Corporate Social Responsibility (CSR) in the UK
Disclaimer: This dissertation has been submitted by a student. This is not an example of the work written by our professional dissertation writers. You can view samples of our professional work here.
Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UK Essays.
Corporate social responsibility (CSR) involves with differentiating right from wrong and doing right (Scott, 2007). CSR is the compulsion to make choice and take actions that will contribute toward the wellbeing, interest, and benefits of the society as well as the company.
1.1 Problem of CSR
CRS does not act like law which require people to follow. In contrast, it covers wide range of issues and many of which are unclear with respect to right and wrong (Frankental, 2001). As CSR is a self-interest practice, thus it is difficult to control the use of CSR because different companies which have different beliefs about which actions improve the welfare and benefits of the society (Luck, 2006). Companies can find themselves in difficult situations where they do not know how to act or what to do.
In recent years, CRS is the key issue in all business sectors, including retailing industry. It is rather controversial to discuss whether supermarkets like Waitrose and Tesco should focus on driving toward or go beyond the field of strategic management. In countries with a dynamic market economy like the UK and the US, it is widely agreed that firms should not only concentrate on pursuing strategies that make economic profitability, but they must also have certain social responsibilities that must be fulfilled as well (Enquist et al., 2006). However, the agreement for firms to pursue both profitability and social responsibility and this should be the end of the discussion. Opinion about the issue, however, differs more or less with regard to the importance of profitability and social responsibility (Downey, 2004). Some people in a society look at the view of profitability as the most important purpose for economic organisations and that only social responsibility of companies is to achieve and pursue profitability within the boundary of law.
Tesco is the UK leading supermarket with largest market share in retailing industry. As a face of capitalism, Tesco has been accused, criticised and involved in many social responsibility issues. According to the British Broadcasting Corporation (BBC, 2007), with substantial evidences, Tesco was revealed to make huge profits at the expense of farmers, communities and the environment. It is also abusing the power that results from its huge market share.
In Tesco's CSR report (BBC, 2007), Tesco was exposed to fail in supporting the UK farmers. In 2002, at the height of the UK apple season it was disclosed that less than half of apples on Tesco shelves were UK sourced. This practice is obviously contrasted with the Supermarket Code of Practice, which was meant to redress the balance between the biggest supermarkets and their suppliers. The big four supermarkets, including Tesco, were still using the same unfair trading practices that the Code was meant to stop.
In response to such claim, Tesco states: "We have a long-standing commitment to source as much UK produce as possible" (Tesco, 2007). Tesco refers to its commitment to UK farming and claims that it has always provided support to British farmers in the past years. It said that as its business grows, so has that of its suppliers. It claimed that it has been developing long term working relationships with its suppliers and by working together, they can both meet customer needs and have both grown their market share together.
In addition, according to the BBC (2006), Tesco has been blamed after one of its suppliers, Northern Foods which announced that it will close its Trafford Park Bakery in Manchester and this action lead to 690 jobs cut. The closure of Northern Foods is part of a shake-up announced in May after poor sales triggered two profit warnings. Critics claimed that as part of CSR practice, Tesco should be more supportive as promised in its CSR policy which stated that it has always been supportive to everyone involved in its business. In contrast, Tesco surprised and shocked the General Workers Union by doing nothing to support these 690 workers. Critics stated that this action of Tesco showed that it is throwing its buying power weight about by depressing prices and moving production at will to other plants (BBC, 2006).
In response to the claim that it does not employ CSR practice and abuse power, a spokeswoman of Tesco said in respond that Tesco is regret to learn that Trafford Park is closing and that Northern Foods have taken the decision to resign Tesco's pastry business at the site. Tesco spokesman said that they have been as supportive as they can be to improve the performance of the site. A spokesman of Tesco also added that when it was told by Northern Foods about the closure of Trafford Park, Tesco did ask if it could move this business to another site or sites. However, Northern Foods told that there is not enough capacity to do the business. Tesco's spokesman also said that Tesco will continue to work closely with Northern Foods who will still supply it with a significant number of other products across other areas of its business. Tesco also emphasised that it will be working with its supply base to ensure the availability of sausage rolls, pies and quiches for its customers (BBC, 2006). However, from the eyes of critics, Tesco's action does not fall into the scope of CSR practice.
In the past years, many retailers have been taking part in 'Fare Trade' products as they have become in the interest of customers. Thus, as the demand in for Fair Trade products, especially bananas has been increasing, Tesco has decided to support the scheme. However, a survey has revealed that Fair Trade bananas in Tesco are fall in the scope of 'Unfair Trade' (Friend of the Earth, 2003). Banana Link, a small and dynamic not-for-profit co-operative founded in 1996 to campaign for a fair and sustainable banana trade, approximated the weekly profit from banana in Tesco for £1 million and this is enough to employ 30,000 full-time banana plantation workers at a living wage. And this would be twice of what they are earning now. This means that workers in banana plantation are paid just a penny for every pound's worth of bananas sold in Tesco and this without a doubt is not enough to feed their families. While Tesco takes £0.40p, importers hardly hit break even point just to stay as Tesco suppliers.
If Tesco finds that suppliers make a mistake in packaging requirements, they have to pay Tesco £25,000 as emergency product withdrawals (Friend of the Earth, 2003). Tesco requests suppliers to make the payments to cover the costs of its compliance with the Ethical Trading Initiative. This means that this demanded payment would be tough for smaller businesses. Supermarkets, including Tesco use bananas as a key item in their price wars. However, Tesco is not the one that suffers the cut in price. Since 2003, Tesco banana contract put its suppliers in the position where they cannot pay legal minimum prices in most banana exporting countries and are forced to supply fruit from the most environmentally and abusive socially sources.
To rid such claim, Tesco insisted: "Tesco supports the work of the Fair Trade Foundation. This year we launched our own brand Fair Trade bananas sourced from the Windward Islands" (Tesco, 2008). However, many critics still find that this statement is unjustified and that the public did not get the whole truth, suggesting that Tesco needs to fully employ CSR practice.
In term of sustaining communities, Tesco failed to meet the code of CSR practice. According to the BBC (2004) Tesco is facing a challenge to its purchase of the London-based Europa, Harts and Cullens stores. Trade body the Federation of Wholesale Distributors (FWD) made an appeal with the Competition Appeals Tribunal with an aim to block the deal. Tesco had received a clearance from the Office of Fair Trading to buy the convenience stores from their parent company Adminstore. However, the FWD said the deal would be both bad for consumers, competition and communities. This is because the FWD found that every time a large supermarket like Tesco opens, there would an average 276 jobs lost (BBC, 2007).
The FWD said that Tesco may use convincing evidences to perverse that it boosts the local economy every time it opens new stores. However, what Tesco does is the opposite when it opens new supermarkets. It has been approximated that a supermarket opening will cause the closure of all village shops within a seven mile radius (BBC, 2007). And Tesco tends to import food into the area, making local sourcing to be just a niche market. To deal with such criticism, Tesco states in its official website and CSR policy: "Tesco invests in all types of communities throughout the UK, providing jobs and careers for local people. Making jobs and economic activities stay in, or close to, local neighbourhoods starts to boost the local economy" (Tesco, 2008).
With regards to environment, the BBC (2007) disclosed that Tesco recycling campaign and its claim in the CSR report do not relate to the products on Tesco' shelves. It was revealed Tesco stated its success rate of recycling in its CSR report as nearly 80% of its packaging waste relates to waste from its own operations, mainly from a long distance transit of produce which requires additional packaging. Thus, critics suggested that the best way for Tesco is to reduce packaging waste is to lessen the use of packaging materials in the first place rather than to recycle the materials after use. In response to this critic, Tesco say in its CSR report: "Tesco is committed to protecting the environment by doing what we can to reduce our waste. We are looking for ways to minimise product packaging recycling wherever possible" (Tesco, 2008).
2. LITERATURE REVIEW
2.1 Overview of Corporate Social responsibility (CSR)
According to Kotler. P and Lee.n (2005, p.2) doing the most good for your company and your cause. By comparing good it has too many sights to give attention. A quick browse of different web sites for the fortune 500 reveals that good goes by many names, including corporate social responsibility, corporate community involvement, community relations, community affairs, community development, corporate responsibility, global citizenship, and corporate societal marketing. In order to do the best practice of CSR the authors prefer to use following definition: "Corporate social responsibility is a commitment to improve community well being through discretionary business practices and contributions of corporate resources."
A key element of this definition is the word discretionary, it referring to business activities, which are managed by law or moral ethics. Like as voluntary commitment to its serving community. If this sort of practices is managed by the company than it will be describe as socially responsible.
According to Price Waterhouse Coopers (2005-2008) the greatest asset of any retail and consumer product company is its reputation and its perceived value among consumers. Today, consumers around the world, particularly in Europe, are concerned how a company manufacturers its product and whether it is managing for continued sustainability through attention to economic, environmental, and social performance. If not, a brand's reputation can decline, and with it, an attendant decreases in future sales and profits.
It is especially important for retail and consumer product companies to maintain the reputation integrity of their brand and to be socially responsible throughout their business operations since their products and services are usually marketed directly to product purchasers.
According to the World Business Council for Sustainable Development (WBCSD) defines CSR as ''the commitment of business to contribute to sustainable economic development, working with employees, their families and the local communities'' (WBCSD, 2001). Hence the fundamental idea of CSR is that business corporations have an obligation to work towards meeting the needs of a wider area of stakeholders (Clarkson, 1995; Wad dock et al., 2002). More generally, CSR is a set of management practices that ensures the company maximizes the positive impacts of its operations on society or ''operating in a manner that meets and even exceeds the legal, ethical, commercial and public expectations that society has of business''(BSR, 2001).
2.2 Definition of CSR
The Institute of Directors, a UK-based trade group, has also presented another Good definition of CSR: CSR is about businesses and other organizations going beyond the legal obligations to manage the impact they have on the environment and society. In Particular, this could include how organizations interact with their employees, suppliers, customers and the communities in which they operate, as well as the extent they attempt to protect the environment (Lea, 2002). I think the above definition captures most of what CSR is all about.
According to Tom Cannon (1994, p, 32, 33, 38, 44, 45,) corporate responsibility, the role of business in society is depending on business types and as well time of change. "Business corporations exist primarily to produce goods and service that society wants and needs. Achieving this objective is their first and foremost responsibility; if they are unsuccessful in this mission, they cannot reasonably be expected to assume others."
Simultaneously, business depends for its survival and long-term prosperity on society providing the resources such as people, raw materials, services, infrastructure - which it needs to convert inputs into profitable goods or services. Business relies on society supplying a means of exchange - typically money - to allow it to convert the goods it produces into assets. Society is expected to provide an environment in which business can develop and prosper, allowing investors to earn returns while ensuring that the stakeholders and their dependents can enjoy the benefits of their involvement without fear of arbitrary or unjust action. An organization must support the established or prestigious programme; develop those activities, which endorse or sustain its position; and concentrate its investment in certain areas.
Society expects many things of its corporate sectors, from the corporate its stakeholders expects lots of outcomes and they are classified by the relationship to the business. For the owners point of view the primary expectation will be financial returns, if the corporate is able to return good financial returns to its owners then the corporate will added values to the company. Same like the employees' pay and additionally the working environment and training facilities. For customer it needs to supply of goods and services and secondly the quality of goods. Creditors need to have the assurance and secondly the security of money backs on time. The supplier wants firstly their payment and secondly long-term relationships. The community wants safety and security and secondly wants contribution to community. And the government wants from the business the compliance and secondly wants the improved competitiveness.
According to Ramanathan (1976) argued that there is a social contract between organization and society. Jaggi and Zhao (1996) also agreed with the social contract view when they argued that organizations do not exit in a vacuum, but are part of a society, which creates and supports them. Society will not take too kindly to corporations, which fail to recognize and support important social values. Organizations are aware that society will not hesitate to use different sanctions to punish or bring to book any irresponsible act or omission by an organization as and when deemed necessary.
In work done by (Gray et al, 1995, 1996; Guthrie and Parker, 1990; Patten, 1992; Roberts, 1992). Holland and Foo (2003) noted that the unregulated nature of the disclosure in CSR reports could only allow the development the relationship of reporter, which provides a degree of accountability.
Corporate stakeholders have the right to know what contributions corporate entities are making to society. The provision of information, which satisfies this need, is known as accountability; hence Gray et al. (1996) defined accountability as "the duty to provide an account of action or reckoning of those actions for Which one is held responsible". Hackston and Milne (1996) also supported the view that corporate entities should be held responsible for their actions that affect society. In the light of this, a recent survey (DTI, 2001) of 45 global and large companies operating in the EU showed that over 90 per cent reported on their mission, vision and values, workplace climate, community involvement, local economic development, market place and environmental impact.
2.3 History of CSR
The nature and scope of corporate social responsibility has changed over time. The concept of CSR is a relatively new one—the phrase has only been in wide use since the 1960s.In the eighteenth century the great economist and philosopher Adam Smith expressed the traditional or classical economic model of business. In essence, this model suggested that the needs and desires of society could best be met by the unfettered interaction of individuals and organizations in the marketplace. By acting in a self-interested manner, individuals would produce and deliver the goods and services that would earn them a profit, but also meet the needs of others. The viewpoint expressed by Adam Smith over 200 years ago still forms the basis for free-market economies in the twenty-first century.
In the century after Adam Smith, the Industrial Revolution contributed to radical change, especially in Europe and the United States. Millions of people obtained jobs that paid more than they had ever made before and the standard of living greatly improved. Large organizations developed and acquired great power, and their founders and owners became some of the richest and most powerful men in the world. In the late nineteenth century many of these individuals believed in and practiced a philosophy that came to be called "Social Darwinism," which, in simple form, is the idea that the principles of natural selection and survival of the fittest are applicable to business and social policy. This type of philosophy justified cutthroat, even brutal, competitive strategies and did not allow for much concern about the impact of the successful corporation on employees, the community, or the larger society.
In the 1960s and 1970s the civil rights movement, consumerism, and environmentalism affected society's expectations of business. Based on the general idea that those with great power have great responsibility, many called for the business world to be more proactive in (1) ceasing to cause societal problems and (2) starting to participate in solving societal problems. Many legal mandates were placed on business related to equal employment opportunity, product safety, worker safety, and the environment. Furthermore, society began to expect business to voluntarily participate in solving societal problems whether they had caused the problems or not. This view of corporate social responsibility is the prevailing view in much of the world today.
2.4 Benefits of CSR Disclosure
Implementing the CSR concept in an organization, there are lots of benefits an organization can get examples are: increased customer loyalty, more supportive communities, the recruitment and retention of more talented employees, improved quality and productivity and the avoidance of potential reputational risks which may arise from environmental incidents. However, Cooper (2003) noted that the practical experience of early adopters of CSR reports was mixed. Some companies noticed that instead of the provision of the reports enhancing companies' reputation, it actually attracted adverse comments by drawing attention to divergences between the values espoused by the company and its actual behavior. One can only view this as an inevitable teething problem, which would over time disappear from the corporate scene. Cooper's survey of FTSE 250 companies found that less than 33 per cent of companies considered that their CSR activities resulted in improved customer loyalty while only 20 per cent believed that it enhanced staff recruitment and retention. Cooper concluded that the benefits may be more subtle and realized over a longer timescale than is sometimes suggested, but there is no doubt that the resulting benefit will be enormous in the long run. Despite these perceived benefits, Schaltegger et al. (1996) have argued that one of the driving forces in the popularity of CSR reports was the need to appease some user groups, e.g. environmental activists.
2.5 Framework of CSR
CSR framework provides a standard for social and ethical accounting, auditing and reporting. It includes mandatory external verification and stakeholder engagement. Tesco's CSR report published in annually and it has KPI, where the CSR people have to work hard to develop in next financial year. Work has done by the Institute of Business Ethics covers the fairness to employees, suppliers, customers, equity and loan creditors, contribution to community and protection of the environment. The framework provides that an independent verifier should assess the company performance annually.
According to Social Accountability (SA) there are lots of fields to look at which are trade union, and non-governmental organizations (NGOs) on the basis of International Labors Organization (ILO) conventions - the Universal Declaration of Human Rights and the UN convention on the Rights of the Child. This standard focuses on child labors, forced labors, health and safety, working hours, discrimination, discipline, free association and collective bargaining. Any organization recognizes that it has a duty to act as a responsible corporate citizen, by meeting its obligations to all its stakeholders - shareholders, customers, employees and the local, national and global communities in which it operates.
In this work done by Peter Jones, David Hillier, Daphne Comfort, Ian Eastwood in Management Research News, at Patrington: 2005. Vol. 28, Iss. 1; pg. 34, 11 pgs describes the awareness of consumerism and sustainable development. It provides the basic outline of sustainable development and how it relates to the business as a successful retailer. Here the retailers are increasingly recommending on social issues, for example, social inclusion, ethnical trading, healthy living, training, health and safety, community support initiatives under a broadly sustainable agenda. However, on this report there is no model used for measuring the standard of CSR. Here the author looking in different company's report and letting the reader, sustainable development is important and it gives the stakeholders enough confidences to invest or employees to work for the company. If the author add the model of Key performance Indicator (KPI) then it will be good enough to measure the level of CSR. In this work done by Peter Jones, David Hillier, Daphne Comfort, Ian Eastwood in International Journal and Retail and distribution Management, Bradford: 2005. Vol. 33, Iss. 2/3; pg. 207, 8 pgs suggests that the majority of the major retailers are addressing sustainability agendas, that they recognize, albeit in varying measure, the impacts their businesses have on the environment, the economy and society and several of them are looking to measure and benchmark their performance. But on this report the author did not mentions about fair trade and how it will impact on the supply chain on the organization. If any organization can build up a good relation between supplier and consumer providing good money to the supplier and best product and service to their customer then it will increase the market loyalty, which will increase the goodwill to its whole stakeholders.
2.6 CSR in UK Practice
Within the last few decades' corporate social responsibility (CSR) has been fast momentum across the business community and it is seen to be gradually higher on boardroom agendas. Many of the UK's top retailers are major employers, they continue to be very much at the leading edging of innovation and growth and many of them recognized the impacts they have on the environment, on society and on the economy. They are increasingly keen to communicate their commitment to CSR to their shareholders, their customers, their employees, to government and to the public at large. Mixtures of factors are cited as being essential in building the current momentum behind CSR. Ernst & Young (2002) recommend that there are five key drivers, which have influenced the increasing business, focus on CSR namely greater stakeholder awareness of corporate ethical, social and environmental behavior; direct stakeholder pressures; investor pressure; peer pressure and a heightened sense of social responsibility. The Government's approach is to encourage and incentive the adoption and reporting of CSR through best practice guidance, and, where appropriate, intelligent regulation and fiscal incentives. The government also looks at Pensions Act Amendment, Transparency. The Government encourages companies to report on their CSR performance in a number of ways such as Issued guidance on environmental reporting, Supported initiatives promoting company reporting, Provide the guidance for the financial services sector and the ACCA sustainability reporting awards, Supported the Global reporting Initiative and The enhanced business review requirements of the Companies Act. The UK government focusing their attention in four key areas, namely promoting good practice, supporting work to demonstrate the business case, promoting international action on CSR and joining up action across government (DTI, 2001).
The recommendations in the European Union's Fifth Action Programme on the Environment embedded in the report Towards Sustainability (1992) has contributed to the current interests in this area. The report calls on organizations to provide information on a number of areas, namely: details of their environmental policy and activities and the effects thereof in their annual reports, their expenses on environmental programmers, and make provisions in their accounts for environmental risks and future environmental expenses.
A number of the top ten retailers report on the improvement and/or use of CSR Key Performance Indicators (KPIs). Tesco, for example, employs some 18 CSR KPIs covering economic, environmental and economic issues and containing 24 specific targets. In choosing these KPIs the company uses one or more of four criteria, namely customer priorities; staff priorities; business priorities; and compliance with legislation or public policy. The company's CSR report provides a brief description of the annual target for each KPI, outlines the actual performance against each target and sets a target for the following year. During 2003/2004 the company exceeded expectations on 18 of its targets, met 13 and was below target on three. Where possible verification of the data used for the KPI's is carried out using external sources including market share data, independent surveys, services bills and audits for the Emissions Trading Scheme and Climate Change Levy Agreement.
2.7 Criteria of CSR practices and Effectiveness
In order to practices effectively it needs accuracy of commitment, facing the challenge and work with coordination in between corporate bodies in the entire business. In this case the effective can be measured by (KPI) at annually while doing the financial report. It also monitored and justified their work by different independent person for whole year and makes a comment for improvement if needed. By doing survey, how the business can improve such as expectation from stakeholders, community, and government and for its own employees then it can find some direction, which they can follow. By following those steps the company can reach its most effective practices at CSR level.
This chapter has reviewed the literature regarding the CSR, measuring the performance within organizations. The literature review has examined some common themes emerging from the implementation of the CSR in real practices. After reviewing the past works, it is very clear that CSR is vast growing concern and its important in business is essential. So in real business CSR is seen quite common and practices by the corporate bodies effectively. In order to measurement the performances of CSR, they have to maintain the model, which called (KPI). Around the business many related groups looking for improvement of CSR performances because of their profit interest.
3.1 Data collection
After some deliberation, we decided on asking for perceptual data from the middle management individual responsible for CSR activity at the firm. Previous studies have principally relied on aggregate measures of financial performance that have provided inconclusive evidence for a CSR-financial performance linkage. Accordingly, we have focused on the firm project level in order to discover how value is created by strategic CSR.
We began this paper by stating that ''Corporate social Responsibility in Tesco ''. As we argued earlier, there is no consensus that CSR can, or even should, be managed for profit, just as other business processes are managed for profit. As a result, well-intentioned CSR researchers have sought to find a way to demonstrate CSR profitability without having to claim that management takes strategic action to create value. This research agenda did not succeed because it could not specify how competitive advantage and value are created. In order to do so, we have chosen to focus on middle management, precisely because they are in the best position to explain the strategic intent of their portfolio of social action projects,
Working from managerial intent requires accepting certain trade-offs. By shifting to a more micro focus, we also leave behind more objective indicators of value creation. On the project level, one would almost have to engage in a cost-benefit analysis of each project in order to determine the value created. Firms do not yet engage in such fine-grained evaluation of their CSR projects. Given the current state of the art of CSR management and reporting, we decided that we needed to rely on the perceptions of the managers responsible for CSR regarding the strategic goals of CSR projects. Such perceptions of firm benefits and of the quality of stakeholder relations may be biased. In response to this issue, we have applied the necessary methods to control for possible bias.
Support for using perceptual managerial data rather than external stakeholders and other secondary databases come from the theoretical literature and from practical research issues. There is considerable theoretical support for using perceptual data if, in fact, managerial decision making is driven by the beliefs of top management, it makes sense to ask how management perceive the environment and the extent to which they believe they are responding to CSR challenges in a strategic fashion. It is crucial to test the extent to which top management seeks competitive advantage and value creation via CSR in an uncertain environment.
On a practical level, external databases of CSR and reputation surveys in UK principally ask top management which firms they most admire. The resultant reputation and CSR rankings overweight firm size and profitability. External stakeholder groups, in particular NGOs, rarely deal with a large cross-section of firms and either speak favourably of partners with whom they collaborate or negatively of large firms that have conflicts with specific stakeholders. However, the managers we questioned are well aware of their firm's PR and marketing programs for CSR and corporate reputation. These managers from the kinds of large companies we surveyed are well aware of their rankings in the CSR and reputation surveys. Our use of perceptual measures serves the purpose of telling us the extent to which managers seek to communicate with stakeholders and convince them that the firm is socially responsible.
In short, while external databases and stakeholders may provide insight into firm behaviour regarding social issues, these sources do not measure the strategic import of stakeholders for firms nor how firms seek to create value through CSR. This can only be done by asking top management itself. We are aware, nonetheless, of the limitations of our data and perceptual measures; our results must be handled with caution, inviting further research, awaiting the moment when more fine grained, objective data will be available.
A survey instrument was developed to measure the basic constructs of work place policies, environmental policies, market place policies, community policies and company values. We include the items used to measure these constructs in Appendix 1. Each of these items was measured using a five-point Likert scale. A small pilot study was then carried out and the preliminary results found the measures to be robust.
We have selected Tesco. Data collection was carried out from May to September 2009. We sent the survey to the firms in the database as measured by number of employees. We focused on Tesco extra because they were more likely to have engaged in CSR activity. We have visited the store to identify the management team would be the best person to respond to the survey. 10 surveys were completed either after the initial interview or as a result of the follow-up. This represents a response rate of 70%. As a further control, in approximately half of the cases, we spoke directly to the individual filling out the survey to confirm that they understood the purpose of the survey and would be able to provide accurate data. All the surveys were reviewed as well by two researchers for inconsistencies in the data, response patterns and outliers.
3.2 General lines of approach
We set out to research the reality on the ground to learn how Tesco had developed models of best practice around the issue of working and employment conditions. In view of the fact that the field of CSR is still vast and changing, and that there are no standards or guarantees laid down in this area, we were not concerned to know whether or not the companies studied deserved a seal of CSR approval. We simply sought to establish why and how they had acted, the opinions of the in-house stakeholders and, if possible, those outside the company, on what had been achieved, what future developments were planned and, if applicable, what limits had been encountered in implementing these models of good practice. Naturally our intention was subsequently to analyse these materials, to enable us to contribute original material to the debate on CSR in UK, describing both the general trends currently finding expression in each of the countries studied and the tools being put in place. We never lost sight of the obvious fact that in our case studies, we covered only part of the huge range of corporate situations in UK. To this end, we developed an approach demonstrating the following three characteristics:
3.2.1 An inductive approach
Based on the collection of case studies, on the basis of which we sought to discuss the question of the specific content currently derived on the ground from the concept of socially responsible practice, when applied to the areas of employment and working conditions. The cases analysed present socially responsible practices in the field of employment and working conditions, but they are not necessarily success stories or business cases worthy of being taught 'at school'. The very credibility of our method depended on our not seeking to make the situations analysed 'even more attractive'.
3.2.2 A transnational approach
Examining a range of situations in the UK, we were careful to take account of the contextual dimension of corporate social responsibility. Each national report reviews the way in which the question of CSR is formulated in its country and in the academic literature on the subject. Despite this degree of diversity, our work makes no claim to represent the whole wealth of experience existing in the EU Member States or the candidate countries. Nevertheless, it aims to look beyond the realities of the four countries studied and to take account of wider realities.
3.2.3 A sociologically inspired approach
Aiming not only to describe good practice in the companies studied, but also to analyse the interplay of the actors involved in planning, implementing and evaluating the practices concerned. With this in mind, discussion forums were organised to facilitate discussion of the results of our case studies in UK.
4 RESEARCH FINDINGS
Sustainability has become a key to success in retail business because firm should not only think of hoe to satisfy their shareholders, but also others involved in their business, such as their shareholders, customers, workers, suppliers and suppliers. Sustainability is a new business term that refers to the way that companies engage and satisfy a wide range of stakeholders that it associates with, such as employees, suppliers, the communality where the firms operates in, and the environment which is referring to the air, water, land resource and other aspects in the term of keeping the planet in good condition for the future generation (Goulet, 2004).
Studies indicated that businesses in these days now understand the requirement to satisfy not just their shareholders who particularly want the maximum profits and returns, but also a wide variety of stakeholder groups who place a range of demands on the company and its managers (Ricart et al., 2005). Therefore, to survive and do well in the competition in the market, companies must not pollute the environment, must seriously practice safety and employment standard, and must reasonably run business to balance the needs of shareholders and other stakeholders in short term and long term basis (Downey, 2004).
The main issue that forces leading supermarkets like Tesco and Waitrose to move toward sustainability is a quick negative coverage in media as well as the interest from the public and shareholders. Tesco as the UK's leading supermarket has been the target of negative image of corporate social responsibility (CSR). One best example of such practice was revealed by the Friends of the Earth (2003). It has a solid proof that Tesco did not do what it said in its CSR report. Tesco was claimed for putting profit before people and the environment. The leading giant supermarket was revealed to make huge profits at the expense of farmers who did not earn enough to feed their families. The UK importers also find it hard to hit breaking even point just to stay as Tesco' suppliers.
Tesco's negative behaviour exposed by the media seriously damaged its brand image and thus, it has been increasingly focusing on CSR practice and sustainability in the recent years. This can be seen in its Tesco Corporate Responsibility Review 2007 in which it has now embedded CSR as an important part of its corporate structure. Tesco's CSR initiatives plans to improve its sustainability practices in several ways: being a good employer, climate change, sustainable consumption, waste, packaging and recycling, farmers and local sourcing, retail and the high street, health, nutrition and well-being, ethical trade and developing countries, and charities and community.
To effective move toward sustainability, Tesco works in partnership with the Red Tractor symbol (British assurance standard) on over 700 fresh produce, dairy and meat (Tesco, 2008). Tesco has done this by putting special stickers on British meat and other produce and this also helps increase the profile of the Red Tractor and Tesco is the only retailer to get involved in Red Tractor Day. At present, 90% of Tesco's fresh chicken, 95% of fresh beef, 92% of fresh pork and 80% of fresh lamb is British, as are 100% of fresh eggs and milk which are in organic and UHT. Tesco also encourages British farmers to grow their own businesses through supplier relationship by introducing joint promotional activities and marketing initiatives which have significantly increased output for some of its farmers.
Tesco also plans to be an extra hand to help customers in making green choices. At the moment, Tesco is developing Green Clubcard scheme to promote energy-efficient and other green products, such as intelligent plugs that switch off appliances when they are not being used. It also uses Green Clubcard to encourage customers to reuse and recycle. And since 2007, Tesco has been offering Clubcard points to customers for reusing carrier bags (Tesco, 2008).
Moreover, Tesco plans to share its profits to the communities teaming up with new youth volunteering charity, V and CSV (Community Service Volunteers) to make the difference in communities. Tesco has promised £500,000 over two years to support the projects and this figure will be match-funded by Government through V. Tesco aims to recruit 40 full-time 'Catalysts' across England and 12,000 young volunteers to take part in community projects ranging from setting up a youth club, helping out in an old people's home, or organising a party for socially deprived children.
Waitrose is one of the UK's premium supermarkets and it joined John Lewis Partnership in 1937 as a chain of 10 specialist food shops. Waitrose is one of those among retail businesses to travel an extra mile in making the society a better place to live (Waitrose, 2008). Waitrose travels toward sustainability by focusing manly on delivering the best offers to everyone involved from shareholders to customers and suppliers (Jones et al., 2003). It has focused on seven main ways to moving toward sustainability: climate change, packaging, waste and recycling, sustainable reconstruction and reconstruction, ethical supply chain management, sustainable sourcing, health and nutrition, and building sustainable communities (Waitrose, 2008).
Waitrose engages 'Fair Trade for British Farmers' campaign during Fair Trade Fortnight 2007 and it concentrates heavily on Lamb, Beef and Dairy because this is the farming that has shaped Britain's countryside and to show both problem and examples of good CSR practice. Waitrose has become the first UK supermarket in 2006 to sell only line-caught fresh and smoked cod and haddock in place of trawled net fish, with an intention to announce that it wants to remove beam trawled fish from its assortment. And it does not only offer customers well-selected food choices, but it also provides free advices on healthy eating to customers by making these information available on its official website where people can gain many useful healthy and nutrition advices, ranging from healthy pregnancy, weight management to healthy eating for young children (Waitrose, 2008).
In response to heavy concern on climate change, Waitrose works hard to reduce water usage and excessive waste and to minimise the environmental impacts caused by its products and packaging, distribution network and business operations. Waitrose packaging designers are continually working to improve packaging performance and, where possible, reduce packaging weight. Waitrose is already on track having reduced packaging consumption relative to sales by 36% since 2000. At the same time, Waitrose continually seeks the environmental and technical feasibility of alternative materials, such as biodegradable packaging and in 2004 it introduced a 100% biodegradable jute-based wine carrier bag, with £0.20p from every sale donated to the Spiti Project which is a London-based charity supported by His Holiness the Dalai Lama that is helping to provide a school, medical facilities, educational scholarships and the installation of water pumps for villages in the remote Spiti region of the Himalayas (Waitrose, 2008).
Also, Waitrose makes both financial and non-financial contribution to the communities. In 2008, it has given £1 million value of products to Barnardos, the British Heart Foundation and FareShare and made financial donation of £6.2 million, which are 1.36% of pre-tax profits, to charity and community groups where Tesco donated £57 to the charities, which are 1.9% of pre-tax profit. It aims to offer every customer the best possible shopping experience contribute to local communities through charitable giving, volunteering and long-term community investment (Waitrose, 2008).
4.2 Social Responsibility: Tesco Vs Waitrose
The main reason of how and why Waitrose is a more socially responsibility corporation than Tesco is because CSR is a self-interest practice and thus, it can be critiqued that if norms such as protecting the environment or human rights are generally valued, taking a purely voluntary approach to promoting compliance, with such norms will produce few results form firms (Lantos, 2002). Tesco's main intention is to gain maximum profits with fewer investments and thus it has minimal interest in CSR, but practices only what it needs to satisfy its shareholders, the publics and communities. Waitrose, in contrast, is obviously representing its greatest source of support for CSR, seeking to ensure that the good continue to be good, while Tesco knows the Code of practice, but looks for every possible loophole to avoid (Kohls, 1989).
Tesco has been left out of a new 'ethical' stock market because it is not green enough. Tesco failed to meet the FTSE4Good criteria because it did not carry out a thorough enough audits of its environmental policies (BBC, 2001). Tesco claimed in its CSR report that it is "committed to reducing its energy consumption and emissions of greenhouse gases responsible for climate change" (Tesco, 2008). However, it was disclosed that Tesco's delivery trucks clock up 224 million kilometres a year, making 1.15 million journeys. And as part of maintaining its competitive advantage in retailing industry, it flies in fresh produce from all over the world. Thus, making its name in the list of the FTSE4Good is impossible as air freight does not help reducing the emissions of greenhouse gases (BBC, 2001).
In contrast, Waitrose does not only engage standard activities to cope climate change, such as buying more local produce to reduce air freight, recycling, waste and recycle, sustainable fishing, responsible sourcing, Waitrose organic and agricultural policy and electronic product recycling. Critics claimed that Waitrose is one of the UK one of biggest examples of retailer to takes ethical values seriously by early employing carbon-reduction measures since 1999 and it is also working with the Carbon Trust to develop a methodology to measure the carbon embedded in their supply chains and this is helping them to make key sourcing and transportation decisions (Telegraph, 2008).
In addition, it is revealed that CSR programs weaken in developing countries and this allows numbers of multinational firms, including Tesco operating there to gain competitive advantages in less-concerned CSR manner. This is because domestic governance in development countries fails to develop their capacities to protect their citizens (Lantos, 2001). Tesco targets developing countries with weak regulations, cheap materials and low labour cost, so that it can abuse CSR system. For example, related bodies in Thailand criticised that the attitude and behaviour of Tesco is rather surprising and shocking. And on top of that even though it may not have violated any retail law it was behaving unethically by driving out local grocery businesses. Tesco Thailand, which is the third largest market after the UK and Korea, has the impression that is not good for local community. Instead of recognising local, small retailers and suppliers as stakeholders, and work in partnership with them, Tesco Thailand attempts to rid them out of market competition (Ethical Corporation, 2006). And this action makes local small retailers end up closing their business and lay off staff.
Also, Tesco Thailand has completely ignored its UK sustaining community while it is operating in Thailand. During the natural disaster Tsunami which killed thousands of people, including British tourists who were visiting the area at that time. Tesco only helped Thai Red Cross to raise funds rather cutting some of its huge profits to help victims in affected countries (Ethical Corporation, 2006). On the other hand, Waitrose, which has not yet engaged overseas operations, but intends to open stores in Dubai by 2010, made a donation of around £85,000 worth of products, including baby milk, rice, food and toiletries, to countries in Southern Asia affected by Tsunami. It also helped non-profit organisation to raise fund to help the victims. Waitrose has made it clear in its overseas expansion plan that it intends to maintain effective CSR programs and policy in other countries even they have weaker CSR policies (Waitrose, 2008).
Moreover, Tesco claimed in its CSR report that it always provides its employees with safe working environment and all of its workers are treated fairly and honestly regardless of where they work (Tesco, 2008). However, the BBC (2007) revealed that Tesco involved in allegations of worker abuse at garment factories used by their suppliers in Bangladesh. The BBC claimed that garment workers are regularly forced to work 80 hours a week in factories where conditions are often violent, and where workers do not have access to trade unions. Waitrose, in the contrary, is a co-founder of the Temporary Labour Working Group (TLWG) which is set up to establish a set of voluntary minimum standards concerning wages, working hours and conditions in the UK food industry as well as carrying out a consultant with suppliers of jewellery, cushion covers, metal ware and textile industries form India to ensure that they comply with the Code of practice in the UK (Waitrose, 2008).
Furthermore, Tesco says that the flexible store formats improve access to good quality, affordable, fresh food and that it aims to create the best Healthy Living product range for customers (Tesco, 2008). However, the BBC (2008) reported that Tesco has been ordered to pay more than £50,000 in fines and an investigation costs after finding five Tesco stores in South Wales selling out-of-date food. Waitrose is more Waitrose is a more socially responsibility corporation than Tesco because it does not only offer fresh seasonal produce to customers, but also provides free advices on healthy eating, such as delicious healthier alternatives to favourite foods, being either lower in fat, saturated fat, sugar and being the first retail to use calories and traffic light system of the Food Standards Agency's (FSA) which is a new type of labelling to help customers make healthier food choices (Waitrose, 2008).
5 DATA ANALYSIS AND DISCUSSION
5.1 Analysis and Justification
The hypotheses were analyzed using ordinary matrix. The dependent variable was value creation. The independent variables were visibility and the managers we queried are well aware of their firm's PR and marketing programs for CSR and corporate reputation 602 Social Responsibility and Value Creation voluntarism. Since the dependent variable is continuous and the data are cross-sectional, such a model appeared appropriate. Following standard procedure in CSR research, we controlled for company size, risk, and industry.
We undertook tests to demonstrate the reliability and validity of the constructs, and tests to detect problems of common-method variance and non-response bias. The results of these tests appear in Appendix 2.
The Tesco supermarket case is an interesting one for a discussion of CSR because the company shows a CSR awareness across a range of external and internal activities. External activities include local regeneration and employment projects (for details see Retail Week, 7/12/2001), a long-running initiative to link sales to donating computers for schools, and establishing ethical trading practices with different suppliers. In part this external CSR activity can be seen as a counter to past criticism of the supermarket sector in the UK that it was forcing suppliers (particularly farmers) to accept very low prices for produce, and then making unreasonably high profits from the sale of that produce in the supermarkets. Whilst subsequent reports have not supported these continuing allegations, supermarkets have taken a variety of steps to gain greater public support.
Tesco recently produced a Corporate Social Responsibility Review for 2009/10, which extends the comments made on CSR in its 2009.10 Annual Report. Within the CSR Review, a strong emphasis is placed on external CSR activities - 'its environmental and social performance' as its chief executive terms it. These activities relate particularly to environmental issues (such as energy efficiency measures and recycling efforts) and community activities (most notably Tesco's 'computers for schools' initiative, and working with local authorities in 'regeneration' areas to train long term unemployed people for jobs in new stores). Internal CSR activities are noted in such areas as employment diversity, health and safety and the increased availability of an occupational pension scheme.
In terms of handling any issues relating to restructuring, a central mechanism for this is the partnership agreement that Tesco signed in 1998 with its recognised trade union USDAW (Union of Shop, Distributive and Allied Workers). At the time, Bill Connor, USDAW's General Secretary, called this agreement 'the start of a partnership which will offer them the opportunity for more involvement and more consultation than ever before' [The Northern Echo, March 14th 1998]. Likewise, the General Secretary of the TUC, John Monks, declared that poor employers should 'come to Tesco and learn that good partnership relations between a union and employer can add value' [The Times, March 14th 1998]. Examples of this partnership approach have been evident in relation both to health and safety and assistance for the unemployed. In 1999, Tesco was praised by the TUC for a health and safety partnership with USDAW which cut staff accidents and sickness. It was the first retailer to sign up to the TUC's safety initiative. More recently, the focus has been on providing jobs and regeneration through partnerships between local authorities, USDAW and Tesco to guarantee jobs in new stores to local unemployed people who completed specially run training courses.
Under this partnership agreement, staff forums have been created in each of its over seven hundred stores, the forums comprising store management (the Store Manager and Personnel Manager), union representatives and elected employee representatives (elected on the basis of one employee representative per fifty employees with a minimum of five representatives per store).
Elected representatives receive training in for example, holding effective meetings and giving briefings. The forums meet four times a year and discuss local store issues but not terms and conditions. The individual store forums in turn send representatives to one of three regional forums, who in turn elect a national forum. The Tesco UK workforce includes over 100,000 USDAW members (up from 80,000 at the time the Partnership Agreement was signed in 1998). This represents the largest unionised workforce of any UK company.
Management thinking behind the agreement was to create greater staff cooperation, resolve local problems, and create a more open style of communication. The five key aspirations it had for the agreement were:
- to secure high quality representation for staff;
- to allow USDAW to understand and promote Tesco's business goals;
- to guarantee co-operation;
- to enable USDAW to challenge management; and
- to allow Tesco to remain flexible enough to retain its leading market position (Allen, 1998).
The union presence is seen by management to give greater legitimacy to the process and the union has been highly supportive of the agreement. Whilst the partnership relations have not been without criticism, particularly criticism of union incorporation (see for example comments in People Management, 27/4/2000), other commentators have seen advantages in replacing traditional union-management relations with the multi-level forums, particularly in terms of allowing a broadening of the union-management agenda to take more account of issues such as job security, training, and career prospects Allen, 1998). For Allen and others, the result has been an overall increase in trade union and employee input into business decision-making.
The company do not communicate extensively on the nature and activities of the workplace forums. Their existence is noted on their website (in the section on staff, see www.tesco.com) but is not communicated in the company's Annual Reviews or CSR report.
Views on the workplace forums
The functioning of the workplace forums was discussed with managers and employee representatives at two stores, and in addition with a sample of employees not directly involved in the forum activity.
Among those involved there was general satisfaction expressed that the partnership model, based on the staff forums, was a good idea and fitted well with the company's overall policy towards employee relations (though an even more tangible aspect of the partnership model was seen to be the significant bonuses paid to staff reflecting the annual profits made by the company). Among the trade union representatives a feeling was evident that the consultative style of employee relations was the only relationship the company was prepared to countenance with USDAW, and that the consequence for the union of not accepting a partnership approach would probably have been de-recognition by Tesco. However, all parties expressed the view that the forums worked reasonably well as an open exchange of views on store-level matters. At the same time, a number of problems were identified with maintaining the level of forum activity. Two were most evident:
1. Maintaining an adequate agenda. The forum meetings are typically quarterly in frequency and this was widely seen to be too infrequent for day to day issues to be adequately covered. These shorter term issues are more likely to be covered in regular five minute briefings by managers - referred to as Team 5 within Tesco. These briefings have been introduced on a weekly basis and aim to cover all staff. According to the company, currently around two-thirds (65%) of staff say that they are getting a Team 5 briefing each week, and the company's target is to extend this to cover all staff (Tesco CSR Review, p. 25). Further, there are certain subjects - notably issues relating to employees' terms and conditions of employment - that cannot be discussed in the forums. This again appeared to concentrate forum discussion on a store management rather than employee agenda.
2. The agenda of the workplace forums appeared also to have been restricted to a degree by the company's success and continued expansion. Thus, since their introduction in 1998, there had been very little in the area of restructuring for the forums to be concerned with. As a result, emphasis in the forums had been on work arrangements, store organisation, training, customer relations and so on, rather than employees' internal working conditions. Only if at a future date the company undergoes significant restructuring will the forum system, along with the broader partnership relationship with the union, be tested as to its robustness in dealing with the consequences of restructuring. If this arises, however, both company and union representatives will have enjoyed a significant period of building relations under relatively conducive conditions.
Among the employees not directly involved in the forum process, there was some feeling that the forum activity was not a prominent source of information or consultation for them. The feeling appeared to be that these employees learnt more about what developments were occurring from the management briefings, or informally from their union representative, than from the forums.
6 CONCLUSION & RECOMENDATION
The partnership agreement was welcomed by both the company and the union as a means of developing employee relations within Tesco. During a period which has seen considerable decline in union membership and the coverage of union recognition in the UK, this agreement with USDAW has proved symbolic in illustrating how companies and unions can develop collective relations. At the time, Tesco's retail manager, Michael Wemms, maintained that this partnership agreement showed 'that a unionised company should always be able to do better than non -unionised set-up given a sensible structure' [The Glasgow Herald, March 14th, 1998]. Since the late 1990s, a series of other companies in the UK have likewise forged partnership relations with their main union(s). The fostering of relations with unions rather than seeking to minimise their presence in the company represents an area of CSR that has not to date been adequately considered.
The discussions with those involved in the workplace forums indicated a generally supportive response to this method of social dialogue. Currently in the UK there is no legal requirement to consult with employees at workplace level, other than to deal with specific issues (such as collective redundancies and transfer of undertakings). This will change in the coming period as the European Directive on works councils takes effect. What the Tesco case indicates, however, is that such forums can play a useful consultative role within organisations. However, what the case has also shown is the problem (also evident in other studies of consultative mechanisms) of maintaining an adequate agenda for such consultative bodies, particularly where the meetings are held relatively infrequently, where certain issues (such as terms and conditions) are deemed not suitable for discussion, and where other management briefing systems exist which allow more regular communication of locally-relevant issues. As the discussions with those not directly involved in the forums also highlighted, a persistent problem with such representative mechanisms is to how to keep the constituency informed and involved with the consultative process, rather than this becoming an activity more or less separate from the workforce. Overall, however, while the company appears to make little of this activity as a form of CSR - indeed, primarily showcases its external, much more than any internal, CSR activity in its communications to its various stakeholders - the forum structure, and more broadly its partnership relationship with its trade union, represents an example of good practice CSR in the field of social dialogue.
In general, ethics is 'a code of moral principals and values that control the behaviour of a person or group with respect to what is right or wrong' (Chryssides & Kaler, 1996). Ethics also sets a standard for what is right or wrong, or good or bad, so that people in the society can act in the way that will not harm or hurt others (Seitz, 2001). Two main ethical theories that can be applied to the case of Tesco and Waitrose are utilitarianism and Kantism. The CSR policies and practice of Tesco can be referred under the scope of utilitarianism, while CSR of Waitrose can be explained under the concept of Kantism.
According to Friedman and Mill (2007), utilitarianism is the thinking in which moral worth of an action is solely determined by its contribution to overall utility in maximising happiness or pleasure as summed among people. In short, 'all action should be directed toward achieving the greatest happiness for the
Cite This Dissertation
To export a reference to this article please select a referencing stye below: