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AN ANALYTICAL STUDY ON CORPORATE SOCIAL RESPONSIBILITY AND COMPANIES IN CHENNAI BY: AKSHAYA R
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AN
ANALYTICAL STUDY ON CORPORATE SOCIAL RESPONSIBILITY AND COMPANIES IN CHENNAI
AUTHORED
BY: AKSHAYA R[1]
ABSTRACT
At
the end of the 1880s, at the introductory stage of industrialization, there was
widespread debate about whether corporations should be socially responsible.
Proponents of socially responsible business wanted to introduce some kind of
corporate social ethics to hold companies socially responsible. The purpose of
this thesis is to gain a deeper understanding about CSR and why companies engage
in such activities. A total of 200 samples have been collected out of which all
the samples have been collected through google forms survey. The samples are
taken from many parts of India. Majority of the male respondents say that the
company holds an environmental responsibility and 24% of the respondents who
are female say that it is a philanthropic responsibility. Even though the
latter can also make a valuable contribution to poverty reduction, will
directly enhance the reputation of a company, and strengthen its brand, the
concept of CSR clearly goes beyond that.
KEYWORDS: Social
responsibility, Corporate, Reputation, Company, Financial Performance
INTRODUCTION:
Near
the close of 1880’s, When industrialization first began, there was much discussion
over whether or not businesses had a social responsibility to the community. In
order to make businesses accountable for their social responsibility,
proponents of socially conscious business aimed to establish a form of
corporate social ethics.Critics Argue that corporations should not be
constrained by laws or moral conventions.
There
is an ongoing debate about social responsibility, and over the past decade
companies have become increasingly socially responsible (Adamsson&
Johansson, 2008)[2]. There
has been a significant increase in the number of companies taking on social
responsibility in recent years, and many companies engaged in what is now known
as Corporate Social Responsibility (CSR). The demand for companies investing in
CSR has increased in recent years. employees; suppliers; community groups;
governments and some shareholders. The rapidly growing concern over global
warming in recent years has further increased the demand for CSR(Diana, 2006)[3].
Several companies have responded and increased their investment in CSR
(McWilliams & Siegel, 2000)[4].
For this reason, an increasing number of companies are continuously working on
CSR-related issues. For example, companies are increasingly addressing
environmental and social issues (Företagoch CSR, n.d.). However, some companies
resist investing in CSR, believing it goes against their company's goal of
maximizing profits. (McWilliams andSiegel, 2000). Pressure that companies to
take their social responsibility has increased from all stakeholders. Customer
are starting to make decisions based upon more than the product, they consider
factors such as working conditions, human rights, environmental and social
concerns when purchasing a product or service
Comfort,
Hiller, and Jones (2006) state that there are five main factors influencing the
growing interest in CSR. These include: increased stakeholder awareness of
ethical, social and environmental business conduct; direct stakeholder
pressure; investor pressure; peer pressure; and increased social awareness responsibility.
In addition, companies recognize the importance of her CSR to corporate image
and reputation. Comfort et al (2006) further argue that CSR has several
benefits Improvedfinancialperformance and profitability.
Reduce
operating costs. Long-term sustainability of the company and its employees.
Improved employee engagement and engagement. Improving innovation capacity,
good relationship with government and community. Improved risk and crisis
management. Improved reputation and brand equity. Build closer relationships
with your customers. Numerous studies and literature with varied results have
been conducted in the subject of CSR.
OBJECTIVES:
The purpose of this thesis is
to gain a deeper understanding about CSR. This will be done by answering the
following research questions:
·
To understand why do companies engage
in CSR?
·
To analyze how do companies apply
CSR?
·
To understand what is the correlation
between the use of CSR and financial performance?
·
To determine the benefits society
gets through CRS.
HYPOTHESIS
CSR leads to better Financial
Performance of the Company.
IMPACT OF CORPORATE SOCIAL RESPONSIBLITY
Reduce
operating costs. Long-term sustainability of the company and its employees.
Improved employee engagement and engagement. Improving innovation capacity,
good relationship with government and community. Improved risk and crisis
management. Improved reputation and brand equity. Build closer relationships
with your customers. Numerous studies and literature with varied results have
been conducted in the subject of CSR.
Several questions about CSR still remain, for
example there is no evident answer if CSRactivities affect the financial
performance, why companies engage in CSR and how they apply to it.
There
are several different definitions of CSR and companies choose to apply it in
different ways therefore it is a rather complex subject. (McGuire, Sundgren and
Schneeweis, 1988; Sarbutts, 2003; Branco and Rodrigues, 2007).
Even
though Graafland et al. (2004) have determined that there are more than 60
concrete aspects of CSR activities, as well as numerous more definitions than
the ones discussed above, Balabanis, Phillips and Lyall (1998) have been able
to categorize these into a few main categories. In the 1970s these aspects were
considered to be:
·
Disclosure of information to
shareholders
·
Disclosure of the board of directors
·
Monopolistic behavior (predatory
pricing, etc.)
·
Equality of treatment for minorities
·
Profit sharing
·
Environmental protection
·
Ethics in advertising
·
Social impact of technology
ENVIRONMENTAL
RESPONSIBILTY
It is the pillar of corporate social
responsibility rooted in preserving mother nature. Through optimal operations
and support of related causes, a company can ensure it leaves natural resources
better than before its operations. Companies often pursue environmental
stewardship through:
·
Reducing pollution, waste, natural
resource consumption, and emissions through its manufacturing process.
·
Recycling goods and materials
throughout its processes including promoting re-use practices with its
customers.
·
Offsetting negative impacts by
replenishing natural resources or supporting causes that can help neutralize
the company's impact. For example, a manufacturer that deforests trees may
commit to planting the same amount or more.
·
Distributing goods consciously by
choosing methods that have the least impact on emissions and pollution.
·
Creating product lines that enhance
these values. For example, a company that offers a gas lawnmower may design an
electric lawnmower.
ETHICAL
RESPONSIBILITY
Ethical
responsibility is the pillar of corporate social responsibility rooted in
acting in a fair, ethical manner. Companies often set their own standards,
though external forces or demands by clients may shape ethical goals. Instances
of ethical responsibility include:
·
Fair treatment across all types of
customers regardless of age, race, culture, or sexual orientation.
·
Positive treatment of all employees
including favorable pay and benefits in excess of mandated minimums. This
includes fair employment consideration for all individuals regardless of
personal differences.
·
Expansion of vendor use to utilize
different suppliers of different races, genders, Veteran statuses, or economic
statuses.
·
Honest disclosure of operating
concerns to investors in a timely and respectful manner. Though not always
mandated, a company may choose to manage its relationship
Starbucks
has long been known for its keen sense of corporate social responsibility and
commitment to sustainability and community welfare. According to its 2020
Global Social Impact Report, these milestones include reaching 100% of
ethically sourced coffee, creating a global network of farmers and providing
them with 100 million trees by 2025, pioneering green building throughout its
stores, contributing millions of hours of community service, and creating a
groundbreaking college program for its employees.
CASE STUDY:
Starbucks
is the world’s largest and most popular coffee company. Since the beginning,
this premier cafe aimed to deliver the world’s finest fresh-roasted coffee.
Today the company dominates the industry and has created a brand that is
tantamount to loyalty, integrity, and proven longevity[5].
Starbucks is not just a name, but a culture.
It
is obvious that Starbucks and their CEO Howard Shultz are aware of the
importance of corporate social responsibility. Every company has problems they
can work on and improve in and so does Starbucks. As of recent, Starbucks has
done a great job showing their employees how important they are to the company.
Along with committing to every employee, they have gone to great lengths to
improve the environment for everyone. Ethical and unethical behavior is always
a hot topic for the media, and Starbucks has to be careful with the decisions
they make and how they affect their public persona.
The
corporate social responsibility of the Starbucks Corporation addresses the
following issues: Starbucks commitment to the environment, Starbucks commitment
to the employees, Starbucks commitment to consumers, discussions of ethical and
unethical business behavior, and Starbucks commitment and response to
shareholders.
COMMITMENT
TO THE ENVIRONMENT
The
first way Starbucks has shown corporate social responsibility is through their
commitment to the environment. In order to improve the environment, with a
little push from the NGO, Starbucks first main goal was to provide more
Fair-Trade Coffee. What this means is that Starbucks will aim to only buy 100
percent responsibly grown and traded coffee. Not only does responsibly grown
coffee help the environment, it benefits the farmers as well. Responsibly grown
coffee means preserving energy and water at the farms. In turn, this costs more
for the company overall, but the environmental improvements are worth it[6].
Starbucks and the environment benefits from this decision because it helps
continue to portray a clean image. Another way to improve the environment
directly through their stores is by “going green”. Their first attempt to
produce a green store was in Manhattan. Starbucks made that decision to
renovate a 15-year-old store. This renovation included replacing old equipment
with more energy efficient ones.
To
educate the community, they placed plaques throughout the store explaining
their new green elements and how they work. This new Manhattan store now
conserves energy, water, materials, and uses recycled/recyclable products[7].
Twelve stores total plan to be renovated and Starbucks has promised to make
each new store LEED, meaning a Leader in Energy and Environmental Design. LEED
improves performance regarding energy savings, water efficiency, and emission
reduction. Many people don’t look into environmentally friendly appliances
because the upfront cost is always more. According to Starbucks, going green
over time outweighs the upfront cost by a long shot. Hopefully, these new
design elements will help the environment and get Starbucks ahead of their market.
COMMITMENT
TO CONSUMERS
The second way Starbucks has shown corporate
social responsibility is through their commitment to consumers. The best way to
get the customers what they want is to understand their demographic groups. By
doing research on Starbucks consumer demographics, they realized that people
with disabilities are very important. The company is trying to turn stores into
a more adequate environment for customers with disabilities. A few changes
include lowering counter height to improve easy of ordering for people in wheelchairs,
adding at least one handicap accessible entrance, adding disability etiquette
to employee handbooks, training employees to educate them on disabilities, and
by joining the National Business Disability Council. By joining the National
Business Disability Council, Starbucks gains access to resumes of people with
disabilities.
Another
way Starbucks has shown commitment to the consumers is by cutting costs and
retaining loyal customers. For frequent, loyal customers, Starbucks decided to
provide a loyalty card. Once a customer has obtained this card, they are given
incentives and promotions for continuing to frequent their stores. Promotions
include discounted drinks and free flavor shots to repeat visitors. Also, with
the economy being at an all-time low, Starbucks realized that cheaper prices
were a necessity. By simplifying their business practices, they were able to
provide lower prices for their customers. For example, they use only one recipe
for banana bread, rather than eleven!
It
does not end there either! Starbucks recognized that health is part of social
responsibility. To promote healthier living, they introduced “skinny” versions
of most drinks, while keeping the delicious flavor. For example, the skinny
vanilla latte has 90 calories compared to the original with 190 calories. Since
Starbucks doesn’t just sell beverages now, they introduced low calorie snacks.
Along with the snacks and beverages, nutrition facts were available for each
item.
Also one big way to cut costs was outsourcing
payroll and Human Resources administration. By creating a global platform for
their administration system, Starbucks is able to provide more employees with
benefits. Plus, they are able to spend more money on pleasing customers, rather
than on a benefits system.
COMMITMENT
AND RESPONSE TO SHAREHOLDERS
One
way Starbucks has demonstrated their commitment and response to shareholder
needs is by giving them large portions. By large portions, Starbucks is
implying that they plan pay dividends equal to 35% or higher of net income to.
For the shareholders, paying high dividends means certainty about the company’s
financial well-being. Along with that, they plan to purchase 15 million more
shares of stock, and hopefully this will attract investors who focus on stocks
with good results.
Starbucks
made their commitment to shareholders obvious by speaking directly to the media
about it. In 2004, Starbucks won a great tax break, but unfortunately the media
saw them as “money grubbing”. Their CEO, Howard Shultz, made the decision to
get into politics and speak to Washington about expanding health care and the
importance of this to the company. Not only does he want his shareholders to
see his commitment, but he wants all of America to be able to reap this
benefits.
In
order to compete with McDonalds and keeping payout to their shareholders high,
Starbucks needed a serious turnaround. They did decide to halt growth in North
America but not in Japan. Shultz found that drinking coffee is becoming
extremely popular for the Japanese. To show shareholders there is a silver
lining, he announced they plan to open “thousands of stores” in Japan and
Vietnamese markets.
COMMITMENT
TO EMPLOYEES
The
first and biggest way Starbucks shows their commitment to employees is by just
taking care of their workers. For example, they know how important health care,
stock options, and compensation are to people in this economy. The Starbucks
policy states that as long as you work 20 hours a week you get benefits and
stock options. These benefits include health insurance and contributions to
employee’s 401k plan. Starbucks doesn’t exclude part time workers, because they
feel they are just as valuable as full-time workers. Since Starbucks doesn’t
have typical business hours like an office job, the part time workers help
working the odd shifts.
Another way Starbucks shows their commitment
to employees is by treating them like individuals, not just number 500 out of
26,000 employees. Howard Shultz, CEO, always tries to keep humanity and
compassion in mind. When he first started at Starbucks, he remembered how much
he liked it that people cared about him, so he decided to continue this
consideration for employees. Shultz feels that a first impression is very
important. On an employee’s first day, he lets each new employee know how happy
he is to have them as part of their business, whether it is in person or
through a video. His theory is that making a good first impression on a new
hire is similar to teaching a child good value. Through their growth, he feels
each employee will keep in mind that the company does care about them. Shultz
wants people to know what he and the company stand for, and what they are
trying to accomplish.
ETHICAL/UNETHICAL
BUSINESS BEHAVIOR
The
last way Starbucks demonstrates corporate social responsibility is through
ethical behavior and occasional unethical behavior. The first ethically
positive thing Starbucks involves them self in is the NGO and Fair Trade
coffee. Even though purchasing mostly Fair Trade coffee seriously affected
their profits, Starbucks knew it was the right thing to do. They also knew that
if they did it the right way, everyone would benefit, from farmers, to the
environment, to their public image.
In
the fall of 2010, Starbucks chose to team up with Jumpstart, a program that
gives children a head start on their education. By donating to literacy
organizations and volunteering with Jumpstart, Starbucks has made an impact on
the children in America, in a very positive way.
Of
course, there are negatives that come along with the positives. Starbucks isn’t
the “perfect” company like it may seem. In 2008, Starbucks made the decision to
close 616 stores because they were not performing very well. In order for
Starbucks to close this many stores in one year, they had to battle many
landlords due to the chain breaking lease agreements. Starbucks tried pushing
for rent cuts but some stores did have to break their agreements. On top of
breaching lease agreements, Starbucks was not able to grow as much as planned,
resulting their future landlords were hurting as well. To fix these problems,
tenants typically will offer a buyout or find a replacement tenant, but
landlords are in no way forced to go with any of these options. These efforts
became extremely time consuming and costly, causing Starbucks to give up on
many lease agreements.
As
for Starbucks, ethical behavior is a different story when forced into the media
light. In 2008, a big media uproar arose due to them wanting to re-release
their old logo for their 35th anniversary. The old coffee cup logo was
basically a topless mermaid, which in Starbucks’ opinion is just a mythological
creature, not a sex symbol.Media critics fought that someone needed to protect
the creature’s modesty. Starbucks found this outrageous. In order to end the
drama and please the critics, they chose to make the image more modest by
lengthening her hair to cover her body and soften her facial expression. Rather
than ignoring the media concerns, Starbucks met in the middle to celebrate
their 35th anniversary.
CONCLUSION:
After
the analysis of the data that has been collected and the discussions formed,
companies should serve society from part of its profits because what is taken
from society should be given back to society. CSR helps to focus on the
betterment of a modern society More policies and smear cut provision in the
company’s act should be highlighted for the better workings of corporate social
responsibility. CSR is generally understood as being the way through which a
company achieves a balance of economic, environmental and social imperatives
(“Triple-Bottom-Line- Approach”), while at the same time addressing the
expectations of shareholders and stakeholders. In this sense it is important to
draw a distinction between CSR, which can be a strategic business management
concept, and charity, sponsorships or philanthropy. Even though the latter can
also make a valuable contribution to poverty reduction, will directly enhance
the reputation of a company and strengthen its brand, the concept of CSR
clearly goes beyond that.
SUGGESTION:
CSR
leads to better financial performance of the company and helps to uplift the
society. A properly implemented CSR concept can bring along a variety of
competitive advantages, such as enhanced access to capital and markets,
increased sales and profits, operational cost savings, improved productivity
and quality, efficient human resource base, improved brand image and
reputation, enhanced customer loyalty, better decision making and risk management
processes. Corporate Social Responsibility is a management concept whereby
companies integrate social and environmental concerns in their business
operations and interactions with their stakeholders.
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Article Information
AN ANALYTICAL STUDY ON CORPORATE SOCIAL RESPONSIBILITY AND COMPANIES IN CHENNAI BY: AKSHAYA R
Authors: AKSHAYA R
- Journal IJLRA
- ISSN 2582-6433
- Published 2023/11/07
- Issue 7
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International Journal for Legal Research and Analysis
- Abbreviation IJLRA
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