Corporate Social Responsibility: Tesco and Sainsburys
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.
Importance of CSR: Case studies of Tesco and Sainsbury
Corporate social responsibility which needed explanation some decades ago, is now included almost every mission statement and does matter in the recent time. It is to a very large extent true that with the awareness of consumer, Media, certain rules from the authorities and pressure from NGOs have lessen the harm of the corporate world to the society. But on the other hand it has been observed that if a conflict between profit and doing the right thing is seen profit wins.
To start with, the project will examine what CSR stands for in reality in the light of the definitions provided by different intellectuals. It will further highlight does corporate social responsibility matter followed by the discussion about the importance of CSR in the recent times. After that the project further enquires the different approaches towards CSR as some people are in favour and many are against CSR activities in the business.
Furthermore, the project throws light on the obligation and practices of the different institutions and authorities which includes businesses, Government, Professional accountants, Non government organization and general public as well.
The impartial conclusion has been made after enquiring the findings from previous literature, previous progress in respect of CSR, corporate world's role in current situation, future priorities declared by government, accountants, non- government organizations and civil society .
Moreover, an analytical approach of case studies has been adopted in the project where mainly two companies Sainsbury and Tesco have been chosen to demonstrate the corporate world's current role with regards to CSR. In addition to two companies Sainsbury and Tesco, the analysis of the scores of other companies is also included to reach the conclusion.
Finally, the projects propose some recommendation with regards to CSR for Government, Professional accountant, Businesses and civil society that they need to make collective efforts to make this world a better place not only for themselves but for the successors as well.
1.1 What is CSR?
Although every organization has formed a different definition for corporate social responsibility yet there are common grounds and connection between them. CSR is about how companies manage business processes to produce an overall positive impact on society. (www.mallenbaker.net)
With the passage of time CSR has become very important issues in the corporate world and even for other stakeholders including media. For instance the financial times and guardian have special reporters for Corporate Social Responsibility of the corporate world. Social responsibility can be found in almost every weekly newspaper. According to Mallenbaker CSR is something which ‘like original sin' can never be escaped by corporate world. The following illustration will help to explain CSR to a very large extent:
In terms of the above mentioned illustration, to bring the quality of management, the organization or company has to consider all the inner and outer circle factors which will ultimately bring about the positive effect on the society. For instance if the company tries to show its responsibility in respect of Environment it has to satisfy the government, non-government organization and civil society concerned with environment. Similarly for work place it has to keep in mind the employees rights and unions as well.
1.2 Who are Stakeholders?
Person, group or organization that has direct or indirect stake in an organization because it can affect or be affected by the organization's actions, objectives and policies. Key stakeholders in a business organization include creditors, customers, directors, employees, government (and its agencies), owners (shareholders), suppliers, unions and the community from which the business draw its resources (www.businessdictionary.com). Businesses generally need to manage their relationship with their stakeholders for both short and long term benefits. It is considered more valuable for any company to involve the stakeholder in the whole process and communicate them through a sophisticated process. For the lasting relationship with the stakeholders, the managers need to expand role of the stakeholders by moving form just informing and responding to involving them in corporate social responsibility process.
The history of social responsibility of the corporate in the world is as old as business itself. For instance the laws to protect forest during commercial operation can be found almost 5000 years ago. In ancient Mesopotamia almost 1700 BC King Hammurabi introduced some laws for farmers, builders and innkeepers which showed that they would be prosecuted if they caused any death or major problem for the citizens. In old Rome senators grumbled about the failure of business to contribute sufficient taxes to fund their military campaigns. (www.brass.cf.ac.uk )
With the advent of industrialisation the impacts of the business on society assumed a new dimension. By the 1920s the world saw a new discussion about social responsibility of the business which was actually the beginning of the modern Corporate Social Responsibility movement.
In March 2006 the European commission published its latest communication on CSR which clearly defines that the companies should recognise the social and environmental concerns in their business activities. The aim for this communication was to make Europe ‘pole of excellence ‘on CSR.Uk government also encouraged such activities and in the ‘global reporters surveys' UK companies were rated the top 3 reporters. Almost 80 % of FTSE 100 companies report on social and environmental issues. (www.corporateRegister.com)
1.4 Project Objectives
A large part of the project includes the discussion about the importance of the CSR to the businesses, Government, civil society and especially for the professional accountants who can play a very important role in respect of CSR reporting. It has been tried to achieve the following objective in the project.
* What is CSR in reality with its true spirit
* Importance of CSR in the current era
* Stakeholders' expectation from Corporate World
* Role of professional Accountant
* What the businesses are doing in this respect
* How CSR can be developed
* Is there any legislation exists or needed
The debate on CSR is growing day by day but in reality a big part of the corporate world and society almost does not know the real meaning of the this term. Some recognise it as a report for public relation. Some say it is about to improve the business competitiveness. Some call it a good business practice. The other feels it is just a type of threat. CSR in reality is a framework of relations between corporate world and the rest of society both nationally and internationally. It is not the activities just for the big countries in the world but for all the companies exist in this world because people exist everywhere.
CSR is good for long term business development as well as for wider society. The world has seen progress in every area and this thing has increased more concerns for the society. That's why the partnership of society and business world is needed to deal with all the concerns. Government in this aspect ha a very important role to play to bound and encourage the corporate world to recognise its social responsibility and act positively.
This task is not only the responsibility of one department ,company or community but participation is needed from every field of life including Governments, Corporate world, NGOs, Professional Accountants ,Professional bodies and Civil society.
1.5 Priorities So For
CSR has gained more attention for all including media but on the other hand the real importance of the CSR is being neglected or going behind the scene in some way or other. Many organizations are using CSR as a tool to make money for their shareholders ignoring the other stakeholders of the business which is totally against the true spirit of CSR.
The government and private bodies made some priorities in the past and started working on CSR. They precisely mentioned some principle to go along
with these issues. For example U.K CSR department announced publically that it will highlight the importance of social and environmental responsibility, assist the involvement of all the small and medium sized companies in this respect. They further mentioned that they will favour the transparency of CSR reporting and aware the whole corporate not only in U.K but all over the world.
To talk about the professionals who are considered responsible for reporting financial and social issues used to follow only a set of rules established by GAAP and other bodies. These rules and regulation do not seem to be helpful for the professional accountants to report social and environmental issues. The professional used to look into the past for reporting like historic cost, prudence etc and have ignored the changing trends of the world which has become the global village. Although management accounting deals with the removal of waste which is also a part of CSR yet there are so many things which the accountants are lacking. The accountants should know the reality that the standards only provide guideline and it is accountants who by using their own moral standards ethically can make the things bit better.
In terms of the firms' priorities for CSR, it seems that they are claiming more than taking practical steps and their priorities together with their practise are ambiguous. Although CSR reporting have become tradition in many companies but still they are lacking many aspects. It seems that they are looking after their own benefits only and not giving importance to other stakeholders .They seems to follow Friedman's idea that money belongs to shareholders only and they have to decide where to invest it. They are planning for short term ignoring long term. They do no consider this reality that by investing in social issues like community development, employees betterment , customer care, environment issue etc not only improves the reputation of the companies but develop the companies benefits in long term.
But in spite of all the claims it seems that saying something and doing something practically are two separate things. One can find hundred and thousands of press releases about CSR but less practical steps can be found. It does not mean that nothing is being done on CSR but more needs to be done.
2. Literature review
This Chapter will examine the academic literature on Corporate Social Responsibility. More specifically the review will focus upon what CSR in reality stands for, its importance, Rules and Regulation, what the companies are doing in respect of CSR, Professional Accountants' Role and expectations of the stakeholders. CSR which has been used for business ethics, defined as tantamount to corporate philanthropy, and considered strictly as relating to environment policy has different meaning and importance for everyone. (McWilliams, Siegel, Wright, 2006)
"Through the power of collective action, the Global Compact seeks to advance responsible corporate citizenship so that business can be part of the solution to the challenges of globalization. In this way, the private sector - in partnership with other social actors - can help realize the Secretary-General's vision: a more sustainable and inclusive global economy". (www.unglobalcompact.org)
2.1 The concept of CSR
"JCI believes that CSR is about what business can do - not about what business must do. It is about opportunities not about obligations or new rules". (www.davidgrayson.net). The recent CSR concept was first found in the mid-twentieth when the focus was just on social issues like charity and Labour issues. But later the area of discussion widened and covered ecological issues as well. It included how business should take account of its economic, social and environment impacts in the way it operates- maximizing the benefits and minimizing the downsides.
Corporate social responsibility means that a company or business is not only accountable to its shareholders but to all its stakeholders which include its customers, suppliers, employees, local communities, investors, environment, governments etc. CSR to a very large extent has been noticed a voluntary action with less legal requirements.
2.2 Importance of CSR
The exploitation in the business world is as old as business world itself. Whether it was employees rights, communities inconvenience, environment, shareholders, customers, suppliers, creditors or debtors it has been obvious everywhere. But as the CSR ha gained a lot of attention, the world has become the global village now where the comments like ‘' Profit is only responsibility can not be accepted. (Husted, B.W. and Salazar, J., 2006). Where selected stakeholders like particular suppliers, creditors or shareholders can not be favoured by managers, where abuse of power by business can not exist, employees can not be exploited and society can not ignore the damage of the environment.
The main reason for the awareness for all these things is CSR. One thing is sure that the pressure on business to play its role on social issues will continue to grow in future. In the last ten years the institution which worked hard within the global sphere of operation gained more respect, power, monetary benefits and influence as well. On the other hand the institutions like police, judiciary and scores of government institutions have been failed in doing so. But the pressure is growing day by day in this respect.
The governments have admitted this thing that it can not change the whole world without the help of the people who are living in the world particularly the corporate world which is getting benefits from the society. So the government is in one way or another putting pressure on the businesses to contribute towards the social issues.
On the other hand businesses have also come to known that for long term recognition and benefits, they have to be active in respect of CSR. They have to recognise the rights of their employees respect their suppliers, save the environment and contribute towards the other issues which exist in the society
2.3 Intangibles and CSR
The importance of the intangibles can not be ignored as the new International Financial Reporting Standards (IFRS) stated that from 2005 all listed European companies must report acquired intangible assets. The intangible assets includes Brand value, goodwill etc. (www.csr.gov.uk).
It is said that intangible assets are more important for a business than the tangible ones. CSR not only helps in building these assets but protects and expands them. For example the brand value of any business do not start form the beginning but retained afterwards with different CSR activities which may include Consumer specific activities, health and safety measures , Sponsoring community development programme, support for clean environment and so on.
A business can be more competitive and successful as well by adopting CSR policies which is an edge for any company. For example a link between a business and customer give more information to the business about the needs and requirements of the customer. Ultimately this thing results in the business becoming more competitive in terms of product development. CRS also makes the businesses more efficient and competitive in respect of price by taking steps like minimizing waste .If the companies prefer to make the recyclable products, it can help on the one hand to reduce a danger for environment and on the other hand can help a lot to reduce the cost of the product which ultimately results in low price for the customer and more benefits for the businesses.
2.5 Different Approaches towards CSR
Corporate social responsibility is one of those topics-like Manchester United and the New York Yankees- that raises passions both for and against.
(Simon, 2005). Different approaches can be found about CSR which are contradictory. This part will examine some of the approaches available and analyze them.
For many years, Milton Friedman (1962) has been known as the villain in the business and social literature. His notion, that business are owned by their shareholders and they have to decide about their money if they want to give it to the charity or not, has been criticized (Husted and Salazar, 2006).He further had an argument that CSR is indicative of self-serving Behaviour on the part of manager and reduces shareholders wealth (Abagail , Donald and Patrick 2006).But without going into details this idea seems to be true that how spending more on social issues will help to maximize the benefits of the businesses . The shareholders do not have any problem to spend a moderate amount on these types of issues.
On the contrary, there are others who have totally different opinions. For example Jones says in his stakeholders' theory that the firms which are loyal and honest to their stakeholders ultimately create incentives for their own firms. Some say that CSR is only used by some companies to get competitive advantages. (Abagail , Donald and Patrick 2006)
Some are with the viewpoint that CSR is not about giving charity only but it is more than that. It is about helping the community, taking steps to save environment, taking care of the rights of employees, improving relationship with customers and about contributing towards other social issues. (www.mallenbaker.net)
One thing is quite sure from the previous experiences that companies cannot maintain business success and shareholder value by maximising short-term profits and the importance of the CSR can not be ignored in the recent time. (Oketch, M. 2004). The companies should, therefore, should take part in the activities which allow them to get benefit in the long run, and contribute as much as possible to the community without making a loss. This will take them towards a win-win situation.
2.6 CSR and Poverty Reduction
Because of the unfair distribution of the wealth, people in some countries do not have food to eat and water to drink while in some countries people have more than they need. Although poverty reduction and CSR do not seem to be connected with each other yet the social responsible business can contribute to reduce the poverty especially in developing countries. Creating Jobs, Training the people, addressing the issue of child labour, gender equality, health care, community development, higher minimum wage and better working place conditions are some of the steps under the roof of CSR which can help to reduce the poverty to a certain level. A proactive approach of corporate world, society, professionals and governments is needed towards CSR to reduce the poverty.
2.7 Professional Accountants' role
Scores of Professional accountant have already started taking steps to adopt the concept of CSR and ready to contribute towards a contemporary issues especially environment-being the most important currently. But they have been criticised usually for not unfolding the required information which the stakeholders are looking for. Their CSR reporting fails to be logical and does not produce comparable data on environmental issues, risks and uncertainties which can be relevant to the business' current and future performance .
The main objective of corporate reporting is to communicate economic measurement of the information about resources and performance that would be useful to users who have a right to this information. To fulfil this objective, corporate reports have to possess the following qualitative characteristics: relevance, reliability, comparability, objectivity and timeliness (Barry Elliot and Jamie Elliot, 2004).
Accountants, who are actually considered responsible for reporting all the aspects, have been following set rules made by professional bodies and other authorities. These bodies have only provided basic rules which do not include the ultimate guidance on social and environmental issues. Furthermore accountants have been focusing on past only rather than dealing with present and future. For instance historic cost, prudence, representational faithfulness and so on have been their basic areas of interest. These concepts actually do not help when reporting social and environmental issues.
After years of criticism both professional bodies and government worked out certain criteria's about these issues. But in spite of the fact that accounting standards have some provisions and government has put some restriction, the accounting professionals need to take these new issues into consideration while reporting financial performance. The standards only provide basic guidelines to standardise the system globally and the whole world will be a better place if theory and practice is balanced for its betterment. The accounting professionals need to use their moral standards as well while reporting.
2.8 Governments' role
The role of the governments is very vital to improve the contribution of the business to the social development. According to many intellectual the basic thing which prompts any organization to play its responsible role in society is legislation in that particular area. There are laws which cover many areas like minimum wage, Health and safety and disclosure to investors but the governments have probably need to make some amendments in laws in the areas such as social and environment. Whereas on the other hand many opine that if the legislation regarding CSR is prepared, the businesses will only make efforts which the law requires but never more. At the moment many companies are doing their best voluntarily but the legislation can effect their motivation and they may step back.
The governments have been facing two challenges. First how to engage more and more companies in CSR and secondly how to make the contribution of the companies better in terms of CSR. For the first challenge the government has made a set of rules and regulation for the companies to follow CSR and reviewed it action and polices across the board and made CSR a priority. For the second challenge the governments have been encouraging the roles of the companies which are doing their bets for the social issues.
The governments can make corporate social responsibility better by providing best practice guidance, intelligent regulation and incentives to the companies where needed. Some suggestions of making a separate department for CSR have also come to the surface from many critics. They think that accountants are not supposed to deal with CSR especially social and environmental issues.
2.8.1 U.K Government
U.K business world to some extent going in the right direction as the global Reports 2006 survey shows that U.K companies were rated the top three reporters (www.csr.gov.uk).
‘'Since I became Minister for CSR in May 2002 we have seen rapid growth in
Interest in the application and implications of CSR. What has impressed me most has been the level of creativity and enthusiasm brought to the subject from all quarters. We've seen encouraging progress. I'd like to highlight some significant recent developments and look at where we need to focus for the future.'' (www.csr.gov.uk)
The government encourages companies to report on their CSR performance in different ways like:
* Issued guidance on environment reporting
* The ACCA sustainability reporting awards
* Supported the global Reporting Initiative
The U.K Government has brought the regulation up to date as well. From October 2007 Quoted companies must also disclose the information about employees, environment, social and communities matters. Company act 2006 also has shown some legislation in this respect. (www.corporateRegister.com)
2.8.2 European Union Role
Like UK European commission also considers Corporate Social responsibility an important area and have already started working. In 2001 the European commission developed a strategy on CSR which resulted in the establishment of a Multi-Stakeholder forum on CSR in October 2002.In march 2006 European commission published its communication on CSR which states that CSR can make a significant contribution and make Europe a ‘' pole of exellance''. During its presidency of EU in 2006, Finland held a conference with the name ‘' Corporate social responsibility policies promoting innovation and competitiveness'' which also emphasized on the importance of the Corporate Social Responsibility. (www.csr.gov.uk)
2.8.3 International Commitment
In September 2006 a ‘world summit on sustainable development'' was arranged in Johannesburg where all participant committed to promote corporate responsibility and made a future line of work.
Some critics, however, says that the government is trying to avoid its duties because it is just dependent on the NGOs. Governments are trying to push NGOs on the front foot instead of going forward themselves. It is true that governments are making efforts for the development of CSR but the main problem is practice. It has been observed in different surveys that the non-government organizations in the world are making more efforts and taking practical steps for the solutions of social issues than the governments and the Governments are lacking the implementation of the its theory .
2.9 Consumer and CSR
To talk about the role of the general public, they have also a very important role to play. Sometime the companies want to be more efficient and wishes to make CSR Central to their corporate identity. For instance the Seventh Generation who are the suppliers of the chlorine-free toilet tissues and Ben & Jerry's, who are the eco-friendly ice-cream maker, have not been responded well by the consumer. It seems that only minority of people are ready to pay premium prices for these responsible products. This type of behaviour from consumer can demoralise the companies or force them to limit their CSR activities. Some critics says that only consumer can not be blamed for not supporting CSR activities as it is the duty of the government that it should aware the general public about CSR. If a common consumer does not know what CSR is or how it can be supported, how consumer can encourage such activities.
2.10 NGOs and CSR
NGOs and trade unions have been pointing their fingers at the international government bodies for their lack of commitment towards CSR. It is to some extent true that companies have been left alone with less guidance and little support from governments.
It has been noticed that Non-government organizations have been working more actively than the governments. Whether they are social or environmental issues non- government organizations seems to be excelled. For instance in many parts of the world different charitable or non- profitable organizations are going ahead to the governments' institutions, professionals, and corporate world. ActionAid , Amnesty International UK , Oxfam GB , Refugee Council , Saferworld , Save the Children UK and World Development Movement are some of the examples of the NGOs which are working for social and environmental issues and putting their best efforts without making any profit.
2.11 CSR in developing countries
CSR aims both to improve the contribution of the business in society and maximize the benefits out of the business activity. The more CSR activities can be found in the richest countries than in the middle and low-income countries. The agenda of CSR is less visible in these countries.
CSR actually offers opportunity to the governments, Private Sectors, Professional Accountants to bring changes in the current social system in these countries. Even the companies which are doing their businesses in the developed countries can do a lot in these countries by expanding their Corporate Social Responsibility practices to these countries. By doing this they can enlighten their image and get long term benefits as well.
However over the past few years the governments, businesses NGOs and civil society have managed to some extent to adopt CSR agenda and have started doing something in the developing countries as well . For instance the countries like South Africa, China, India, Brazil and Philippines have started CSR movements in their respective countries. But it is the beginning and still lot to do in this regard.
2.12 Consequences in the absence of CSR
The above mentioned discussion about CSR and its importance made one thing very clear that CSR has become essential both from the business an Social point of view. If the society, the accounting professionals, businesses and other academics in the financial field do not challenge these issues and stop being passive in order to meet the true purpose of their roles, the problems will continue to grow.
As far as the businesses are concerned they make money while working in a society. If the society where they are working is strong enough in respect of money and can enjoy the basics needs of the life the economy will grow which will result in a prosperous Situation. If the companies are making money from the people, it is not strange to give some part of it back to the people in the form of facilitating them in different respects such as community development, helping the poor, Taking care the children, take care of the suppliers, customers, employees and contribute towards the solution of the environmental issues which is in reality their surroundings as well. It is said that to get love from some one you have to give it first. By doing all the efforts regarding CSR the companies actually enhance their image side by side other benefits for long term. In the absence of CSR business can make money but can not earn long term benefits and respect in the society in current situation.
To talk about the professional accountant, it is obvious that they follow certain rules and regulations while reporting but they need to follow morality and ethics as well. The professional, of course, are the part of society and not the part of problems in society. As CSR has become a source of betterment for the society, they should take care of the social and environmental issues while reporting for the companies and should try to point the risks in future with regards to business side by side giving analysis of the past. If they just ignore the issues of the society, who knows they can be ignored by the society.
Knowledge is a series of inventive activities which applying models to unfold the reality (Watofsky, 1983) .This type of inventive process changes time to time and human beings observe the changes. But the models which human beings themselves recognise vary time to time.
The method of case study has been adopted in the project which will itself answer many questions like ‘How, when and why'. The procedure to go for case study is more explanatory and flexible than the other methods. Case study procedure is found suitable because it helps to understand the complex issues deeply, points out the problems during the procedure and suggests remedies as well.
The Case studies of Sainsbury and Tesco in this project are carried out in order to know the current situation of CSR and its importance in corporate world in U.K. The reason for selecting Sainsbury and Tesco is that the both companies are the very successful and big names in the U.K, represents other business community and rivals as well. The project aims to observe the CSR importance by analyzing their internal and external efforts regarding CSR and their relationship towards the stakeholders of their businesses. It further identifies some of the criticism from the other members of the society and recognises some strategic gaps regarding CSR which needs to be filled. The appropriate method of case studies has been adopted to achieve the objective of the project. The information about the companies which that have been used in the case studies has been taken from the companies' CSR Reports (2008).
3.1 Case Studies
To control the situation, it's very important for the companies to recognise the importance CSR, adopt CSR and change this world into better living place for future generation. Though all the companies are claiming that no one other can be as responsible as they are and Corporate Social Responsibility matters to them yet analysis of the current and past situation is necessary to reach a point of view what is going on and what can be done more.
To analyze the current CSR situation the project will examine the two companies which claim to be the best followers of corporate social responsibility and are considered representatives in supermarket. The companies are J Sainsbury and Tesco which are competitors as well.
3.2 Sainsbury's CSR Review (2008)
J Sainsbury is one of the leading U.K food retailers with some other financial activities as well. It consists of Sainsbury supermarket, Sainsbury's Local, Bells stores, Jackson's stores, Sainsbury's online and Sainsbury's bank. It has employed about 150000 people. According to Justin King, The chief Executive Sainsbury, being a responsible company Sainsbury have five principles that provide a framework for business. These include Respect for environment, a great place for work, making positive difference to the community, sourcing with integrity and Best for food and health' Justin King (www.j-sainsbury.co.uk). The oncoming detail will analyze J Sainsbury's contribution towards CSR and try to reach the conclusion.
3.2.1 Respect for Environment
To start with environmental issue, as the world has seen another problem in terms of environment which is Climate Change. This problem has changed the thinking of the world. Scores of seminar, summits and government policies can be seen in few year times which end in that every single entity in this world need to contribute towards the solution of this problem. As a well wisher of the society, every one needs to contribute towards the betterment of the society. CSR report 2008 of Sainsbury has explained some of the important achievements in this respect and has also set targets for the future. According to the chief Executive, Justin King, Sainsbury is responsible towards the environment and is taking practical steps. (www.j-sainsbury.co.uk)
The first step, according to the CSR report 2008, which they have taken, is that they have reduced the energy consumption. In 2007/2008 Sainsbury opened UK's greenest store where they installed new energy - saving technologies. Another step they have taken in this respect is that they have introduced electric delivery vans and traialled river transport as congestion free alternative to using Lorries in London. Sainsbury improved its energy efficiency in last year from 425 kgCO2/m2 (2006/07) to421 kgCO2/m2 (2007/08). This thing has been welcomed not only by NGOs and government but civil society as well. It would create a great impact on economy, environment and set an example for the other companies because less energy using means less operational costs and less CO2 emissions.
3.2.2 Less water consumption
Water consumption, and send waste to landfills are some other problems which effect the environment very badly. As far as water is concerned ,it is known as life and world's most precious thing .The value of water can be asked the people who do not have it or get it with serious efforts. To do less consumption of the water Sainsbury has taken some steps like they have installed non-hazardous, microbiological urinal flushing system in many of their stores. They expect that this step only will save 201 million litres of water annually. For wastage they reduced the waste sent to landfill by 5048 tonnes a decrease of 6%.They are following the philosophy of reducing, reusing and recycling. Reusable carrier bags are also provided by Sainsbury to its customer to support environmental solution. (www.j-sainsbury.co.uk)
3.2.3 Community Welfare
As community is also an important stakeholder of corporate world, so the importance of the society can not be ignored. So as responsible corporate one has to recognise and respond this important stakeholder. According to Department of health 1.8 million children in U.K are overweight in addition to 700000 more as obese and this figure can increase to 25% by 2050 if the serious steps are taken. Sainsbury has donated 52 million worth of sports and activity equipment to schools through Active kids. They have claimed to raise this amount to 100 million by 2011.Furthermore as a responsible they are sponsoring English Schools' Athletic Association (ESSA)
Being the sole retail sponsor of comic relief since 1999, Sainsbury raised 2.3 million in 2008 only. This money is used to support the most disadvantaged people in the community. This campaign included the activities like Red Nose and Sports Relief. Sainsbury played its part at the time of flooding in 2007 in Gloucestershire when flooding disrupted the main water supplies to the big part of that area. When the water supply was shut off and the people were without water, Sainsbury was the first retailer to donate a free water bottle for the members of the community.
Donating food to charities, Local hero scheme and providing youngsters the experience of scouting are other example of the contribution towards the betterment of the community. (www.j-sainsbury.co.uk)
A safer neighbourhood is very important in any society. Sainsbury originated a scheme of safer neighbourhood in 2006 which was the result of the conversation of CEO Sainsbury, Justin King, and Mayor of London, Livingstone. The purpose of the scheme was to provide safe environment to customers and employees throughout the U.K.
As the success of the corporate world today more depends on intangible things than the tangible. On the one hand the employees' skill is considered unmatchable asset of any organization but on the other hand their recognition and support is also necessary. Any good organization provides their employee a good environment to improve their skills. Sainsbury paid 56 million to their 118000 employees' bonuses in 2007.They further introduced more schemes like Apprenticeships scheme, Graduate programme and leadership programme. They gave them the chance to ‘talkback' colleague counselling and Tell Justin to communicate their problems and put their suggestion to improve the situation .Sainsbury also won award of prevention of accidents occupational health and safety in 2007. This thing would inspire the employees to play their effective role and give them chance to polish their capabilities. (www.j-sainsbury.co.uk)
Some of the important steps which Sainsbury has taken for the development of the community are the recruitment of the Disable people with minimum requirements for the job, providing flexible hours to the employees, Giving chances to the people with fresh start, Local employment partnership and Ex-offenders programme.
3.2.4 Equality of rights
A good socially responsible organization tries to accommodate all its employees regardless of their background, gender colour etc. Equality is another characteristic of Sainsbury's social responsibility. They have reported in the CSR report 2008 shows that they have 24% female duty managers and 16% store managers. They have further announced that they will start a scheme of coaching the female managers. To deal the ethnicity they have announced to take some further steps.
3.2.5 Healthier Diet
Healthier diet can make the society healthier and Sainsbury is deeply concerned with their commitment to provide healthy eating. In 2007 Sainsbury created a Nutrition Science Advisory Group and started working with British Nutrition Foundation and other organization to provide healthy foodstuff to the society. Some of the examples of the efforts are mentioned in Sainsbury's CSR report 2008.Sainsbury in over 80% of their products has already met the Food Standards Agency's (FSA) 2010 salt target. They have removed 26.5 tonnes of salt from their sandwiches in the past year only.
For milk products they also contributed by introducing their own-brand 1% fat milk which is half of the fat milk available in the market.75% of the cereal provided by Sainsbury is high in fibre as most of the people in the U.K do not get enough fibre in their diet. This is another important contribution to make society healthier. They have taken practical steps by reducing sugar and Big 5 drive which encouraged customers to make fruit and vegetables a necessary part of their diet. (www.j-sainsbury.co.uk)
Most of the time the trouble for the customers is to find the product which they are looking for. To make it easy for the customers Sainsbury has made their labelling very transparent with precise description about the product. Customer can easily find the thing they are looking for. In May 2007, Sainsbury became the first to adopt the Department of Health's Guidelines on Alcohol Labelling.
3.2.6 Suppliers' Importance
The suppliers as stakeholder have their own importance and business need to be responsible, honest and fair towards their suppliers. Sainsbury names it sourcing with integrity which means honest relationship with their suppliers. Last year they started a programme to support the organic apple farmers and helped British beef Farmers as well. Sainsbury arranged a supplier conference in Jan 2008 and about 800 delegates attended this conference.
3.3 Tesco CSR review (2008)
Tesco Is world's third largest grocery retailer with more than 440,000 employees working worldwide and 3728 stores worldwide in 13 countries. Tesco claims to be responsible corporate with clear social and environment approach. (www.tescoreports.com)
For Tesco Corporate responsibility is not only fundamental part of their business planning but strategy of growth as well. The chief executive, Sir terry Leahy, has motioned some of the key steps in terms of corporate social responsibility in Tesco CSR review 2008.He explained that the different groups that influence or are affected by their business is fundamental to their values. He has further added that stakeholders' needs and concern also help them to identify the relevant CR issues.
The belief that business has a very important role to play to tackle issues in society has raised challenges for the businesses. Whether it is poverty reduction matter or community development, environment issues or customer satisfaction, are expected to play their roles. The grocery retailer like Tesco which have 3728 stores worldwide and he third largest grocery retailer in the world supposed to be more responsible .To support what Tesco is doing as a responsible business a further analysis of the situation is needed. (www.tescoreports.com)
To start with the environment which requires more efforts in the recent times than previous era? Especially climate change will require some serious commitment from every field of life. The discussion about the climate change opened the eyes of people, governments, businesses, NGOs towards this issue. The experts are with the view that we have to reduce the carbon emission by 50% at least by 2050 which seems a very difficult target for all the countries. In U.K some critics say those supermarkets are to a very large extent part of this main problem. The critics believe that the supermarkets are running energy-intensive stores selling the product which are coming far off area and that are why they can play a very important role to play. (www.tescoreports.com)
Tesco, according to chief executive Sir Terry Leahy, is facing this challenge and intend to do miracles. Some steps have already been taken for instance Tesco has reduced its carbon emission from 8.6 to (2006) 4.47 in 2007.Tesco have also showed a transparent system of publishing their direct carbon footprint which will help them to identify the areas of problems.
On the other hand they have made some joint ventures as well to deal with this problem as it can not be dealt single handed. Tesco has funded £25 million to a new Sustainable Consumption Institute at the University of Manchester for five years. It has also produced £100 million Sustainable Technology Fund to support the reduction of carbon emission which will inspire their suppliers and others to reduce the carbon emission .The main causes of carbon emission include heating, lighting, refrigerating products and transporting goods to the stores. Tesco invested £86 million in energy saving technology which included low energy lighting, energy-efficient bakery ovens, wind turbines, combined heat and power (CHP), trigeneration and hanging curtains on freezer doors. In 2007 this investment reduced carbon emission 5.8% which exceeded the target of 5.5 %. (www.tescoreports.com)
As a responsible company in the world, Tesco has not limited its steps to U.K only but Tesco has invested in energy saving technology in china, the Czech Republic, Hungry, Ireland, Poland, Slovakia, South Korea, Turkey, Thailand and The US. On top of this Tesco has appointed energy champions in Ireland and all staff members attend the briefings about energy saving.
The other environment issues like waste problems have been also dealt with responsibility as the toes 2008 CSR review shows that it recycled 70% of their waste last year which was mostly cardboard and plastic and also cut the packaging material as well. Tesco made 222 millions reusable trays which saved 130000 tonnes of cardboard (www.tescoreports.com).
No business can ignore the importance of suppliers so is the case with Tesco. Tesco claims that it is working with dynamic and confident suppliers. In 2007 Tesco placed special emphasises on supporting smaller and local businesses. Tesco also developed a system called Tescolink which is useful for the suppliers to access data such as store level sales of their products. They further took steps including helping the farmers in one way or other. For example the eggs and milk sold in Tesco are British. (www.tescoreports.com)
3.3.2 Community Development
The positive impact on the communities and struggle to meet the expectation of customers is the slogan of Tesco. Some of the examples are as follows:
* Tesco helped 7000 disadvantaged children in china through schools in 2007
* IN 2007 Tesco contributed 54.4 million to charity
* In 2007 Tesco made donation £20000 to the Red Cross appeal to support victims of floods in Asia.
* In February donated 20000 in China for the help of victims of snow storm.
* In 2007 Tesco provided equipment worth 6.5 million to more than 4000 schools in Poland
3.3.3 A great place for work
Employees in any business suppose to be the most important asset and important stakeholder as well. Tesco received award for the pension scheme ‘pension scheme for the year' and three further awards which included Best Trustee Training and Development, Best Use of Specialist Investment Managers and Best Pension Communication. Creation of 4536 jobs in china alone, Providing job to the people in their 70s and 80s, arrange the flexible working hours for employees, gender and sexual equality, Rewards and benefits scheme, health and safety steps, communication and consulting with employees and training and development of the employees are some of the other example of Tesco's responsible behaviour towards its employees. (www.tescoreports.com)
After having reviewed the current situation of Corporate Social responsibility situation according to the CSR reports of both J Sainsbury and Tesco, the project will highlight certain contradictory issues related to CSR in these companies. The main purpose for taking J Sainsbury and Tesco as case studies was to give an overview of the current situation of CSR in corporate world especially in U.K. J Sainsbury and Tesco are the big names in corporate world and considered as representative in their respective areas. Their contribution towards CSR can inspire the other companies to come forward and their lack of interest in CSR can affect the other companies' behaviour.
4.1 Criticism on Sainsbury
The CSR report 2008 of J Sainsbury shows it as a responsible organization which is trying hard to recognise and respond society with responsibility. But there are other aspects which have been raised by the critics and other members of society.
For instance Sainsbury seems to be perfect on CSR policies when we see Sainsbury's csr report (2008) but the other side of the picture is bit different. Association of Licensed Multiple Retailers criticised Sainsbury for selling alcoholic drinks below cost price. ALMR revealed that on the bank holiday weekend supermarket sold 60 bottles of 284ml Stella Artois for £20.The chief executive of the organization, Nick Bish, remarked that Stella at Sainsbury was ‘Frighteningly cheap' which did not show a responsible behaviour towards pricing .(www.Talkingretail.com)
Another remark against the policies of Sainsbury regarding pricing and building large stores, Dr Michael Warhurst, the environment group's campaigner, said that Sainsbury must take urgent action to improve prices, treatment for farmers and stop building large stores out of town which he argued encourage shoppers to drive and damage local businesses. (www.guardian.co.uk)
Jamie Oliver, the TV Chef, criticised Sainsbury for not joining chicken debate.
"The fact that your PR department hasn't even got the confidence to turn up and talk about what you do for millions of people who come through your doors each week. Of course the supermarkets should have turned up. How could they not? I was really upset."
He further added that Sainsbury has failed to turn up to the filming of his investigations into how chicken and eggs are farmed. (www.fwi.co.uk)
4.2 Criticism on Tesco
Despite the fact that Tesco is a high profile company with significant achievement in terms of CSR, there is still lot to do. Tesco has been claiming that they have a very good environment for its employees and community development is one of their key objectives. But there is another side of the picture which shows Tesco as a rigid company towards the employees. The Urban and Environmental Policy Institute (UEPI) reports shows that Tesco is refusing to hold discussion with local unions and only offering store workers part-time positions. (www.Timesonline.co.uk)
Another example is the sack of two polish employees, Zbyszek Bukala and Radek Sawicki, Tesco's distribution centre in Tallaght. The two workers claimed that they have been sacked after complaining about working conditions at the warehouse. These two workers were actually recruited through an agency and they claimed that the Tesco workers are paid more than the employees recruited through agency (www.timesonline.co.uk).
Andrew Simms wrote a 372 page book ‘Tescopoly' which revealed some discussion about the well known store. He explained that Tesco has become the monopoly in the recent times. Furthermore he responds Tesco's claim that the number of customers who shop at Tesco shows its popularity. He says that this is a ridicules argument. People need food and they do not have so many choices. This argument, he says, is like motorway makes claims that a very large number of cars on motorway show its popularity. (www.channel4.com)
Regarding environment, Tesco's own report shows that London Road Tesco in St Albans store will increase the pollution and will increase 70% traffic in that already busy area.
The above mentioned criticism on Tesco and Sainsbury shows the side of the picture. Tesco and Sainsbury have been claiming that they recognise the importance of CSR and are and doing their ultimate efforts in this respect. It is true that they are doing work in this respect and they have included CSR as necessary part of the reporting but in reality as the above mentioned criticism shows they are lacking many things. They need to recognise the real importance of CSR and try to fill the gaps
The above mentioned discussion raises scores of questions as well for businesses, governments, accounting professionals and academics. To know how much profit is being made is not the only purpose of reporting financial statements. The most important is by which ways and means have this profit been made. Therefore, it is right time for everyone to wake up and recognise their responsibility
Accounting professionals, the users of accounting and other academics in this field can do a lot to change the things. Before going into details on these issues, it is important to know what the regulations and standards are.
4.3 Financial Reporting Standards
* Generally Accepted Accounting Practices (GAAP).
* International Accounting Standards Board (IASB)
* International Financial Reporting Standards (IFRS)
* International Accounting Standards (IAS)
* Financial Accounting Standards Board (FASB)
The only thing which is enough to surprise is that even the Generally Accepted Accounting Practices (GAAP) does not have much regarding aspects such as the environmental issues. The existing accounting concepts only serve to legitimate the existing system and diminish the social responsibilities of organisations and even on global scale countries. They need to stand up and act to bring some change in the existing financial reporting behaviour from an egoistic point of view to a more public interest perspective and include issues like the social and environmental aspects.
4.4 Legislation for CSR
Another question which arises that whether the companies should be legally
Forced to include their social responsibility aspects in the financial report or it
Should be only on volunteer basis. There are contradictory opinions about this issue. Some say that only legal policies for CSR made by the government can affect its true spirit because the companies in that case may cease to put as much efforts as they are putting on volunteer basis without any restriction.
Theodore Levitt in his article ‘Harvard Business Review ‘The Dangers of Social Responsibility' points out that government's job is not business and business's job is not government. (Abagail , Donald and Patrick 2006 ). Milton Friedman, An American Nobel Laureate Economist and public Intellectual, has criticised the government intervention and regulation. He was with the opinion that businesses are owned by the shareholders and therefore shareholders should have the authority to spend wherever they like it to spend.
Some are with the opinion that if CSR aspects are legally forced to include, the companies may try to manipulate the information just for their personal benefits ignoring the real issues. There can be agency problem as well which means that executive have all the authorities and managers can use CSR as a tool to make their career better or can use CSR for personal agendas.
The old concept of the csr has been changed now. It is not just the donation at the end of the year but more than that. It is rather for the companies to show their responsibility whole year for environment, employees, communities etc. If social responsibility is condoned with the certain rules and regulation the outcome would not be according to the expectation - the world would be a better place not only for this generation but for the successive generations as well.
The others are not agreed with this view and wishes to make it legalised and support their point of view with certain arguments. They are with the view that there should be legal restriction for the companies to report their csr contributions in the financial report because all the stakeholder need to know that the company, which they are attached to and have connection in one way or other, is doing its part with responsibility.
Whatever the arguments are given by the both parties one thing seems obvious that even accounting professionals and bodies do not have room for social issues such as environment. The bodies like Generally Accepted Accounting Practices (GAAP) do not have much to support such issues and do not have set criteria. The accounting professionals and other academics need to accept this as challenge and try to include these issues in financial reporting.
Many critics opine that it is the duty of the accountants to report the social and environmental issues .They are with the view point that accountants can only report the financial issues and not the social issues. Although they are not against the importance of the corporate social responsibility yet they are arguing that the separate department should be allocated to this important issue.
The interesting thing is that everyone is trying to raise these issues but is not taking practical steps CSR is not given as much importance as it required. Probably it is time for the academic bodies and professional people as well to bring revolutionary steps and include public interest perspective such as poverty, inequality, employee's rights, environment issues and so on. They should take these issues into consideration while reporting financial performance. The standards of the reporting system provide only basic guideline but the accounting professional can use their moral standard while preparing financial reporting.
4.5 Current CSR Situation in some other Companies
To look after the interest of only shareholders has been the main concern of almost every company -make more and more profit. Therefore, it can be said that companies are following capitalism. Carl Marx advocated that because of capitalism the workers were exploited by the authorities to make more and more money. He believed that the capitalism would be soon replaced by a system favourable for the working class. But unfortunately this has not happened. The main role of the companies has been to look after the interest of shareholders only neglecting the other stakeholders. Since the main interest of the companies has been profit which forced them to act unethically. For instance, Peter Holgate has criticised that the earnings of the companies are increasing in a straight-line but the stock market, Interest and foreign exchange rates fluctuate time to time.(www.pwc.com)
The importance of the issues like environment should be understood and responded by the corporate world. Shell is a big name and considered one of the pioneers for recognising CSR alleged to have polluted Nigerian land and have made the people suffered.
China where Beijing Olympics has provided a platform for the development of the social and environmental sustainability is facing criticism for its problematic environmental and human rights issues. Samsung is known as responsible company because of its contribution in certain areas but also identified as exploiter to its employees because of its labour policy which do not have room for the rights of employees. Similarly Shell is recognised as the follower of CSR but has been criticised by the non-government organization, media and public because it inflated its gas and oil reserves by 20 percent. (www.economist.com).
Some of the other companies are reporting about their social responsibility as well but it is very difficult some time to find the related information. For instance Sainsbury and Tesco have designated separate sections for csr on their websites where they have mentioned so many things but it is hard to find the related material most of the time. One can get readily figures but can not know exactly what their favourite supermarket is doing for social issues. Although it seems good that they have at least set an example for many other companies to come forward and contribute for these issues.
There are other companies which are to a very large extent are acting positively or at least putting their efforts towards the social issues. For example Emirates Group the parent company of emirates Airline has overviewed its environmental programme and have focused on the programme of growing business with creating less waste and pollution (www.csr-asia.com).China which is reported to be the biggest polluted in the world has also taken some practical steps for environment. The sales taxes on passenger vehicles with engine bigger that four litters will be 40 percent from 20 percent. Similarly engine sizes from 2 to 4 litters will be 25 from 15 percent. But for the vehicles with engine size smaller than 1 litter the tax has been reduced from 3 to 1 percent. The policy will be effective from 1 September 2008 (www.csr-asia.com).
As many of the companies have recognised the importance of Corporate Social Responsibility and know that to achieve their goals they have to be volunteer towards the society. In older days some of the British private companies set up railway services costing a lot of money for the benefits of the public without any government pressure. Henry ford started paying his employees doubled than the per hour rate. Avon became the biggest supporters of cancer research. All these companies started foreseeing for long term success in this world they not only have to recognise its stakeholders but have to respond them positively. (www.economist.com).
Many others, however, started making Corporate Social Responsibility their tool to make more and more money. They knew this thing that by donating to the socially responsible investment where the return will be a bit lower, they would be able to achieve less but respectable ways to make money without facing the criticism from society. As the corporate watch 2006 report also shows that companies has made csr a tool for their own personal benefits.
CSR is important and significant in a sense that it makes a good relation not only between the organization and stakeholders but it enhances the image of the organization with long term benefits. A Socially Responsible company tries to operate in a way that its product not only becomes the best alternative of the money of the consumer but also they have a positive role in the society in one way or another. Recycling or renewable energy can be the examples of such products.
As the above mentioned Case studies and discussion conclude that a trend of making CSR for many big names like Sainsbury and Tesco, Motorola, Coca Cola has become an integral part of not only their reporting but integral part of their present and future strategy. They have not only enhanced their business names but are getting long term benefits as well. But on the other hand it has been observed that if a conflict between profit and doing the right thing is seen profit wins. when surveys are observed the most respected business' such as Bill Gates of Microsoft, Jack Welch of GE have not done their part honestly and did not set good examples for other businesses.
Many critics are with the viewpoint that to make the situation better government should take some strict steps and make further changes to rules and regulation such as the Creation of independent Ombudsman. But on the other hand some are with the view that by imposing more rules in respect of CSR by government will effect the actions of the company. The companies will in that case only try to fulfil the required criteria and the companies which are already trying their level best to achieve the state of art situation will be demoralised and even can step back.
Professionals also may help a lot to make the things extraordinary, if they focus on moral standards side by side the provisions made by governments and other authorities. If they only follow the
Cite This Dissertation
To export a reference to this article please select a referencing stye below: