Corporate social responsibility in Tesco

Abstract

This research seeks the concepts of corporate social responsibility in terms of present business world. Here I want to analyse the necessity and importance of CSR for an organisation to running a better business in all around the world and how an organization can achieve a competitive advantage over his competitors being socially responsible to his community. Here this study will analyse the argument of CSR as well. For the above objective of this research, I will look at one of the best worldwide retail company which is based on UK by the name of Tesco. This paper will also look at the CSR activity of Tesco and try to look at that is the CSR activity for his community within the Tesco is really profitable not only for them but also for their stakeholders and community as well?

Objective

The foremost objectives of this research are as follows:

I would like to discuss the necessity of corporate social responsibility.

To look at the importance of CSR.

To achieve a greater knowledge that how can a company get a competitive advantage by following CSR activity throughout the community as a whole.

To analyse the dispute of CSR

Introduction

According to the MACMILLAN Dictionary, Corporate social responsibility is a belief that a company should consider the environmental and social effect of its activity on its employee and the community around it. However CSR while a situations where the firm goes further than observance and engages in “actions that appear to further some social good, beyond the interests of the firm and that which is required by law.” (McWilliams and Siegel; 2001) .lying on a broad array of issues corporations are encouraged to behave socially responsibly (Welford and Frost, 2006; Engle, 2006). Even though businesses have underway to recognize the significance of CSR and a extensive varieties of initiatives have come to light (Nelson, 2004).CSR should be good for business for not only long term success, it also useful for society, community, employee and environmental as well.

In UK, most of the company (government and private) are very concern about CSR activities and now UK is one of the leading contributors internationally in CSR thinking and practise. (CSR Government update, 2003)

Now a days we are living in a complex and unconvinced world. Corporate scandal, uncertain economy, threat of terrorism, stock market downturn etc is the major causes of reducing trust and stability in corporate sector and its leaders. For example, A historic environmental disaster caused by BP where they spent the past decade using splashy ads to promote itself as a green company (Rachel beck; 2010). In UK, 44% of the British public consider that it is very important for company to shows a high Degree of social responsibility when they buy the company’s product where 58% of general public in all around the Europe believe that commerce and industries do not pay enough attention to the society and environment. (Arthur D Little; 2003) In those cases, the concepts of CSR are increasing its value and necessity in the global business and corporate sector.

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In this research I want to discuss the significance of CSR in UK Retail Company. I want to investigate that the impact of CSR on the businesses and I want to discuss that what the retail companies are doing for covering their CSR activity within the community. Here in UK, some of the multinational retail company operating their business. Tesco is one of them who operating his business successfully.

In every financial year, Tesco publish their CSR report which includes their present CSR progress and their aims and objectives. In this research, I want to look at Tesco`s CSR activity and is those activity really making any profit for their business and for community and environment as well.

What is Corporate Social Responsibility?

Corporate social responsibility (CSR) resources the task of a business in a reciprocally responsible approach whereby the business is:

undertakes moral practices in employment and labour by convalescing workplaces

concerned in building local communities and communicates with apprehensive communities concerning the consequences of its policies and products

invests in building community infrastructure

contributes to a cleaner environment, its security and sustainability

Contributes via its corporate governance to monetary development at a bulky. (Gopal K. Kanjia and Parvesh K. Choprab; 2010)

However One of the prime purpose of corporate social responsibility programme is outwardly ´to build goodwill as a sort of business policy to be redeemed in case something goes badly wrong in the main part of business´ (Smith and Cohon; 2004, p.21). As per Husted and De Jesus Salazar (2006) stated that CSR from a clearly cost benefit investigation under three scenario relating to the firm want to involve in CSR activity. The first one is Altruism which means that firms genuinely wishing to be socially responsible without observe to the bottom line. The second one is Coerced egoism where the firms performing in a socially responsible approach only when obliged by regulation. The third and final one is the Strategic use of CSR where there is clear benefit to the firm for engaging in CSR.

Geoffrey P Lantas (2001) include some authors view about position in business role in society. Here Albert care and Milton Friedman stated their view for economic CSR- pure profit making view. On the other hand R Edward Freeman told about ethical CSR- socially aware view and Archi Carroll stated about altruistic CSR- community services view.

Finally we can say that, CSR involves some kind of standardized reporting that allows the business to assemble information on how it is building evolution on different fronts.

Businesses that connect in CSR characteristically centre on some or all of the subsequent:

Environment: The requirement appears at the green impacts of products and services, with what the business does external the company to recover the environment.

Employees: It’s significant to certify that all employees are cared for effectively. Businesses habitually spotlight on workplace circumstances, benefits, living wages, and training.

Communities: Engaging the immediate communities is an important part of not just creating good human capital that can serve the business, but also securing a standing that can further establish the business.

Regulations: relating to regulations to the fullest and frequently exceeding them is part of being communally responsible.

Definition of CSR

The characterization of CSR is often debated. The UK government summarise the definition of CSR is that-

ʺThe government sees CSR as the business contribution to our sustainable development goal. Essentially it is about how business takes accounts of its economic, social and environmental impact in the way it operates- maximising the benefits and minimising the downsides. Specifically, we see CSR is the voluntary action that business can take, over and above compliance with minimum legal requirements, to address both its own competitive interest and the interest of wider societyʺ (Source -www.csr.gov.uk). Some other definitions are as follows:

Figure 1: Persistent matrix of corporate social responsibility (Gopal K. Kanjia; Parvesh K. Choprab (2010)

Carroll (1983) stated a definition of CSR which is “Corporate social responsibility involves the conduct of a business so that it is economically profitable, law abiding, ethical and socially supportive. To be socially responsible

Then means that profitability and obedience to the law are foremost

Conditions when discussing the firm’s ethics and the extent to which it

supports the society in which it exists with contributions of money, time and talent” (p.608).

European Commission (2006) stated that -ʺ The concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basisʺ

The World Business Council for Sustainable Development (WBCSD) (2000,

p. 10) gave a clearer definition of CSR is ʺcommitment of business to contribute to sustainable development, working with employees, their families, the local community and society at large to improve their quality of lifeʺ.

Kivuitu Yambayamba and Fox (2005, p. 1) once more illustrated that ‘The concept of CSR is sometimes used as shorthand for business’ contribution to sustainable development’.

Coleman (2006, p. 1) understand that CSR as division of business principles

And defines it as the ‘managerial obligation to take action that protects and improves the welfare of society as a whole and promotes the interest of

the organization’.

Starbucks, CSR report in 2004 stated that “A responsible company is one that listened to its stakeholders and responds with honesty to their concerns”

Those are the few definition of CSR. Basically it is very difficult to give a specific and accurate definition of CSR in terms of present competitive word. If I look at above those discussions, there is some key word which is clearly involved with the fact of CSR. For example -to achieve sustainable goal, voluntary action for society, promoting green environment etc. Basically CSR is the way to improve the quality of life by working with employees, society, stakeholder, community and should be responsible for promoting a green and safer environment for present and the next generation as well.

Could do with for Corporate Social Responsibility

In this global economy, a business firm should be socially responsible if they want to survive in this competitive market. A growing number of shareholders and investors began to accept the idea that CSR can lead to financial return on the long run (Min-Dong Paul Lee; 2008). Pratima Bansal in (2002) gave an explanation that why firm should become socially responsible. She stated three reasons behind this. Those ares-

It immediately makes a good business intellect for the firm.

If every company is doing this, we have to do it.

On a top management team within an organization, there sometimes an influential person who really cares about those issues and looking for an opportunity for making the way the company is run as an extension of his or her commitment to society.

Pratima Bansal (2002) also noted that there are a number of agency that make ranking for firms based on their corporate social responsibility and a number of mutual firm who meet their standard of socially responsibility. Such as Fortune Reputation Index and The Dow Jones sustainability Index. Business weeks climate groups make climate change ranking based on multinational company by their total reduction of greenhouse gases ( Michael Bowfield; 2007)

There is a clear link between corporate social responsibility and financial performance of an organization. Geoffrey Heal (2004) stated in annual conference of the Monte Paschi Vita a wide-ranging list of the benefits that commentators have linked to CSR programmes. Those are:

Reducing risk

Reduced waste

Improving dealings with regulators

Generating brand equity

Improved human relations and employee productivity

Lower cost of capital.

A news item from Business Respect in 2007 published about a survey between business leaders about their view towards CSR. From this investigation, business leaders understand and settled strong beliefs That CSR can increase profit and the confidence that having good environmental management is more than purely public relation focused.

Philip Kotler and Nancy Lee (2005) told that company have understanding a range of bottom line reimbursement for adopting CSR policy. For example, better sales and market share, add to corporate reflection and clout, strengthened brand positioning, boost ability to create a centre of attention, motivate and retain employees, decline operating cost, increase demand to investors and financial crisis.

There are several situations where social responsibility of a business becomes obligatory. Some of these situations which demonstrate the requirement of Corporate Social Responsibilities are discussed below.

A societal move towards to business is the existing business viewpoint, which demands business organizations to be receptive to the social exertion.

As a consequence of globalization of business, global companies activate in a big way in their host countries. To facilitate ascertain a good corporate illustration; they include social responsibility as a corporate purpose. Native companies are strained to follow outfit for maintaining their corporate uniqueness.

In the terms and conditions of collaborations agreements, very often, social welfare stipulations are included which necessitates the collaborating company to take up social responsibility of business.

On account of legal requirements, companies have to deliberate on social problems.

Corporate contributions of social welfare projects of permitted NGO’s are exempted from income tax in UK.

An organizations obligation to social responsibility creates a good corporate representation, and there by a enhanced business environment

Community responsibility of business enables the organization to pick up its product positioning and thereby advance its market share.

Extremely time and again situations insist due to natural calamities, accidents and so on.

Consequence of Corporate Social Responsibility

In 2005 poll, 81% executive said that corporate social responsibility is indispensable for their business. They have a different view that what the exact meaning of Corporate social responsibility but the majority of them believe that business should serve as a steward in society and that it has a duty to investor, employees, consumers, community and the environment ( Michael Blowfield and Alan Murray; 2008). Commencing a documentary on BBC, in the year of 1996, 267 companies publish CSR report. But nowadays this sum is in excess of 3000.The another business reporter Will Smale(2006) stated that now a days it is very hard to find a multinational company that doesn’t articulate a commitment to CSR. Maturana and Varela define the CSR by saying is that when two or more human beings generate a relationship, they have an ethical responsibility to the other humans in that relationship. Corporations are gradually more adopting socially responsible actions, conduct, policies and processes. A corporate social responsibility (CSR) policy is beneficial not only for a corporation’s bottom line but also for its employees, stakeholders, consumers and for communities, the environment and the social order.

In 2003, 1in to fortune 500 firms had a board committee enthusiastic to environmental issue which is now 1 in 4. The number of business school those are offering green courses 34% in 2001 which is in 2007 is 63%.However CSR focused jobs increased 37% from 2005 to 2008. Furthermore, 97.3% people are agreeable to make a financial give up for working a socially responsible company. (Sources: DevelopmentCrossing.Com)

William, Medhurst and Drew (1993, p.10) settled some payback for company who connect in CSR movement, those are:

Superior access to capital

Diminish operating cost

Bounce back financial performance

Enhance image

Let’s have a look importance of CSR to the community. Bob Manteau (2007) stated that now-a-days company have the responsibility to help the community where they make their money and it is become the requirement of present business. As per Moon and Muthuri (2006) corporate community involvement means that corporations need to support the community by providing Financial, material, or human skills through modes such as corporate contributions, strategic philanthropy, employee volunteering and community driven development.

CSR to the community not only profitable for the community, it is profitable also for the company as well. Ben Cohen and Mal Warwick (2006) stated some of the significant benefits which may help to strengthen the business which are as follows:

Employee’s moral will rise. Even if they take part in community activities where the company to be found rather than where they live, the co workers will be gratified by an opportunity to add meaning to the efforts they make to build the business.

Business can come across that the word-of- mouth buzz about the company is assembly momentums. So it can be easier to find and attract the skill and highly enthusiastic new employees for the business.

Community involvement activities increase the reputation among the customer and client around the local community. So business can expect greater customer loyalty and personal referrals for new business.

Community oriented business can attract the civic leaders in all fields and it will be increase the chance to get access to community decision maker .

If the reputation grows around the communities mind, it is very easier to get to know compatible business leaders which will be open the prospect for exchanging the ideas and experience, expanding the breadth of suggesting new ideas for business and for employees as well.

Now we can look at the corporate community voluntary activities by some of the multinational company:

Company

Illustration of grounds supported

Exemplar of Activities

Tesco

Being a good neighbour

Bolstering local economy, Engaging people in their community.

Asda

Asda foundation

Charitable work

Co-operative

Affinity products and services: raising awareness and funds for development

Fairbourne Springs Oxfam mobile phone

recycling scheme Charity cards in support of

international development

and human rights

Ford Motor Company

Affordable Housing

Participating building homes for habitat for humanity Detroit

IBM

Mentoring school age-youth.

One-on-one mentoring of students by volunteer employees.

FedEx

United way, National Safe kids Campaign and American Red Cross

Participating in United way “Day of Caring”

Morrison

Taking good care of our

shoppers, our colleagues and their

Communities. Work, communities

And healthy balanced lifestyles.

Health, safety and wellbeing, skills training, education through” Lets Grow” programme and

Customer service.

Sainsbury

Providing great service, quality products and being a good neighbour

Creating jobs, Charitable work, fundraising etc.

Waitrose

Investing in local initiatives and encouraging Partner involvement.

Charitable, involve partner and employees to volunteering work

(Sources: Tesco, Waitrose, Sainsbury, FedEx, Morrison, IBM, Ford motor Company, Co operative and Asda website)

Above this discussion, importance of CSR not only benefited for the community, it can bring the value for the company as well.

Gaining competitive advantage by Corporate Social Responsibility

Michael E. Porter and Mark R Kramer (2003) settled that a business organization can bring into play their philanthropy efforts to pick up their competitive context, such as the excellence of their business environment in that location where they operate. They also agree with that, this can be help to gain social and economic goal and improves a company’s long term business prospects. Take an example from Tesco’s annual report which is published in 2010. Tesco donated 61.6m to cover their philanthropy activities.

Philanthropy efforts can time and again be the most cost effective way for a company to look up its competitive context (context for strategy and rivalry, demand condition, related and supporting industries and factor condition) enabling companies to influence the efforts and infrastructure of non returns and other organization. (Michael E. Porter and Mark R Kramer; 2003)

Ronclinelli and Berry (1999) also construct a statement that “Socially responsible environmental practise may also lead to stronger sales and customer loyalty, increase productivity and quality, an enhance ability to attract and retain employees and in some cases, to reduce regulatory oversights or more favourable treatment by regulatory agency”. (Bob Manteaw; 2007)

Competitiveness around the companies depends on productivity with which company can use labour, capital and natural resources for producing high quality goods and services. Productivity depends on having workers who are educated, safe, healthy, decently housed and motivated by a sense of opportunity.

A British business features many hurdles in the great effort to compete. A few of which, scheduled below:

Stable need for modernization

Problems recruiting and retaining high quality, stimulated staff

Low down efficiency levels in evaluation with the UK, USA, Europe and China

Expensive promotion campaigns to build brand reputation and responsiveness

Legislation that is progressively more demanding and persistently changing

Ever more selective customers both individuals and supply chain

It is well acknowledged that contribution in one’s community has delicate benefits and that corporate responsibility and community involvement initiatives are increasingly having noteworthy positive contact for many companies.

Apart from generating substantial public goodwill, the undeviating effects of CSR for business are the subject of increasing research and analysis. Here is an outline of what this research is indicating:

CSR can support companies to put together links with public policy makers, aid modernization, involve, motivate and retain employees, build corporate reputation and improve competitiveness.

An upward number of companies have sky-scraping profile ethical projects and marketing campaigns. CSR is helping these companies to show the way the field and gain a competitive advantage .

Progressively more the public see a company’s ethical profile as a determining factor as to whether they will buy products or services. A strong company that engages in high profile CSR will be more tempting to a growing sector of the population.

Some local establishment are philosophy about introducing an ethical element into their purchasing and procurement tender processes. Genuine CSR help you to stand out from the crowd when you are showcasing your company.

Powerful environmental vestibule groups are overseeing to change UK legislation – the Companies Act 2006 has corporate responsibility implications for company directors and publicly listed companies due to be implemented in 2008. The movement is likely to continue and early accomplishment would prepare you and your company for the future

Argument of CSR

Different perspectives on corporate social responsibility (CSR) live, each with their own outline. Michael Blowfield (2007) assured that there is diverse confirmation about the CSR. A number of citing evidence of consumer indicate that consumers can willing to pay higher prices for improve working condition within the firm where others emphasize the customer satisfaction and financial performance eventual have more control on company reputation. Some highlight management responsibilities towards stakeholders, others dispute that companies should actively contribute to social goals, and yet others reject a social responsibility of business beyond legal compliance.

Michael Blowfield and Alan Murray (2008) fixed that CSR criticism goes down into four key areas. They are following:

CSR is an outline forced on business by general society organization that damage profitability and therefore business ability to generate wealth for society.

CSR at present dominated by business which be capable of shape the agenda in its own narrow concern.

The current concerns of CSR are too narrow and avoid many of the key issue for which the public expects that business to take responsibility.

CSR, to date, has failed to achieve its goal and CSR need to be more accurate and ground-breaking in the future.

The Economist published a series of article in 20 January of 2005 where they presented that corporate social responsibility is a risk to the effective implementation of capitalism and free market and consequently to global prosperity. This article also stated that business can serve to people good if only they will concentrate to their long term profitability.

Ethical Corporation (2005) make a comment against The Economist article. Their view is company’s principle is to make a profit, whereas profit should be seen as an accurate derived from rewarding a social function. Geoffrey Chandler of Amnesty International also argue with The Economist and he told that corporate social responsibility doesn’t begin with the belief that capitalism fails to serve the public images where CSR belief that “unprincipled capitalism inflicts collateral damage on its entire stakeholder, including ultimately its stakeholders”.

There is another author Manheim (2004) stated about a different aspects of the damage done by CSR. He argues that CSR is a part of anti corporation strategy.

Here is some common argument about CSR which is settled below:

Businesses are owned by their shareholders – money spent on CSR by managers is theft of the rightful property of the owners

The leading companies who report on their social responsibility are basket cases – the most effective business leaders don’t waste time with this stuff

Our company is too busy surviving hard times to do this. We can’t afford to take our eye off the ball – we have to focus on core business

It’s the responsibility of the politicians to deal with all this stuff. It’s not our role to get involved

I have no time for this. I’ve got to get out and sell more to make our profit line.

Corporations don’t really care – they’re just out to screw the poor and the environment to make their obscene profits

Arguments offered in favour of CSR can be broadly split into two camps-

Moral

Economic.

A moral argument for CSR

As per Ben Cohen and Mal Warwick (2006) ” the true purpose of business is to add value- not just by transforming raw materials into goods and providing services but also by adding value to the lives of employee, community and for the sake of future generation by treading as lightly as possible to the planet”. While recognizing that profits are essential for any business article to exist, all groups in society should try hard to add value and make life better. Businesses rely on the society within which they operate and could not exist or prosper in segregation. They require the infrastructure that society provides, its foundation of employees, not to declare its consumer base. CSR is appreciation of that inter-dependence and revenue of delivering on that obligation, to the common benefit of businesses and the societies within which they are based.

CSR largely represents the affiliation between a company and the wider community inside which the company operates. It is acknowledgment on the part of the business that ‘for profit’ entities do not exist in blankness, and that a large part of any success they enjoy is as much due to the context in which they operate as factors internal to the company alone.

Charles Handy makes a convincing and logical argument for the purpose of a business laying beyond the goals of maximizing profit and satisfying shareholders above all other stakeholders in an organization:

The purpose of a business is not to make a profit, full stop. It is to make a profit so that the business can do something more or better. That “something” becomes the authentic justification for the business and It is a moral issue. To mistake the means for the end is to be twisted in on oneself, which Saint Augustine called one of the greatest sins….It is salutary to ask about any organization, “If it did not exist, would we invent it?” Only if it could do something better or more useful than anyone else” would have to be the answer, and profit would be the means to that larger end.

An economic argument for CSR

An economic disagreement in favour of CSR can also be through. It is an argument of economic egotism that there are very real economic benefits to businesses pursuing a CSR strategy and is planned to persuade those businesses who are not positive by the moral case. Proponents of this argument believe that CSR represents a holistic approach to business.

Therefore, an efficient CSR policy will introduce all aspects of operations. They believe the conduct corporations take today to integrate CSR throughout the organization signify a real point of segregation and competitive market advantage on which future success can centre.

Introduction about Tesco

Tesco is one of the worldwide largest retailers which are based on UK. It has 4,811 stores around the world. It is operating in 14 countries with 4, 72,000 people in worldwide. Tesco’s group sales are £62.5bn in 2010. Their underlying profit before tax is £3.4bn. The total revenue in UK, 2010 is £38,558m. There are 2,482 stores in UK with 2, 87,669 employees.

Gross Profit

(Sources: www.tesco.com) Group sales £bn

(Source: www.tesco.com)

As per annual report in 2010, Tesco is the most profitable online grocery retailer in the world. Tesco has moved into areas such as clothes, consumer electronics, consumer financial services, internet services, consumer telecoms and gas stations. Tesco now controls over 30% of the grocery market in U.K. As of March 2008, Tesco have a store in every postcode of the UK. Tesco has a strong strategy which consists of five elements reflecting their four recognized areas of heart added to Tesco’s commitments on community and the environment. Those are follows:

Becoming a successful international retailer

Growing the core UK business

Becoming as strong in non-food as in food.

Developing retail services

To put the community at the heart of what they want to do.

Some of the supermarkets percentage of share is stated below.

SUPERMARKET SHARE

Tesco: 30.6%

ASDA: 16.6%

Sainsbury’s: 16.3%

Morrison’s: 11.1%

Somerfield: 5.4

Waitrose: 3.7%

Iceland: 1.8%

(Source TNS cited by BBC 2006)

Tesco core UK strategy is earning customer loyalty by helping them for spending less with low price and affordable new product. For example- Discount brand.

Corporate Social Responsibility in Tesco

The Chief Executive of Tesco Terry Leahy made a statement about their vision towards CSR is that “By supporting our customers and our staff, and by remaining focused on tackling