Analysis of Primarks Approach to CSR Using Carrolls Pyramid Model - Essay Example

Analysis of Primark’s Approach to CSR Using Carroll’s Pyramid Model Introduction In June 2008, BBC Panorama released the video Primark: on the Rack.It was a feature on the deplorable working conditions of women and children who worked in India’s “shadow” garment factories. The BBC feature specifically focused on Primark because of the ludicrously cheap prices of their products which begged the question of how the company could afford to slash their prices so low. The video traced the production of the garments to a company sub-contracted by Primark; unbeknownst to Primark, however, their subcontractor contacted a third party – often called “shadow factories (Harney, 2008) – to do the beadworks for the garments. This alone was a violation of the subcontractors’ contract with Primark; furthermore, the third party employed children (another violation) and the wages of even those who were of legal working age were only about half the minimum wage permitted by the State (yet another violation). Business performance is no longer just measured by their market performance; it is also affected by their strategies in non-market environments (Baron, 2000). As evidenced by the reaction to BBC’s feature on Primark (Arnott, 2008a), activists and media groups particularly in pluralist Western societies have inflated the importance of these non-market strategies (Orlitzky et al, 2003). One of the foremost construct which captures non-market strategies collectively is the concept of corporate social responsibility or CSR. Corporate Social Responsibility Carroll (1983) defined CSR as involving “the conduct of a business so that it is economically profitable, law abiding, ethical and socially supportive” (608). This is only but one definition among the many that proliferated in the literature since the 1950s but they all underscore the companies’ responsibility for public good (Blowfield & Murray, 2008). Some of the issues subsumed under the CSR concept include human rights, environmental protection, sustainable development, and philanthropy. Further, the European Commission’s (2004) definition emphasizes the voluntary integration of social and environmental concerns in businesses’ operations and in their interactions with stakeholders. The concept of stakeholder in the definition equates to the company’s accountability to them (Jacobs, 1997). In this essay, Primark’s approach to CSR is reviewed using Carroll’s CSR pyramid as the analytical framework. Carroll’s model is used because it has been the most durable as well as the most widely cited framework for understanding the various components that make up social responsibilities (Crane & Matten, 2004). Carroll’s concept is simple and logical, and it goes beyond the traditionally-held notion that corporate responsibility is purely voluntary and optional (Blowfield & Murray, 2008). In turn, Carroll’s model will also be criticized particularly in reference to its adequacy in analyzing how CSR is being practiced nowadays by globalised companies like Primark. Critical analysis of Primark’s CSR based on Carroll’s 4-part model of CSR According to Carroll’s (1991) model, corporate social responsibility requires the “simultaneous fulfilment of the firm’s economic, legal, ethical and philanthropic responsibilities” (45). This is depicted as a pyramid, with economic responsibility underpinning all others in the notion that “without it the others are moot considerations” (41). Economic responsibility The fundamental responsibility of business is to produce the goods and services needed by society and to sell it at a profit (Carroll, 1991). Economists such as Franklin (2008a) even argue that the pursuit of profitable business is already a “socially responsible thing in its own right”. Society benefits in the form of jobs, products and innovations. In the case of Primark, this is certainly the case for the people down its supply chain – not just those who are legally subcontracted but even those who work for the third party. Despite their deplorable conditions, the work they are doing for Primark offered them a relatively better alternative livelihood option. As well as that, Primark was also able to provide its consumers very low prices for good quality products – specifically the reason why Primark is such a hit in high street fashion. According to Primark, profitability was assured by low overhead cost, low advertising cost, and economy of scale. Nevertheless, companies do have a purpose besides being profitable; at the very least, how those profits are made should also be considered (Blowfield & Murray, 2008). It was through such an inquiry that Primark’s corporate responsibility wass put to the test. It also reopened the debate as to the purpose of corporations such as Primark, in particular its relation to the affected society such as in India: “Is the corporation the private property of the stockholders who choose to do business in the corporate form or is the corporation a public institution sanctioned by the state for some social good?” (Boatright, 2000: 248). Legal responsibility If we follow the logic of CSR critics such as Franklin (2008a), then apparently the presence of Primark’s business in India is in itself a social good and it is basically for this that they are sanctioned by public institution. In fact, some governments have weak regulatory environment purposely to attract such investments but it also left a lot of room for exploitation (Blowfield & Murray, 2008). Not surprisingly, the video Primark: on the Rack captured this aspect of Indian law: despite it having one of the best mechanisms against child and forced labour, most people feel it is being only feebly enforced. According to Carroll’s (1991) definition, legal responsibility is the obligation of business to “pursue their economic missions within the framework of law” (42). Obeying the law is a company’s most fundamental responsibility to society (Blowfield & Murray, 2008). As far as Primark was concerned, they were complying with the laws and regulations not just of Ireland and UK where they operate but also in India where most of their suppliers operate. Cassell (2001) notes, however, that the high mobility of manufacturing goods is both boon and bane of a globalised economy; whilst the benefits – especially to developing countries – are apparent, the transnational dispersal of supply chains are creating difficulties in terms of regulation and legislation. In light of Primark’s subcontractor’s flagrant violation not only of their contract with Primark but also of the laws of the State, not only was Primark’s ethical commitment questioned (and deemed valueless) but it has also come under fire for not fulfilling its legal responsibilities satisfactorily – the minimum social responsibility of companies. As Blowfield and Murray (2008) articulated, any responsibility that ignores legal compliance is inherently flawed; despite Primark’s denial of prior knowledge of the abhorrent practice, it did not excuse them from such accountability and the consumers’ reactions spoke clearly that they held Primark just as liable as the violating subcontractors (Arnott, 2008a). Ethical responsibility A company’s ethical responsibilities go beyond mere legal compliance (Carroll, 1991). Earlier definitions of corporate responsibility such as those of Davis’ were almost synonymous with ethical responsibility: it “begins where the law ends” (in Blowfield & Murray, 2008: 12). As can be seen from the example of Primark, having an ethical code of conduct and membership in the Ethical Trading Initiative (ETI) is no longer a guarantee for customers since commitment to those conducts should not be limited to the company but must be espoused by its affiliates as well. But De George (1987) questioned “whether, to what extent, and in what way, corporations can or should be held morally responsible” and indicated that general ethical theory doesn’t provide the answer; instead, a collective moral accountability should be considered. This collective moral accountability is ethical CSR (Lantos, 2002). Lantos (2002) pointed out that a company’s ethical responsibility is morally mandatory; beyond fulfilling their economic and legal obligations, companies are responsible for ensuring that any particular action of theirs does not inflict actual or potential injury to individuals or groups nor should it result to social harms. In this regard, Primark may be said to have reneged on their ethical responsibility when those children and underpaid labourers were employed for finishing their products; the excuse that they employed auditors specifically to discourage such practices but that it must have escaped the auditors’ notice is not acceptable, considering how BBC Panorama was able to obtain the information (Shepard, 1998). If that were so, was Primark’s response – dropping the three suppliers who sub-contracted the beadworks and embroidery to a third party who employed child labourers (Arnott, 2008b) – the correct ethical course of action to take? Unfortunately, it was not. The cessation of Primark’s business with those three suppliers will have devastating consequences for those they employed (Warner, 2008). A bulk of their business was devoted entirely to Primark and although the labour rates may have been far below Western standards, most of them counted themselves lucky to have found employment in clothing sweatshops, which paid better than traditional farm labour. Globalisation has allowed Western companies to exploit the under-utilized labour force of developing nations such as those in India (Warner, 2008) and it has challenged the State’s ability to protect the rights of its citizens (Cassell, 2001). However, Western companies also help to bring improvement by insisting on high ethical standards (Warner, 2008). These high ethical standards are as required by those companies’ CSR. It can be said therefore that CSR helps to solve regulation problems. Primark understood the value of ethics especially to their corporate image. The company’s motivation for corporate responsibility changed after the revelation made by BBC and it stemmed from the awareness of what measure would serve the company’s own interest – this enlightened policy was advocated by Beesley & Evans (1978). Primark’s subcontractors, on the other hand, have only just begun to understand that “business...cannot exist for long without an ethical base. Mistrust, cheating, conniving, deceit, and fraudulent behaviours are quicksand upon which no business systems can be built” (Fisher & Lovell, 2009, xv). Ethics and economics do not always go hand in hand – as those sub-contractors probably believed – but businesses must now realize that profit is no longer their only consideration; legal and ethical considerations also constitute the minimum (Carroll, 1991). Philanthropic responsibility Philanthropic responsibility refers to voluntary corporate actions which promote human welfare or goodwill possibly through financial contributions to community programmes (Carroll, 1991). The fundamental difference with ethical responsibilities is that philanthropic activities are not expected in the moral sense, hence their discretionary nature. It underscores the notion of businesses giving back to society through donations (Blowfield & Murray, 2008). The philanthropic function of businesses – although it has become a significant aspect of CSR – is also its most criticized aspect. Franklin (2008a) dismissed it as a sideshow which involves playing with other people’s money. It is because of this that Lantos (2002) claimed that altruistic CSR is immoral as it violates shareholders’ property rights specifically if the corporation is publicly owned. Further, Franklin (2008a) argued that if altruistic efforts distract from the core business, business then becomes downright irresponsible. Due to its non-mandatory nature, philanthropic responsibility is placed at the top of the pyramid in a typical hierarchal framework as observed in U.S. businesses (Pinkston & Carroll, 1994). Applying Carroll’s model to Europe, Crane & Matten (2004) concluded that “all levels of CSR play a role in Europe, but they have different significance, and furthermore are interlinked in a somewhat different manner” (p.46). Since the philanthropic aspect of CSR which concerns Primark is addressed to affected communities in India, it would be more prudent to assess how philanthropy is viewed from that perspective. From the video Primark: on the Rack, children forced into labour were the beneficiaries of the altruistic interventions of a not-for-profit organization, BBA, who campaign against child labour in India. Also, a study by Jatana and Crowther (2007) concluded that philanthropic CSR contributed immensely to the empowerment of poor women in India as it has been used to provide them with alternative livelihood projects. The philanthropic actions of businesses actually play a huge role in promoting social welfare especially in the destitute areas of India just as they do in developing countries (Sachs, 2008). Visser (2006) made the same case for the African context, pointing out that philanthropic responsibility is so important to Africa it is second only to economic responsibilities. While the same conclusion could not be asserted for India without extensive study, it can be inferred that philanthropy is not merely the icing on the cake – as Carroll (1991) supposed for Western societies – for the poor of India; in some cases, philanthropic contributions may be the CSR aspect that matters most. Critique of Carroll’s CSR model The points raised in the last section highlights one weakness of Carroll’s model: it does not take into account the regional context where it is applied. Culture is a major influence on how CSR is prioritized (Burton et al., 2000). Although the relative importance of each responsibility is reflected in Carroll’s model, Carroll denied that his model was hierarchal (Blowfield & Murray, 2008). Nevertheless, its pyramid structure implies that some responsibilities were more important than others. It must be added however – and this is what’s missing in Carroll’s model – that the position of each responsibility in the hierarchal framework is context-dependent. Another weakness in Carroll’s model is that it has not been able to keep up with the rapidly changing concept of CSR; specifically, it did not emphasize the role of CSR as strategy. CSR is part of what business must do to keep abreast of the rapid changes in societal expectations (Franklin, 2008b). Many of CSR’s critics accept the idea of altruistic CSR only if it is relevant to the needs of business people. That is, companies must pursue a win-win situation and select socially-worthy activities aligned with their business (Franklin, 2008a). Human rights advocates, however, argued that this approach to philanthropy “commoditise basic principles of human dignity and thus surrenders moral high ground... corporations should protect human rights because it is the right thing to do, whether it is profitable or not” (Steinhard in Alston, 2005: 179). But Franklin (2008a) insists that advocates of philanthropic activities should have been the first to appreciate the shared values underscored in the idea of aligning the benefits to society with those of the business’ interests particularly because it is the sustainable approach. To be precise, businesses are more likely to support CSR initiatives if they also benefit from it; furthermore, their involvement will be more dynamic and innovative. Conclusion As can be seen from the discussion above, ethics may sometimes clash with economics. Performance excellence in the management of business is not the same as excelling in corporate responsibility management and situations may even arise when these two compete. Primark for example was able to give its customers good price for their products without compromising their profitability; however, it came with a social and ethical price. It is understandable that Primark would want to wash itself off the taint of this undesired social impact which they unwittingly caused. But it was unacceptable that, in the guise of CSR, Primark resorted to a harsh action which worsened the social consequences to the affected people. After all, the loss of jobs is not a trifle concern for these people however trifle their wages may be. Other, more socially-benefitting course of actions could have been taken instead. A business, first and foremost, must keep its sight on the commercial imperative because keeping their business profitable whilst providing goods and services that people need and want is how they contribute most significantly to the overall welfare of society (Franklin, 2008b). However, it is no longer the only consideration. Progressive companies and multinational companies (MNCs) know this; but in this day of economic globalisation where business affiliates are widely dispersed and outsourcing is the order of the day, every company that attaches itself to MNCs must not make light of their legal and ethical responsibilities, however lax the state regulations may be. On the side of MNCs on the other hand, they must not make light of the philanthropic aspect of CSR. Although it is not a moral or ethical dictate, philanthropic contributions may have far greater value to those it benefits than how it was conceived by the benefactors – the great divide between rich and poor makes it difficult for the rich West to fully appreciate the value of their contributions when it is viewed from the perspective of the poor developing nations. Additionally, this relationship between society and business can be further enhanced and made more sustainable if businesses choose community programmes which add value to their company. In all aspects of CSR, a myopic sort of idealism from both ends of the spectrum is no longer satisfactory. A win-win and sustainable solution is needed because the debate concerning CSR has moved from ‘whether it should be implemented’ to ‘how it should be implemented’ (Franklin, 2008a). And soon, companies will be placed under the microscope – just like Primark was – to determine ‘how well CSR is being implemented’. 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