Corporate Social Responsibility (CSR) (DP IB Business Management)

Revision Note

Flashcards

An Introduction to Corporate Social Responsibility

  • Corporate Social Responsibility (CSR) refers to the concept that businesses have a responsibility to consider and positively impact society beyond their economic interests

  • It is a framework through which companies voluntarily integrate social and environmental concerns into their business operations and interactions with stakeholders

Diagram: social responsibility goals

Companies can display CSR towards many of its stakeholders - suppliers, employees, the environment, the market
Corporate social responsibility goals can be focused on a range of different stakeholders
  • CSR involves taking into account the impact of business activities on various stakeholders, including employees, customers, communities, the environment, and society at large

  • CSR goes beyond legal compliance and strives for companies to actively contribute to sustainable development and societal well-being

Examples of Socially Responsible Activities 

Socially Responsible Activity

Example

Sustainable sourcing of raw materials and components

  • High street retailer H&M has a goal of using only recycled or sustainably sourced materials by 2030

  • It also publishes a list of the majority of their supplier’s information which is updated regularly, allowing stakeholders to verify and hold the company responsible for their suppliers’ conduct

Responsible marketing

  • Marks and Spencer ensures that it never actively directs any marketing communications to children under the age of 12 and does not directly advertise any products high in fat, sugar or salt to children under the age of eighteen

Protecting the environment

  • Cafe chain Prêt à Manger offers discounts to customers who bring their own coffee cup, reducing the number of single-use plastic containers it dispenses

Responsible customer service

  • John Lewis's famous 'Never Knowingly Undersold' slogan refers to the company's commitment to checking competitor prices regularly to ensure that the price its customers pay is the lowest available in the local area at that time

Ethics and CSR

  • Ethics relates to the rights or wrongs of making a strategic decision that are beyond legal requirements

  • Some ethical businesses adopt an ethical code of practice which informs decision-making and may set out how they:

    • Behave responsibly with regards to the environment (for example, using recycled materials in packaging)

    • Avoid negative impacts on animals (e.g animal testing)

    • Adopt fair working practices (e.g. paying a real living wage)

    • Implement robust and equitable supply chains (e.g. using sustainably-sourced raw materials in production)

    • Takes steps to eliminate corruption (e.g. ensuring appropriate tax is paid in the countries in which the business operates)

    • Avoids controversial products or take steps to minimise their impact or access to them (e.g. having strict verification procedures in place prior to cosmetic surgery procedures being carried out)

    • Ceases trading with questionable suppliers or customers (e.g. cancelling a supply contract with a supplier that uses child labour)

  • It is now common practice for large companies to publish annual Corporate Responsibility Reports which provide an audit of the steps being taken to meet their commitments to a range of stakeholders alongside annual financial reports

  • Extra costs are involved in operating in a socially responsible way and these costs are usually passed on to consumers

Reasons for Implementing CSR

  • Business set ethical or socially responsible objectives for a range of sound commercial reasons

Business Reasons for Implementing CSR

Reason

Explanation

Improved Reputation

  • CSR can enhance the business image and reputation and improve its attraction to many stakeholders 

    • Operating in a socially responsible way is likely to be attractive to both existing and potential customers

    • It should lead to positive media coverage

    • The business may be able to retain and attract quality workers to fill job roles

    • It may be looked upon favourably by investors, especially those that prefer ethical investment

Added Value

  • CSR can be very profitable as it adds value

    • In competitive markets CSR can provide a differentiating USP that may mean the business can use premium pricing

    • E.g. Tony's Chocolate's, whose mission is to be commercially successful whilst being committed to using cocoa only from slavery-free sources, is able to charge around 200% more for its products than its mass market rivals

Employee Morale & Motivation

  • CSR may improve employee motivation and productivity

    • Workers are more likely to feel connected to a business that 'does the right thing' and may be more inclined to work hard to ensure that the business is a success

    • Employees are also less likely to leave the business or take time off work

Solve Social Problems

  • CSR may help to solve social problems e.g. resource depletion

    • Businesses that adopt CSR objectives are likely to understand that they can play a key role in solving some of the emerging social, ethical and environmental problems faced by communities around the world

    • E.g. businesses that look to minimise the use of fossil fuels in production processes will be making a small contribution to global efforts to combat climate change

The Impact of Implementing CSR

  • Businesses experience a range of impacts as a result of implementing CSR

    • They usually attract long-term loyalty from employees and customers and may find that their approach provides a useful competitive advantage

    • They are also likely to receive the support of the local community and local government especially if they share their aims

    • Suppliers and competitors of ethical businesses often change their approach to ensure that they do not lose sales to more ethical rivals

    • Taking an ethical approach costs more and may reduce the overall level of profits if the business is not able to raise their prices to compensate

Case Study

Japanese fashion retailer Uniqlo has tried to move towards an eco-friendly strategy in recent years

  • It is focusing on technologies that make the production of new clothing from recycled materials possible

  • The business has invested significant sums in energy-efficient production facilities

  • It supports the campaign to safeguard the islands and coastal regions of Japan’s threatened Seto Inland Sea

Examiner Tip

Some large businesses have been accused of greenwashing, where significant efforts are made to create the impression that its is environmentally friendly when, in fact, it is not.

Greenwashing may involve

  • Making broad sustainability claims without evidence.

  • Overstating positive environmental effects in marketing materials.

  • Advertising products as eco-friendly whilst but sourcing raw materials from unsustainable suppliers

  • In 2015, Volkswagen admitted to cheating emission tests by making its diesel cars appear far less polluting than they really were whilst promoting them as environmentally friendly in its marketing campaigns

    • This led to Volkswagen facing several lawsuits and fines totalling billions of dollars and long-term damage to its previously excellent reputation for quality and dependability

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