Corporate Social Responsibility in Wal-Mart Stores - Essay Example

CSR: WAL-MART STORES INC. By and Introduction To critically analyze the topic of corporate social responsibility, the author/researcher will use Wal-Mart stores. The company is a multi-national firm operating in the retail industry. It has stores all over the world and services millions of people worldwide on a daily basis. The company is socially responsible, and these efforts are evident in the various projects supported by the company. The company remains one of the largest chain stores in the world. History of Wal-Mart Stores Sam Walton founded Wal-Mart stores. The entrepreneur opened his first store in America, and the stores have continued to grow over the years. Currently, there are over 7000 stores worldwide and employs more than 2.1 people, commonly referred to as associates according to Sam’s policy. The company also has thousands of departmental and discount stores all over the world. The headquarters of Wal-Mart Stores is in Bentonville, Arkansas. The company topped the list of Fortune Global 500 as one of the largest public companies based on revenue. The company publishes a report dubbed the Global Responsibility Report to keep the public informed. The report covers People, profit, and the planet. It informs the general public and customers the progress on various projects as well the earnings made annually. The report all emphasizes on equality and gender diversity in its associates. The company also has an advisory board on Gender Equality and Diversity, who role is to ensure equality and proper gender representation in the gender roles. This has seen an increase in the number of female leaders in the top leader from 23 873 in 2005 to 25,246 in 2010 (Wal-Mart Stores, 2013). Corporate Social Responsibility in Wal-Mart Stores As one, the multinational companies, Wal-Mart has adopted corporate social responsibility as one of its core business strategies. The store invests billions of dollars annually in a variety of projects to ensure its customers maintain confidence in the multinational company. From ethical sourcing, hunger relief, school nutrition programs, police and military family support, anti-malaria initiatives and small farmer market access, Wal-Mart stores CSR strategy is all round (Wal-Mart Stores, 2013). The firm engages in ethical sourcing of its associates. Previously, the firm had a court battle for employing underage kids in Bangladesh. As a result, the firm was in the spotlight for the wrong reasons. The firm has taken measures to overcome this negative perception by engaging in ethical sourcing of its employees. There is screening of employees when being hired in addition to practicing gender equality and diversity. This has been successful in the US stores, Europe, Asian and African stores. This has helped the company boost its public image (Wal-Mart Stores, 2013). The firm also engages in hunger relief in the world. As the largest grocery in the world, the store responds positively to the hunger menace. The store believes that the world population should have access to nutritious, affordable and sustainably grown foods. The Wal-Mart stores and Sam’s Club donates millions of foods to the American food banks to ensure all Americans are well fed. The firm projects to donate 1.1 billion pounds of food by the end of 2015. In addition, the firm plans to award $250 million as hunger relief funds. The school nutrition program aims at installing mobile container kitchens to ensure school going children are well fed. In 2011, the company provided 19.5 million meals to schools worldwide. In addition, 50 container kitchens were installed. The firm estimates that 38 million meals will be provided annually. The multinational also provides support to the families of deceased officers in South African Police services and the South African National Defense Forces. In 2012, 175 children of the police and military officers were given back to school stationery items. The stores chain donated 5000 food hampers to families of officers deployed in war-tone countries in African continent. The anti-malaria initiative aims to reduce deaths due to mosquito bites. Approximately 1 million people die in Africa due to the malaria illness. In partnership with Adventurer and Kingsley Holgate, the firm provides mosquito nets to families in Africa. Approximately 13, 500 mosquito nets were donated to Malawi from 2009 to 2012. The small farmer market access for small farmers helps farmers get a market for their fresh farm produce. The program is called Ezemvelo and has sourced 504 tons of vegetables since 2012. This has helped farmers avoid incurring huge losses due to a lack of a market for the produce. There are other CSR activities the firm undertakes and this are outlined in the Responsibility report published annually. Arguments for and against Corporate Social Responsibility Corporate social requirement is a must for the modern company planning to survive in a competitive environment. Unlike in the past, companies are under intense scrutiny from the public who are also the consumers. Previously, companies have contributed negatively to the environment without public outcry. Such impacts range from unethical business practices, environmental pollution and poor working conditions (Brynes, 2005). Companies have started taking responsibility for their actions with the belief that it will improve their social, economic status. The companies are also under pressure by the government to be socially responsible in a bid to improve the welfare of the society (Bruch & Walter, 2008, p.50). Arguments for Corporate Social Responsibility There are benefits associated with corporate social responsibility. This includes the maximization of shareholder’s value in the company, boosting the company’s public image and public support, avoidance of negative environmental impacts, as well as increased long-run profits. Shareholders are the owners of the company and hence the negative effects of the company will cost them. Where the business is not socially responsible, the cost of remedying the social problems will be passed to the shareholders, reducing the net profit. Therefore, earnings per share held by the owners will be lower (Cray, 2010, p.4). Where the business is socially responsible, the Profit will be higher in the long-run, and this will reward the shareholders with a high-interest rate. Good corporate social responsible will also boost the public image of the company. A good public image is essential for any company intending to create a positive relationship with the public while increasing the customer base. The best way to create a good public image is through having a good reputation. It is evident in the ability of the firm to fulfill the expectations of its stakeholders (Fortune, 2009, p.8). Where the firm can pursue social welfare responsibly, and then the reputation is increased. According to a study conducted by the Industry New Zealand, the findings showed that customers prefer buying products and services from businesses that contribute to their well-being. This means that there will be more customers buying from businesses considered to be socially responsible (Fombrun & Shanley, 1990, p.234). As a result, customers will still buy from such businesses even if they charge a premium price for their products. Companies that are not socially responsible are always being hunted down by the government; governments requires all companies to be socially responsible. There are a number of expensive regulatory measures which are instituted to prevent firm’s inaction (Mintzberg, 2009, p.4). Through social responsibility, companies are keeping the government at bay, and they are likely to be less regulated (Laszlo, 2003). Some companies have engaged in othodox methods to escape social responsibility. Such methods include corrupting government officials, running away from responsibility or even paying less attention to environmental conservation. The government has reacted to such evil practices by instituting legal proceedings on anybody found engaging in such practices. Companies engaging in corporate social responsibility secure long run profits for the company. Though the company will incur huge cost to be socially responsible, the firm will enjoy high revenue in the future. This is because, through socially responsible, the company will receive public support which will in turn become customers (Murphy, 2008, p.21). CSR will ensure a firm’s continued survival amidst stiff competition from opponents. The success of a company will depend on how the community perceives it and its activities. If the business wants support and less criticism, then it must be responsive to what is happening in the community and act immediately (Porter & Kramer, 2005, p.57). Where the firm is not responsive to what is happening to the company, the public will turn a blind eye to its activities. In addition, the firm will attract more government regulation, and this will inhibit its success (Bernstein, 2000) . Arguments against Corporate Social Responsibility However, there are dissenting voices to the topic of corporate social responsibility. There are those opposed to the idea of companies being socially responsible. They have presented various reasons as to why they are opposed to the company being sensitive to the welfare of the society. The late Milton Friedman presented the oldest objection in 1962. He articulated that management has only one responsibility that it should focus. This the objective of shareholders value maximization. He argued that the welfare of the society is not the responsibility of business firms; rather it should be left to the workings of the free market forces. If the free market does not address the social issues, then it should be the responsibility of the government and not the people (Fredrick, 1962). The other objection holds that business is not equipped to handle social issues. Rather it should focus on its main objects of profit maximization (Bowen & Howard, 2013). In addition, business executives are specialists in finance and operations management. They do not have special skills to address social issues and, therefore, this ought to be left to specialists in this field (Aguinis et al., 2012, p.935). Therefore, business focus only focuses on its core objectives. Corporate social responsibility dilutes a firms core purposes. Where the firm is responsive to social issues, then this will make the managers divert their energy to things that do not concern them. Therefore, the business should only focus on this that pertains profit maximization, as well as shareholder’s wealth maximization (Fleming, 2012, p. 56). Opponents also oppose the idea of corporate social responsible on the basis of the firm is already powerful, therefore, no need to get additional power. This argument holds that the social power will make the business more powerful without additional benefits (Fleming, 2012, p. 56). As such, the business should only have the business power which is required to gain competitive advantage over the competitors. The last argument holds that through socially responsible, the business will be less competitive globally. The business resources are allocated to taking care of social issues rather than investing in opportunities that will earn the company a higher return on investments. The business firm should, therefore, focus on investment in projects with higher returns rather than projects that will not give back returns (Meto & Garrido, 2012, p.13). The Essence of CSR According to Carroll’s (2009), the definition of corporate social responsibility incorporates four components of responsibility i.e. the legal, ethical, economic and philanthropic responsibilities. The responsibilities are what the corporate stakeholders and the general public expect from the company. This definition expands McGuire (1963) definition of corporate social responsibility. According to McGuire, the company is responsible to the society in addition to the economic and legal obligations. Carroll’s definition outlines the ethical responsibilities expected of the company; the economic and legal obligations are required whereas the philanthropic obligations are desired. Traditionally, companies were legally and economically responsible while, in the modern company, it incorporates the philanthropic and ethical responsibilities in addition to the traditional obligations. The modern responsibilities are newer and broader, and it is essential if a company is to survive the tight competitive atmosphere. The economic obligations entail the provision of goods and services that are safe for human use and consumption. Business firms produce goods and services and sell them at a profit. This way, the firms can prioritize their profit maximization motive. Traditionally, the business firms focused on achieving acceptable profits for its business activities (Carroll et al., 2014). Therefore, firms are focusing on profit maximization. This is in concurrence with Milton Friedman principle against CSR. He noted that businesses should utilize its resources and engage in activities that ensure maximum profit if derived using legally accepted methods. The legally accepted methods are those that don’t involve deception and fraud. The profit earned serves three main purposes. The first is measuring the success of the business activities a firm engages. The firm undertakes various measures after a successful evaluation to increase the profit earn from successful activities. The profits also act a risk premium to ensure the firm stays in business. It acts as a cushion against harsh economic times when the business is likely to incur a loss. The last purpose is to ensure the future supply of business capital. Retained earnings from the previous period are reinvested back into the company to for use in its business activities. Profit is also added to the capital reserve account for use when need arises. The legal responsibilities are defined as the positive and negative obligations that a firm is expected to observe by the government. Failure to observe the stated laws and regulations, and then the government will institute legal proceedings against such companies. Hefty fines and court sentences are imposed on those found responsible. There has been debate on what constitutes legal responsibilities. Carroll (2009, p.41) states that laws and regulations are the codified code of ethics to be followed by companies. They represent what the firm ought to fulfill for the society. Others view it as the totality of responsibility towards the society by business firms (De et al., 2012). There are proposals to expand the scope of government to include more regulations. De Schutter (2008, p.203) suggests that there should be a regulatory framework for corporate social responsibility. He argues that that the current case for CSR based on presuppositions rather than documented requirements. However, there are objections to having a regulatory framework for CSR. Others argue that the firm’s engagement in corporate social responsibility should remain voluntary. Philips et al. (2003, p.491) opposes the stakeholders theory which suggests that a firms performance is determined by how it manages its relationship with its stakeholders. The debate about whether to expand or relax regulations concerning corporate social responsibility remains an open discussion. According to Valor (2008), those supporting the regulation of CSR activities question the ability of the free market to support corporate social responsibility activities. They argue that the market failure and unregulated business environment fail to rewards business firms freely engaging in CSR activities. The opponents of CSR regulation present that the free market promotes individual interests, which in turn improve the welfare of the society. Formulating a Successful Corporate Social Responsibility Strategy Very few firms can formulate successful corporate strategies. A successful CSR strategy will help a company expand its customer base, maximize profits in the long-run and boost the firm’s public image. A good CSR strategy should be drafted by incorporating views of all stakeholders of the firm. A participative process incorporates the views of all employees, as well as those of senior management. There are several factors considered when drafting a CSR strategy (Luning, 2012). The firm’s senior leadership should make an authentic public commitment to corporate social responsibility and allocate resources to implement it. Where the responsibility for implementing the CSR strategy is a responsibility low-level managers, then the process may not achieve the desired results in the long-run. The senior levels must be part of the drafting process and should commit and engage in its implementation fully (Kellie, 2010, p.7). Furthermore, there should be a clear vision for the achievement of the CSR objectives. Integrate the firms vision with the firm’s core values, mission, and vision, as well as organization values. This strategy should be a prioritized strategy just like other core strategies of the firm. Reporting of the progress of the CSR should be to the senior managers and forms management board (Kellie, 2010, p.9). The engagement of the CSR strategy ought to be at par with other functions such as finance and marketing. In global companies such as Wal-Mart stores, the corporate social responsibility is at the heart of senior managers who monitors the billions of dollars spent annually on social responsibility functions. The company also publishes an annual responsibility report outlining the various CSR activities (Kellie, 2010, p.8). The company should outline the top three goals that the company intends to achieve and develop a CSR strategy to help in the achievement of this goals. Though it is difficult to outline specific goals, the management should at least agree on three business objectives that the firms plan to achieve within a given period (Kellie, 2010, p.7). Formulation of a CSR strategy and resources allocated to it to ensure its full implementation. A good CSR strategy can help the company open up new markets and also grab market share from existing competitors for the company’s benefit. The CSR strategy is to what the firm performs best than others. Each firm has its core competencies which give them a competitive edge over the competitors. The firm should strive to formulate social and environmental strategies which they have the solution to or which they own part of the solution. This will make it easier to fulfill them while still excelling in its core competencies (Stugatch, 2011, p.45). Integrating the CSR strategy into the culture, governance and strategy development of the company. In this case, the firm should use the CSR as a strategy to mitigate risks and seek new opportunities. If it is inbuilt into the performance and recognition systems of the employees. In the case of Wal-Mart, the multinational company selects suppliers based on their prices, quality, sustainability scores as well as in-stock statistics. A business firm should develop performance indicators to measure the success of corporate social responsibilities. Such performance measures should internal and external. Some of the performance indicators which can be used include gains in market share, increased sales, employee satisfaction, brand perception, reputation improvements, and decreased operational costs. Basing the external performance metrics is on social welfare and the environment. In the absence of proper performance metrics, then a company will not be able to tell if the CSR strategy was effective. References List Aguinis, Herman & Ante Glavas, 2012. 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WalMart 2013 Global Report, Bentonville: s.n. Read More