Corporate Social Responsibility Theories - Case Study Example

Case Study Name of Professor: Name of Course: Code of the Course: Date of Submission: Case Study 1.0 Introduction Just as the way life is not a straight path, so is the running of an organizations. With every day dawn, mishaps are due to occur which may be resulting from forces acting from either the internal or external of an organization. The impacts of the mishaps on the organization vary according to their magnitude. When the degree is high, it leads to the creation of a critical incident; one that affects heavily on the daily routine of an organization, creates uncertainty and it may trigger an institutional redefinition or transformation. The following case study gives an insight into the ‘Tesco Horse Meat’ scandal from the perception of a critical incident. 2.0 Company Background: Tesco PLC Tesco is one of the largest retailers in the world. Tesco started its operation is 1919 as a collection of market stalls; an idea which was brought up by its founder Jack Cohen. Over time, the company has grown from just a market stall, to a multibillion company with 15 business prospect in UK where its headquarters are situated and internationally. As at now, the company has business prospects in 12 countries around the globe (Tesco PLC 2013, p.1). The company has an employee base of 530,000 personnel. The company retails a wide range of products ranging from grocery, food items, clothing and electrical. Tesco is currently the biggest retail store in the United Kingdom. 3.0 Critical Incident A critical incident is an incident that deviates by a great margin from what is considered normal either positively or negatively. The recent discovery of horse DNA in the meat products retailed at Tesco can be considered as a critical incident. The Tesco horse meat scandal is in line with the meat adulteration issue which is currently a major issue in Europe, hence leading to the heightened analysis of meat samples from the retailers operating in the region. Although horsemeat is edible and cannot cause any bodily harm when ingested, it is considered unfit for consumption by many European countries for instance in the United Kingdom. For an incident to be referred to as a critical incident, it must fulfill three basic requirements. The following section will analyze the Tesco horsemeat scandal with respect to these three requirements. Firstly, a critical incident must have a critical character that causes a direct shock to the normal procedures and routines of an organization. Taking a look at the Tesco horsemeat scandal, it can be acknowledged that the retailer’s daily routines have been affected immensely. The giant retailer has recorded low sales as a result of the scandal. In fact, the sales tumbled by a high of 15.5 % in some markets for instance Czech (Neate & Moulds 2013, p.1). In addition to this, the company’s share price fell on the news. Secondly, a critical incident leads to uncertainty in an organization. On this point, it can be acknowledged that the horse meat scandals lead to confusion in the stakeholders; the customers did not trust Tesco’s products while the employees did not know how to explain the horse’s meat found its way into the company’s products. Thirdly, a critical incident has the ability to trigger a transformation in an institution in addition to redefining it. On this aspect, the focus which the food safety authority of Ireland and other food safety regulatory organizations have given to the testing of food products in Europe. 4.0 Evaluation and Position Statement As observed above, the Tesco horsemeat scandal can be referred to as being a critical incident. After the news of the presence of horse DNA in the food samples sold in Tesco, the share price tumbled immediately; an indicator that the news had a great influence on the normal procedures of the company that is a phenomenon associated with critical incidents. There are several theories that can be used to evaluate the incident. The following section will evaluate the Tesco horsemeat scandal with respect to corporate social responsibility, triple bottom line and stakeholder theories. 4.1 Corporate social Responsibility theory Corporate social responsibility CSR is as of today regarded to as a business strategy that enables an organization to have a competitive advantage in the market. Corporate social responsibility is defined as a process in which an organization gives back to the society in which it operates or situated in (Garriga & Mele 2004, p.58). CSR may either be meant to lead to profit in instances when it is used as a way of marketing. There are four basic interactions/ engagements in which an organization may interact with the community in its CSR practices. 4.1.1 Economic Corporate Responsibility One of the main objectives of any business organization is to make profits. On this point, it can be acknowledged that it is through making profits that an organization is able to remain relevant in the market and able to support its operations. In order to do this, an organization strives to come up with the best business strategies that include product and service proliferation. In the aim of ensuring that its makes maximum profits, it may engage in activities that put the customer/ consumer at a receiving end. This is the case with the Tesco horsemeat scandal. The retail store failed to include horsemeat in its contents; hence the customers bought the product not knowing that the products contained amounts of horsemeat. This explains the reason as to why the sales in the retail store dropped drastically on the news of the inclusion of horsemeat in the burgers and other products sold at Tesco. Since this critical incident has a long-term effect on the economies of the company, the action to include horsemeat in the products can be termed as economically irresponsible. 4.1.2 Legal corporate social responsibility Tesco had a legal responsibility to ensure that its products matched the legal requirements for food and associated products. In its packaging or advertising, it should have notified the customers that the products which it sold contained amounts of horsemeat. This would have meant that the customers bought the products on an informed consent. On this point, it is important to note that horsemeat is edible and is in fact considered a delicacy in some societies. The failure to comply with the food regulations shows that Tesco was not legally responsible. 4.1.3 Ethical corporate social responsibility Ethics is a collection of values, beliefs and virtues which are upheld and considered to be good in a specific society (Brusseau 2013, p.4). Corporate social responsibility has a great bearing on the ability of an organization to conduct its operations in accordance with the ethical obligations in a society. Since it is not ethical to eat horsemeat in the United Kingdom amongst other countries where Tesco operates in, it is unethical to include it in its products without the knowledge of the customer. This lead to the instant reactions which the retailer received in the market after the news about the scandal leaked to the public. From this, it can be seen that the lack of an organization to honor ethics in its operations may lead to a critical incident. 4.1.4 Philanthropic corporate social responsibility. This type of CSR occurs when an organization feels that it is obliged to engage in activities which are of benefit to the society (Brusseau 2013, p.5). On this aspect, an organization engages in activities which are deemed to be good and helpful to the broader society. Looking at Tesco, it was involved in the inclusion of horsemeat in its products, a move which is against the will of the society. 4.2 Triple Bottom Line Theory The triple bottom line theory stipulates that the organization’s management should not only focus on the running of a business with respect to the economic orientation only but also to focus at social and environmental aspects. On this theory, economic, social and environmental social responsibility should be kept separate and the reports for the three spheres should be reported differently (Brusseau 2013, p.5). The theory also purports that the results of any organizational activity must be sustainable; in that an organization should be able to benefit from its present activities without compromising its chances of enjoying them in the future. The failure to observe the triple line theory by Tesco led to the occurrence of critical incident. The triple bottom line theory can be looked at from four perspectives. 4.2.1 Economic Sustainability The activities of an organization should be geared towards ensuring that it s able to remain strong economically. On this point, it is important to appreciate that the economics of a company influence the status/ continuity of an organization (Brusseau 2013, p.5). Ideally, an organization should always operate way above its breakeven point. This is a point where an organization is able to meet all its costs. Looking at Tesco, it can be acknowledged that the sale of its products is what has led to its economic strength. This explains the reason as to why the company laws strive to have every new product in the market in its stores; so as to increase sales. Therefore, the company needs to ensure that it has the right products in its stores; products which meet the expectations of the customer. This was not the case when the retailer included products containing horsemeat in its stores. The financial loses which the company suffered and is suffering are as a result of its lack of observing economic sustainability. 4.2.2 Social Sustainability Social sustainability entails the upholding/ observation of the values which are upheld by a society. Looking at the context of Tesco horsemeat scandal, it can be acknowledged that the company failed to consider the social values of its customers. In the UK, horsemeat is not considered fit for consumption hence it inclusion in edibles socially irresponsible, hence led to the critical incident. 4.2.3 Fair Trade Fair trade is a system which aims at ensuring that all the stakeholders in the market are engaging on an equal platform; this is fair trade (Brusseau 2013, p.6). An organization should not engage in unethical/ illegal activities so as to get a competitive edge over in the market. This is what Tesco was doing, including horsemeat in its products. The lack of observation of fair trade policies leads to critical incidents as seen in the revenue and share price fall in Tesco. 4.3 Stakeholder Theory The stakeholder theory of corporations engagement evaluates all the consequences of its actions to all the stakeholders in the society or environments which an organization operates in. contrary to the common practice in many organizations which first engage in activities then try to reduce their negative influences on the stakeholders, the stakeholder theory call for a thorough evaluation of the possible consequences on stakeholders which an activity is likely to produce (Phlips, Freeman & Wicks 2003 p.480). In so doing, an organization is able to evade instances whereby its activities may lead to negative influences on the people who are affected by its activities. According to the stakeholder’s theory, Tesco should have evaluated the effects of including horsemeat in the products which it sold to its customers, a move which would have saved the company the great losses which it incurred and is incurring due to the scandal. As per the stakeholder’s theory, Tesco should have made a decision which would have least effects on its customers. If that was done, there would have been the creation of a critical incident. 5.0 Conclusion In conclusion, the case study on Tesco’s horse meat scandal has been effective in giving an insight into what a critical incident is. The paper has discussed the case from the perception of three theories. The first theory was the corporate social responsible theory where economic, ethical, legal and philanthropic responsibility. The second theory was the triple bottom line theory where economic & social sustainability and fair trade were discussed in depth. The last theory which was discussed was the stakeholder theory. From the case study, t can be concluded that the Tesco horsemeat scandal is a critical incident. References Brusseau, J., 2013. The Business Ethics, v. 1.0, The Flat World Knowledge Inc, New York Garriga, E., & Mele, D., 2004. Corporate Social Responsibility Theories: Mapping the Territory, Journal of Business Ethics, Vol.53, no.1, pp. 51–71. Neate, R., & Moulds, J., 2013. Tesco Sales tumble on Horsemeat Scandal, The Guardian, Retrieved on 6th July 2013 from Phlips, R., Freeman, E., & Wicks A., 2003. What Stakeholder Theory is Not, Business Ethics Quarterly, vol. 13, no.4, pp. 479-502 Tesco PLC 2013. About us, Retrieved on 6th July 2013 from < http://www.tescoplc.com/ > Read More