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This essay is written to give corporate responsibility strategy for Bharti Walmart established in India. Section2 gives description on the operations of the wholesale retailer with an overview on its value chain. Section3 discusses the issues faced by Bharti Walmart from the environmental, social and economic perspectives in the recent past and current problems it is facing. The current corporate responsibility report has been reviewed with the performance of the company with RAFT Model in Section4. Finally, an overall corporate responsibility strategy from environmental, social and contexts have been designed for Bharti Walmart in Section5.
Introduction to Bharti Walmart
Walmart's operations commenced in 1962 by Walton in Arkansas, U.S.A. Currently there are 10,300 stores in 27 countries around the globe, employing around 2,200,000 people (CNN, 2012). It has $15,699m income after tax deductions and shareholder distribution. Walmart's mission is "to save people money so they can live better" (Walmart Report, 2012).
Bharti Walmart Private Limited (Bharti Walmart) is a joint-venture with 50:50 stake between Bharti Enterprises (one of India's leading business groups with interests in telecom, agri-business, insurance and retail) and Walmart (the world's leading retailer, renowned for its efficiency and expertise in logistics, supply chain management and sourcing).
Bharti Walmart was established to provide wholesale, cash-and-carry stores and back-end supply chain management operations in line with Government of India guidelines (Bharti Walmart, 2011). Bharti Walmart has 17 Best Price Modern Wholesale stores, with Walmart running Bharti's wholly owned chain of more than 170 Easyday convenience stores and markets in 11 states of India (FT, 2012).
2.1 Bharti Walmart Value Chain
"The value chain describes the categories of activities within and around an organisation, which together create a product or service" (Johnson, et.al., 2008).
Bharti Walmart sells food items, house-hold needs, apparel & footwear, beauty care, electronic appliances and other commodities, in the format of wholesale cash & carry under Best Price Modern Wholesale brand. Its customers are small retailers, manufacturers, institutions and farmers (Bharti Walmart, 2011).
Its value-chain starts from Production, Assembly, wholesale till retailers as shown in Fig.2.1.
Production sector of its supply chain has been segregated into Food and Non-Food Retail. Food comes from nationwide farmers and processed through Direct-Farm and meat (chicken, mutton, fish and eggs) cleaned and packaged by industries obtained from local butchers. In India, pork/beef are not sold or consumed widely due to religious connotations.
Other retail items such as household items are sold as wholesale retail, which are obtained from Bangladesh, Cambodian and Chinese markets with lower wages. Very minor percentage of items is supplied from local producers, which is chiefly fresh-produce and meat.
Other supermarkets, small mom-pop shops, vegetable vendors, cheap, unbranded electronic outlets and fancy stores purchase goods from Bharti Walmart in bulk for low prices. Finance along with Marketing and Sales is prevalent throughout the value chain of Bharti Walmart.
Fig.2.1. Bharti Walmart's Value Chain
Bharti Walmart's Issues
Fig.3.1 Stakeholders for Bharti Walmart
Stakeholders and surrounding environment of Bharti Walmart is similar to Fig.3.1, as where it has its suppliers, primary producers of its goods, labourers in supply chain, staff working directly under them & senior management along with the wages, contracts, health and safety standards, customers, land they use for operating, logistics, energy consumption, waste production, water, air and noise pollution and biodiversity they affect in the environment.
Issues of Bharti Walmart and Walmart are discussed in Environmental, Social and Economic continuum with relevance to their stakeholders and operating environment.
Walmart's issues are also addressed, as they potentially affect the Indian counterpart through brand image, shared supply chain issues and top management.
The existing litigations, issues and accusations for Bharti Walmart and Walmart have been highlighted in relevance to Environmental, Social and Economic factors in Fig. 3.2.
Fig.3.2. Existing Issues for Bharti Walmart
3.2 a. Environmental:
"Wastage of Energy impacting Climate Change:
Despite six years of heavily promoting its renewable energy initiatives, in 2011, Walmart derived less than 4% of the electricity it used from its renewable power purchases and solar power projects. At current pace, it may take many decades to reach its stated goal of 100% renewable power.
Financing Anti-Environment Candidates:
While Walmart has publicly expressed support for addressing urgent environmental issues like climate change, its dollars skew heavily in favour of candidates who consistently vote against the environment, including many leading climate change deniers. Since 2005, nearly 60% of the $3.9 million Walmart has given to members of Congress went to lawmakers, whose lifetime scores on the League of Conservation Voters' National Environmental Scorecard indicate they vote against the environment most of the time. More than 40% of its donations went to lawmakers who vote against the environment at least 80% of the time.
Consolidating & Industrialising Food Production:
Although Walmart claims to support "sustainable agriculture," it has used its market power to usher in a larger-scale, more industrialized food system, in turn, has squeezed farmers. Between 1990 and 2009, the farmers' share of each dollar consumers spent on pork, for example, fell from 46 to 25 cents, while the share going to Walmart and other retailers rose from 45 to 62 cents.
Sale of Shoddy Products increasing Environmental waste:
By demanding ever-lower prices from its suppliers, Walmart drives down quality and durability of consumer goods. Clothing, appliances, electronics, and other products wearing out faster, has sped up the flow of goods from factory to landfill, vastly expanding the amount of stuff Americans buy and discard.
In the mid-1990s, average American bought 28 items of clothing/year. It has increased to 59 items/year with average of 83 pounds of textiles per person, mostly discarded apparel, each year.
Voracious Land Consumption:
Since 2005, Walmart has added more than 1,100 supercenters (vast, low-rise lands) in U.S., expanding its store footprint by one-third. Most of these stores were built on land which is critical habitat for threatened and endangered species.
Raising Green-house emissions:
Walmart's greenhouse gas emissions have been rising steadily. Between 2005 and 2010, its reported emissions grew by 14%. Its operations now produce 22 million metric tons of greenhouse gases a year and it expects its emissions to continue to expand.
Environmental issues have been depicted in Fig.3.2 a. on (Transport, Production & Warehousing and Bharti Walmart Wholesale shop) with their Key Environmental Impacts as Inputs (Fuel and Energy Use; Resource Use) and Outputs (Global Warming, Emissions, Waste, Noise, Vibration & Congestion and Pollution Control.
Fig.3.2 a. Key Environmental Issues and Impacts
3.2 b. Social:
Child and Forced Labour in supply chain
Bharti Walmart imports cheap goods from Chinese sweatshops through forced labour. Child Slavery comes cheap, and many children found slogging 12 hour shift in sweatshops in Cambodia. Women and children are forced to work overtime, and work seven days a week.
Poor working standards
Facilities are rat infested, and dorms without running water. Employees suffer massive physical and emotional abuse which leaves them almost helpless, and completely unable to speak out against their tormentors.
While cheap fruits and vegetables might look good on paper, it is not so simple when costs to employees, workers throughout the food supply chain, and the environment are left out of the equation.
Wages Discrimination for Women
Plaintiffs alleging the world's largest retailer denied them pay raises and promotions because of their gender are regrouping after the U.S. Supreme Court last year dismantled a class of up to 1.5 million current and former Walmart workers.
3.2 c. Economic:
Allegations of violation of Foreign Corrupt Practices Act (FCPA) of the US that bars bribing officials of foreign governments in India. Five people including Chief Financial Officer (CFO) were suspended by Bharti Walmart.
Violation of FDI under FEMA:
Bharti Wal-Mart will also go slow on planned rollouts of its cash-and-carry stores in the country until this investigation into violations of the US Foreign Corruption Practice Act (FCPA) reaches a conclusion. The Reserve bank of India has already asked the Enforcement Directorate (ED) to probe Walmart's investment in an arm of Bharti enterprises, Cedar Support Services Ltd, for alleged violations of FOREX laws.
Indian government investigated into alleged Foreign Exchange Management Act (FEMA, 1999) through Foreign-Direct-Investment(FDI) violations by investing $100million in Cedar Support Services in Bharti Walmart as referred to Indian Enforcement Directorate.
(ILSR, 2012); (Walmart India Exposed, 2012); (Sierra Club, 2011); (Huffington Post, 2012); (Business Standard, 2012); (The Hindu1, 2012); (Newsr, 2012)
The discussed issues have been plotted based on assumptions in Materiality Matrix as in Fig.3.3 in order to illustrate the importance of those problems to various stakeholders and their impact on Bharti Walmart's business operations and sustainability (CSRReportBuilder-Intel, 2011)."
Fig.3.3 Materiality Matrix
Review of Corporate Responsibility
This section has review of Walmart and Bharti Enterprises as separate entities, as they don't have a joint report. In Bharti Walmart's website there is a reference to the sustainability report of Walmart and website related to Bharti Enterprises with some relevant sustainability information.
Bharti Enterprises' Values and Corporate Responsibility Governance Structure and Key Corporate Responsibility Pillars which also potentially maps to Bharti Walmart is illustrated through Fig.4.1.
RAFT model given in Fig.4.2, based upon which the corporate responsibility review has been done in Fig 4.3.
Fig.4.1. Bharti Enterprises' Corporate Responsibility
Fig.4.1 a. Corporate Values
Fig. 4.1 b. Corporate Responsibility Governance Structure
Fig. 4.1 c. Corporate Responsibility Pillars
Fig.4.2. RAFT Model
According to (ACCA, 2009), Corporate governance needs to encompass fundamental values of transparency, accountability, fairness, and responsibility. On this context, review on Bharti Walmart's Mission, Vision, Values, Strategy, Director Engagement, External Principles and Management Standards are given in Fig.4.3.
Fig. 4.3 Review on Bharti Walmart's Corporate Responsibility
There isn't a Mission, Vision and Values unique to Bharti Walmart but it is adhered to that of Bharti Enterprises. Though they look impressive, Bharti Walmart is not performing up to the statements' standards as discussed in previous section. Moreover its strategy which pertains to sustainability is not fully implemented throughout its supply chain or in its shops as per reviews by NGOs and other organisations on the company.
It doesn't have a separate/explicit manager or director to engage in social welfare issues or to address sustainability problems. Not in adherence to International Labour Organisation in India (which has potential for huge and skilled work-force) but in other countries such as Cambodia, Haiti, Indonesia, Jordan, Lesotho, Nicaragua and Vietnam is a huge drawback for such a big global retailer. It is a member of Business Social Responsibility (BSR), Ethical Trading Initiative (ETI), and Sustainable Apparel Coalition (SAC).
Further to add to the negative brand image, Bharti Walmart doesn't produce an explicit sustainability report or even an annual report which most companies display for stakeholder's view on their website. This shows they are not transparent, unaccountable, not fair or responsible organisation in terms of stakeholder engagement, employee engagement as per RAFT policy in Fig. 4.3.
Review of Corporate Responsibility Report:
India is considered as medium risk with prevalent issues of poor working conditions associated with varying interpretations of local law regarding contract workers and lack of systems to verify compliance of wage and hiring procedures. Additional challenges include shortage of labor due to alternate employment opportunities, egregious working hours, undisclosed subcontracting and nonpayment of overtime premium.
It has been addressed with Sumangali bonded labor schemes, working with stakeholders, such as Tirupur Stakeholder's Forum where additional guidelines for employment practices in factories supplying to Walmart.
Sustainability focused technologies, ranging from LED lighting and energy-efficient refrigeration systems to daylight harvesting in India. Water conservation by filtering storm-water runoff from rooftops and parking lots through layers of gravel and sand before it flows into the water table.
Implementation of system to capture and process wastewater from facilities for re-use in such applications as irrigation and flushing.
Shipper boxes In December 2011, Walmart India began piloting use of innovative shipper boxes to transport frozen food to several long-distance delivery stores, utilizing dry ice to keep products frozen regardless of shipping distance.
Walmart India Direct Farm program grows to 3,700 farmers, Initiated in December 2008 with 65 farmers in Malerkotla, this has expanded to include 3,700 farmers across Uttar Pradesh, Delhi NCR, Haryana, Karnataka and Maharashtra states. Working with small farmers to close critical gaps in cultivation and postharvest processes, farmers earn better-prices for their products and receive expert advice on crop planning and management, while customers benefit from fresher, safer and lower-priced produce. With business growth, a more robust system for consolidation, handling, packaging and delivery of fresh-produce will be developed. It grants to Technoserve for training of small vegetable farmers, positioning to reach an additional 7,200 farmers this year.
Corporate Responsibility Company of the Year, Silver-Bharti Foundation's Changemaker Awards & Overall Best Corporate Social Responsibility Practic - World CSR Day/Global CSR Awards.
Developing and delivering training programs for associates and communities, by collaborating with local governments, schools and communities to effectively address issues related to employability of the local workforce.
(Walmart Stores, 2012)
As in Fig.5.1, it is essential for any company operating in an industry to have strategy in global context with responsible actions towards environmental, social and economic impacts. Bharti Walmart should be a revolution adhering to code-of-conduct and adherence to industry standards.
Fig.5.1 Global Strategy
FDI refers to capital inflows from abroad that is invested in or to enhance the production capacity of the economy. Foreign Investment in India is governed by the FDI policy announced by the Government of India and the provision of the Foreign Exchange Management Act (FEMA) 1999. (Competition Commission of India, 2012). FDI invasion in retail sector in India has proved to be contradictory to this point, with breach of FEMA.
FDI with potential benefits given below is good for Indian economy if done without corruption, violation of laws and adherence to ethical standards:
Increased trained Indian personnel in education, research and technical domain.
Generates employment and raises living standards.
Collaborative efforts to tap high deposits of natural-resources.
Capital for sustaining high-risk projects.
Foreign competition and removal of import tariffs, triggers domestic firms to reduce prices and produce high quality goods; Monopolies also get suppressed.
Improves Indian Economic infrastructure.
(Azhar & Marimuthu, 2012)
Fig.5.1 a. Impact of FDI on Indian Economy
As in Fig.5.1 a, high FDI inflows to Indian economy would increase supply of goods in the economy, with unchanged demand levels. Supply surplus would decrease prices and aid GDP growth with lesser output gap.
Moreover, Bharti Walmart has to act in a way to aid economic growth of India, with importance given to local communities through philanthropy, waste-reduction and environmental sustainability throughout its value-chain and supply chain.
It is vital that Bharti Walmart implements Fraud Management structure as in Fig.5.2, to minimise and eventually eradicating fraud in Legislation, Ethical Culture, Corporate Governance and Risk Management continuum to address current corrupt practices and to gain sustainable competitive advantage.
Fig.5.2 Fraud management:
An effective anti-fraud strategy in fact has four main components:
Fraud prevention: Adopt methods that will decrease motive, restrict opportunity and limit the ability for potential fraudsters to rationalise their actions. In the case of deliberate acts of fraud, the aim of preventative controls is to reduce opportunity and remove temptation from potential offenders.
Prevention techniques include the introduction of policies, procedures and controls, and activities such as training and fraud awareness to stop fraud from occurring.
Fraud detection: As fraud prevention techniques may not stop all potential perpetrators, organisations should ensure that systems are in place that will highlight occurrences of fraud in a timely manner.
Usage of analytical and other procedures is involved to highlight anomalies, with introduction of reporting mechanisms, to provide communication of suspected fraudulent acts. It should have exception reporting, data mining, trend analysis and ongoing risk assessment.
Fraud prevention and fraud detection both have a role to play and it is unlikely that either will fully succeed without the other. Fraud detection acts as a deterrent by sending a message (response) to likely fraudsters that the organisation is actively fighting fraud and that procedures are in place to identify any illegal activity that has occurred.
Ethical behaviour needs to be embedded within the culture of an organisation. Commitment from senior management and 'tone at the top' is key. Employees are more likely to do what they see their superiors doing than follow an ethics policy, and it is essential that management do not apply double standards.
Attitudes within an organisation often lay the foundation for a high or low fraud risk environment. Where minor unethical practices may be overlooked (e.g. petty theft, expenses frauds), larger frauds committed by higher levels of management may also be treated in a similar lenient fashion.
In this environment there may be a risk of total collapse of Bharti Walmart either through a single catastrophic fraud (Violation of FDI and Bribery) or through the combined weight of many smaller frauds.
Therefore, it is important that Bharti Walmart considers both fraud prevention and fraud detection in designing an effective strategy to manage the risk of fraud through developing risk-culture and attitude towards Bharti Walmart's long-term sustainability.
Fig. 5.3 Addressing Sustainability Issues
Currently, environmental issues though not major in quantification in India as much as in U.S.A, are vital towards CR Strategy. It is achievable through Bharti Walmart's stakeholder engagement, communication and direct involvement in sustainability issues produced by NGOs and social welfare organisations. Problems raised should be a addressed and mitigated to prevent in future as shown in Fig. 5.2.
Fig 5.4 Overall Strategy
The pressure on retailers to act more sustainably has never been greater. Consumers are basing their purchasing on the environmental provenance of a product as well as its cost and quality. Technology has a major role to play in helping retailers meet their sustainability objectives, at a pace that best suits them and their business plans. Incorporating sustainable ways of working into the business doesn't have to involve costly or dramatic changes, but sound and implementable corporate responsibility plan (Torex, 2012).
As in Fig.5.4, an overall strategy for developing a sound corporate responsibility report for Bharti Walmart is proposed. It is important to consider environmental, social and economic factors with context to corporate strategy, report parameters, governance, commitments, engagement and Management approach. It should not be only a document but implemented in real-time and constantly reviewed, monitored and updated to suit market factors incorporating risk attitude.
Fig.5.5 a Balanced scorecard
Fig.5.5 b Key Performance Indicators
This strategy should incorporate Balanced scorecard approach as in Fig.5.5 a and b while designing it. This approach includes Customer, Operational, Employee and Financial perspectives aligned with Bharti Walmart's Mission, Vision & Goals along with its Critical Success Factors (Customer Satisfaction, Operational Efficiency, Employee Excellence and Financial Profitability) which provides it cutting edge amongst competitors and has Key Performance Indicators (Market Share, Yield Rate, Employee Training & Welfare and Revenue Growth) encompassing the basic level of performance required for that criterion.
Bharti Walmart 's issues in context of environmental, social and economic factors were assessed using Materiality Matrix. Its corporate responsibility practices were reviewed using RAFT model. Strategy to address its issues and weakness in its current corporate responsibility report are given Global Strategy, Fraud Management, Addressing Sustainability Issues and Overall Strategy models.