Modern day management of an enterprise has changed significantly in last fifty years or so. Fact that today, only seventy-one original Fortune 500 companies in America remain in existence since 1957 underlines how much more competitive the modern day business has become. Modern day organisations have to be more innovative in order to sustain their competitive advantage and thus need to plan strategically. Strategic Planning of an organization is influenced by the culture, mission, vision and founding values of the organization. There is a constant interplay between the organization and the society which influences both of them in some way or the other. It is important for the organization to carve a niche for itself as an ethical and socially responsible organization.
Business ethics are an important part of strategic plan and should be prominent while planning for the organisation. According to Smith (2003) Corporate Social Responsibility (CSR) is, "the obligation of firms to society or more specifically to those affected by policies and practices"Â (Smith, 2003, p.3). Companies must incorporate various values and philosophy in their corporate strategy and must full fill their corporate social responsibility towards the society.
1.1 Terms of reference:
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The report studies TESCO and evaluates its strategy in the light of its Corporate Social Responsibility. TESCO is the UK's biggest retailing firm having international presence in food, non food and various other retail businesses. According to the company website (TESCO PLC), "Tesco has a well-established and consistent strategy for growth, which has allowed them to strengthen their core UK business and drive expansion into new markets". TESCO lays a strong emphasis on the Corporate Social Responsibility with an objective to earn the trust of their customers by acting responsibly in the communities. This report undertakes a critical evaluation of strategic planning process at TESCO with reference to organisation's commitment to social responsibility and ethical management. The report is divided in three parts; the first part dwells on the relevance of corporate social responsibility and why it is important for various corporate leaders to incorporate various ethical and social implications while planning strategically for the organisations. The second part describes Corporate Social Responsibility at TESCO while the third part discusses various benefits that CSR provides to various stakeholders.
2.0 Corporate Social Responsibility:
Rapid industrialisation and growth has resulted in widening gap between haves and have-nots. The population explosion has almost doubled up the world population in last fifty years resulting in overstretching of precious resources mostly in developing and underdeveloped countries. Today one third of world population lives below poverty. Further there are environmental issues such as pollution, global warming and energy crisis. All these factors pose a challenge to various corporate to address to their corporate social responsibility there by providing help and support to these underprivileged groups. Crane and Matten (2007) emphasise that the CSR must include various economic, legal, ethical and philanthropic responsibilities.
There are three components of CSR which are legal compliance, ethical practices, and social contributions (Lynn Sharp Paine, 2003). Legal compliance means corporate acts within various laws and regulations, including those related to human rights, environment, labor, or consumer protection. Ethical practices denote corporate acts with the spirit of laws and regulations. Social contributions are how companies act to help others and bring about positive impacts and influences in the community, environment, and for future generations.
Corporate Social Responsibility and business ethics:
Crane and Matten, (2006) define business ethics as "The study of business situations, activities, and decisions where issues of right and wrong are addressed." Dowling & Welch, (2004) observed that, "in order to ensure against unethical behaviour organisations need to develop self-regulatory practices that are based on clearly defined ethical guidelines such as codes of conduct". Not too long ago there was only one way of measuring corporate value and business ethics and that was its financial performance. Recently, a new paradigm has emerged, i.e. global warming or sustainable development. This also extends to cover human rights issues such as child labor and compliance and transparent information disclosure. These areas have also been attracting much attention among ordinary citizens. Against these changing global trends, it is now necessary to consider the social performance and the environmental performance as an equally important yardstick. As one of the integral members of society, companies have to respond to these three aspects of corporate evaluation. Ethical strategic management is all about making moral choices (Fisher and Bonn, 2005) that will reflect directly on the personal integrity and credibility of practitioners (Garavan, 2007). It is important to note here that almost all aspects of management practice have ethical implications. Gilley, & Maycunich, (2000) emphasise the importance of educating business leaders to better understand the importance of ethics and how this can be integrated into the business. CSR activities cover a wide spectrum and each company has to make its own distinctive contribution however there will always be some organisations who attempt to avoid even their legal responsibilities (Boxall & Purcell, 2008).
2.2 Theories of corporate governance and social responsibilities:
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Marked to Standard
There are two conflicting theories of corporate governance. The first one i.e. the Shareholders' theorists of Good governance tend to follow Milton Friedman (1962) statement that social responsibility of business is to increase business and consider that shareholders interest in the increase in value of their shares is paramount of Corporations goals. Shareholder theory gives priority to profit maximisation based on a corporation's legal obligations to generate shareholder wealth. The definition of stakeholders is wide and there is no consensus on it. Some encompass within it all those groups without whose support the organization would cease to exist. Others widen the boundaries of the definition to include any individual or group who can affect or be affected by the achievement of the organisation's objectives (S Cooper, n d).The basic premise of stakeholder theory is that business organisations have responsibility to various internal and external stakeholders and not just the owners and shareholders the responsibility includes a responsibility for the natural environment. The strategic planning process must take decisions in the wider interest and not just the narrow shareholder interests.
Corporate Responsibility at TESCO:
The company website (Corporate Responsibility) while mentioning its corporate responsibility, "We understand that our success comes from behaving responsibly and earning the trust of our customers, suppliers and stakeholders. There are many complex issues that we have to face on a daily basis, from reducing our environmental impact to ensuring consistent standards across our markets". Tesco uses a balanced scorecard method that includes Customers, Operations, People, Finance and Community. The community section of the balanced score card lays enough emphasis on actively supporting local communities, Buying and selling their products responsibly, Caring for the environment, Giving customers healthy choices and Creating good jobs and careers. The company understand that," Managing environmental, social and governance issues is essential to good corporate governance, as this impact on reputation and the long-term success of the business." (Corporate governance) The company has ensured that there are transparent and effective policies and processes in place to conduct their business responsibly and in accordance with the law. The company insists on the highest standards of behavior from all employees. There is a visible commitment from the top management and clear, well communicated guidelines so employees know what is expected of them.
TESCO involves all its major stakeholders (Stakeholder engagement) while formulating and implementing its corporate social responsibility. Tesco management understands that their business exists to serve their stakeholders, who have a wide range of expectations. Sometimes these expectations can conflict. The management listens to the views of all their stakeholders and takes them into account when trying to balance different considerations. Periodic feedback from various stakeholders is used to review the issues on company's CR agenda which they adjust when new issues of significance emerge. The Community Plans are developed to respond to local stakeholder priorities.
3.1 Code of Business conduct:
TESCO website reiterates (Code of Business conduct), "Our success as a business comes from our core purpose, "To create value for customers to earn their lifetime loyalty", and the two main Values that underpin it, "No one tries harder for customers", and "Treat people how we like to be treated". The code of business conduct is aimed to help staff in their day to day work. This also lays down various responsibilities on its staff based on high standards of ethics.
4.0 Importance of Corporate Social Responsibility:
The importance of corporate responsibility can be gauged from the fact that the companies with high CSR standards are able to clearly demonstrate responsibility to investors, legislators, shareholders, employees, customers and the general public, and therefore manage risk and enhance their corporate reputation. By focusing on and reducing their environmental impacts, they are also saving money on electricity bills, resource use and waste removal. Various benefits of corporate social responsibility can be described in context to the organization, employee, consumers and society.
CSR improves and enhances company image and reputation and helps attract new customers
CSR indirectly increases customer satisfaction thus helping in building long term customer relationships
It helps in accumulation of customer goodwill.
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Employee benefits result in higher productivity
Limits government interference
Since financial institutions have more trust in the organisation the sources of finance are more readily available
It minimises the likelihood and cost of fines and legal actions
CSR Increases employee trust in management and thus attracts new employees
It also help increases employee satisfaction, motivation and morale
It certainly helps in Improving employee retention
The consumer feels good about buying products from companies that have a good will and a good image in the market and the one they can trust
The consumer will talk positively to family, friends and colleagues about the company
Non-Government Organisations (NGOs) want to work with companies they trust
Alleviation of social ills
Development of the arts and sport through company sponsorship initiatives
Corporate social responsibility has been increasing getting popularity. It is important for a business organisation to be ethical in its day to day business practices and employ sound ethical practices in its strategic management. Corporate Social Responsibility (CSR) is a compulsory obligation of firms towards society, specifically those affected by policies and practices. Â It is important to note that almost all aspects of management practice have ethical implications and therefore various organisations must carve a niche for itself as an ethical and socially responsible organization. TESCO is one such company that has incorporated corporate social responsibility in its strategic plan and forms the basis of its major strategic decision. TESCO takes its various stakeholders along and formulates various procedures and policies keeping the customers, its employees, the society and the environment in mind. There is no doubt that a sound corporate responsibility has kept TESCO in a good stead and has paid rich dividend in terms of making it one of the most successful retail chain in UK and in rest of the world. Various advantages that a firm can obtain by having sound corporate responsibility and ethical management can be felt throughout the organisation. Companies with high CSR standards are able to clearly demonstrate responsibility to investors, legislators, shareholders, employees, customers and the general public, and therefore manage risk and enhance their corporate reputation. By focusing on and reducing their environmental impacts, they are also saving money on electricity bills, resource use and waste removal. Companies with rigorous corporate responsibility standards are also best positioned to attract and retain high quality staff, thereby reducing employee turnover rates and recruitment costs.