Corporate Social Responsibility, Stakeholders

Corporate Social Responsibility (CSR)

Corporate social responsibility is where a business has an overall positive impact on society.

In recent decades CSR has become an increasingly important ‘buzzterm’. Broadly, we can identify 2 reasons for this:

  1. Many modern businesses adopt the ‘stakeholder approach’. They want to act in a way that shows they care.
  2. Successful businesses have a deep concern for their reputation. It supports the image of ‘quaity’ & ‘value for $’. Many businesses want a good reputation as employers to help them recruit the best. This leads to a strong CSR policy that in reality is primarily focused on profit.

There is controversy over the reasons for the rise of CSR. Supporters argue that businesses have much to gain from CSR and that they benefit in multiple ways – looking wider and beyond short-term profits for a long term vision. Some argue that it is the ‘right thing to do’ and that philanthropy (“the love of humanity”) is a part of modern business practice. Critics argue that CSR conflicts with the fundamental economic role of the business – which is to make profit. It’s never been truly profitable to be ‘green’ and some say that it is nothing more than ‘cynical window dressing’ to satisfy public opinion or gov. watchdogs. Maybe they are using CSR for marketing reasons….but at least they’re doing something…

CSR covers a huge range of issues. Remember the conflict of stakeholder’s objectives? Consumers expect reliable products. Employees want decent pay/conditions. Suppliers want paid on time. Gov want to collect the right amount of corporation tax. Shareholders want a good dividend. Dilemmas arise when what is profitable is not necessarily what is responsible. Short term profit maximisation can work against CSR and perhaps the long term interest of the business too – e.g. BP oil spill and the ‘shareholder view vs the stakeholder view’ moral! More recent examples are ‘tax avoidance’ and ‘zero-hours contracts’…..are they ethical? They’re certainly profitable!

Whatever the reasons – it’s certainly true that CSR has benefited many local communities. For example 1% of Google’s equity and profit is donated to appropriate projects by google.org. So far it has committed over $100million to a wide range of worthy projects ranging from research into environmental problems to global health programmes.

Though of course being CSR active doesn’t mean that a company is squeaky clean. In the US an energy giant gave millions to local charities and was always winning CSR awards. It was called Enron – and in 2001 collapsed with debts of £18bn due to its bosses committing a giant fraud. Also – can Marlboro be socially responsible?

Past paper questions

You’ll have 35 minutes to complete this 30 mark question in the exam. Try to time yourself, 5 mins to read the extract, 1 min per mark to answer.

__Extract A __

__Aldi to launch online sales in UK __

_Aldi has said it will start selling goods online in the UK next year, as it announced record annual sales in 2014. _

The discount supermarket chain will start its online service by selling wine by the case, and then add non-food offers in the spring. Aldi’s sales rose to £6.9bn in the 12 months to 31st_ December 2014, compared with £5.27bn the year before. However, operating profits fell to £260.3m from £271.4m, partly due to price cuts. _

_The retailer, which currently operates 598 stores in the UK, also said it was “on track” to open 65 new stores this year. _

Aldi is the UK’s sixth largest supermarket chain, with a market share of 5.6% in the 12 weeks to 13th_ September 2015._

_Adapted from BBC News 28/9/15 _

In your own words, what is corporate social responsibility?
Your answer should include: Positive / Impact / Society
What is meant by ‘market share’?
Your answer should include: Sales / Percentage / Total / Market
Explanation: It's your sales as a % of the total market sales.
This is a very common exam question. Guaranteed in your paper:Calculate the percentage change in operating profits in the 12 months to 31 December 2014
Your answer should include: 4.09% / 4.09
Using Extract A, explain what Aldi’s business objectives are likely to be.
Your answer should include: Sales / Destroyer / Pricing / Growth / Online
Discuss the reason why Aldi’s customers and employees may have conflicting objectives.
Your answer should include: Prices / Wages / Price / Wage
For a 12 marker try to use two arguments for and two against with a conclusion.With reference to Extract A, assess the potential impact to Aldi of the decision to cut prices (12 marks)Include your own judgement – there’s no such thing as a correct judgement, but your stance must be fully justified!
Your answer should include: Market / Share / Expansion / Sales / Opportunity / Cost / Profit / Long-term