to gain short-term benefits, but invest today to see a better tomorrow, in their business as well as in the world. Reference list Andrew, I. (2011). New CSR Study Shows Greenwashing Doesn’t Work, Fake Green Business Doesnt Prosper – Greener Ideal. [online] Greener Ideal. Available at: http://www.greenerideal.com/business/8709-new-csr-study-shows-greenwashing-doesnt-work-fake-green-business-doesnt-prosper/ [Accessed 2 Mar. 2015]. CSR Wire, (2014). Unilever Expands Sustainable Living Ambition – Press Releases on CSRwire.com. [online] Available at: http://www.csrwire.com/press_releases/36990-Unilever-Expands-Sustainable-Living-Ambition [Accessed 3 Mar. 2015]. Epstein-Reeves, J. (2012). Six Reasons Companies Should Embrace CSR. [online] Forbes. Available at: http://www.forbes.com/sites/csr/2012/02/21/six-reasons-companies-should-embrace-csr/ [Accessed 3 Mar. 2015]. Ethical Consumer, (2007). Corporate Social Responsibility: more than greenwash?. [online] Available at: http://www.ethicalconsumer.org/commentanalysis/factsvgreenwash/corporatesocialresponsibility.aspx [Accessed 2 Mar. 2015]. Fenn, R. (2013). Benefits of Corporate Social Responsibility - Sustainable Business Toolkit. [online] Sustainable Business Toolkit. Available at: http://www.sustainablebusinesstoolkit.com/benefits-of-corporate-social-responsibility/ [Accessed 2 Mar. 2015]. Kliksberg, B. (2007). Safe Democracy Foundation » Blog Archive » From Philanthrophy to Corporate Social Responsibility. [online] English.safe-democracy.org. Available at: http://english.safe-democracy.org/2007/12/28/from-philanthrophy-to-corporate-social-responsibility/#sthash.8NP1mRe3.dpuf [Accessed 3 Mar. 2015]. Nielsen, (2013). Do Consumers Care About Social Impact?. [online] Available at: http://www.nielsen.com/us/en/insights/news/2013/do-consumers-care-about-social-impact-.html [Accessed 1 Mar. 2015]. Pelley, V. (2013). The Sun Shines Out of Our Behinds – Unilevers Project Sunlight Greenwashing Campaign - The Daily Banter. [online] The Daily Banter. Available at: http://thedailybanter.com/2013/11/the-sun-shines-out-of-our-behinds-unilevers-project-sunlight-greenwashing-campaign/ [Accessed 3 Mar. 2015]. Roth, B. (2013). How Sustainability is Growing Unilever’s Brand Equity and Profits. [online] Triple Pundit: People, Planet, Profit. Available at: http://www.triplepundit.com/2013/09/sustainability-growing-unilevers-brand-equity-profits/ [Accessed 2 Mar. 2015]. Science Daily, (2015). Does corporate social responsibility reduce negative reviews for bad service?. [online] Available at: http://www.sciencedaily.com/releases/2015/01/150121114703.htm [Accessed 3 Mar. 2015]. Shankleman, J. (2014). Unilever struggles to sell customers on Sustainable Living. [online] GreenBiz. Available at: http://www.greenbiz.com/blog/2014/04/29/unilever-struggles-sell-customers-sustainable-living [Accessed 3 Mar. 2015]. Sins of Greenwashing, (2013). The Sins of Greenwashing: Home and Family Edition. [online] Available at: http://sinsofgreenwashing.com/ [Accessed 1 Mar. 2015]. Smith, J. (2012). The Companies With the Best CSR Reputations. [online] Forbes. Available at: http://www.forbes.com/sites/jacquelynsmith/2012/12/10/the-companies-with-the-best-csr-reputations/ [Accessed 1 Mar. 2015]. SumOfUs, (2015). This company wants to call killing orangutans "sustainable".. [online] Available at: http://action.sumofus.org/a/unilever-palm-oil/ [Accessed 3 Mar. 2015]. The Huffington Post, (2014). Corporate Responsibility or "Greenwashing"?. [online] Available at: http://www.huffingtonpost.com/ucla-inst-of-the-environment-and-sustainability/corporate-responsibility_b_4881590.html [Accessed 2 Mar. 2015]. Unilever, (2015). Purpose & principles | Investor centre | Unilever Global. [online] Available at: http://www.unilever.com/investorrelations/understanding_unilever/purposeandprinciples/ [Accessed 2 Mar. 2015]. Unilever, (2015). Understanding Unilever | Investor centre | Unilever Global. [online] Available at: http://www.unilever.com/investorrelations/understanding_unilever/ [Accessed 2 Mar. 2015]. Read More