Corporate Social Responsibility and
The Super Market Sector
This wiki will look into Corporate Social Responsibility (CSR) within
the UK supermarket sector. Over recent years CSR has become
increasingly important to the general public, as they have become
more environmentally aware, and more interested in where food
has come from, how it is being produced and how far it has been
transported. These are now major concerns for that of the some
consumers.
The Supermarket Sector
The supermarket sector has become increasingly competitive in recent years.
It has estimated sales worth of £1.74 billion in April 2014, increasing by 2.8%
from 2013 (Sexton, Rob 2014). The supermarket industry is dominated by 4
firms: Asda, Sainsbury’s, Tesco and Morrisons (Tejvan Pettinger, 2014). The
pie chart below shows overall ownership of market share within the industry.
The percentage of market share each supermarket owns makes this an
oligopolistic industry.
(Tejvan Pettigner, 2014)
In recent years there has been an overall increase in profitability. Walmarts
profits rose in 2010 to $3.78 billion along with Sainsbury’s and Morrison’s they
now control 75% of the billion pound UK grocery market (BBC News 2006).
This shows the scale of which these supermarkets are now competing on. In
2004 it was reported that £1 of every £8 spent in the UK was spent in Tesco.
However, the profit increase has not been universal. According to the Sarah
Butler (2014) Asda’s performance has outshone that of Tesco and Morrisons
who both saw a decrease in their profits. Sainsbury’s profits have also
decreased, and a rise from lower priced retailers Aldi and Lidl are forcing
other supermarkets to slash prices even more (Butler, Sarah 2014). This
behaviour, in economic terms, is known as a price war and is common in an
oligopolistic environment.
In this particular market the price war has the effect of reinforcing the idea that
supermarkets are competing only on price. However in direct contradiction of
this Waitrose, who have to a large extent avoided this price war, have seen
their market share increase by 6% in 2014 (Robinson, Martin 2014). Waitrose
is seen as a more prestigious supermarket whose main considerations are the
quality of their food and concern for consumers and their employees. If we
consider this in conjunction with an increase in consumers shopping at local
grocers, we can see that some consumers are attracted by more than just
price. Consumers are clearly becoming more concerned about where they
buy their food from, forcing these supermarkets to become more socially
responsible in a number of different ways.
Corporate Social Responsibility
Corporate Social Responsibility is the continuing commitment by business to
behave ethically and contribute to economic development while improving the
quality of life of the workforce and their families as well as of the local
community and society at large (Holme, Richard; Watts Phill 2000).
The development of CSR strategies is becoming more important for
multinational companies as the general public are becoming concerned over
the activities of large corporations (Burchell, Jon 2008). The amount of
negative press in recent times concerning what is perceived to be non-socially
responsible behaviour by many clothing and food brands, such as Primark,
Nike and Bernard Matthews, has forced these companies to consider CSR
strategies in order to protect their brand image.
CSR Theories
The Four Part Model
(Unknown, Smartbiz no date)
Archie Carroll in the 1970’s looked into the nature of corporate social
responsibilities and proposed the four-part model. Carroll offered the following
definition:
‘Corporate social responsibility encompasses the economic, legal, ethical and
philanthropic expectations placed on organisations by society at a given point
in time. ‘
He regards CSR as a multi-layered concept, which is differentiated into these
four inter-related aspects. The different layers within the pyramid are required
for ‘true’ social responsibility (Crane, Andrew; Matten, Dirk 2007)
-
-
Economic responsibilities entailing companies to consider its
shareholders, employees and customers. Shareholders must be given
reasonable returns on their investment, employees need safe and fairly
paid jobs and customers demand quality products at a good price. This
criterion is therefore the first responsibility in order to be a properly
functioning and stay in business.
Legal responsibilities of a firm are to ensure the firm operations are
acting within the law.
Ethical responsibility makes sure a business is doing what is right,
just and fair even if legal framework does not compel them to do so.
Philanthropic responsibility is a business choice. It is at the
corporation’s discretion to improve quality of life for employees, local
communities and society as a whole.
This four-part model is helpful when explaining the different responsibilities of
a company, however it does not acknowledge the real demands that are put
on a company in order for it to be legal and, importantly, profitable. Crane and
Matten (2007) describe the diagram therefore as fairly pragmatic. In addition
they pick up on the fact that the pyramid does not adequately address the
problem where two or more responsibilities may conflict. Crane and Matten
(2007) use the example of a plant closure causing job losses, which then can
raise the problem of balancing economic responsibilities to provide secure
jobs for employees. (REF)
Stakeholder Theory
The stakeholder theory of the firm is probably the most popular and influential
theory to emerge from business ethics (Stark, A 1994). This theory looks at
the different groups to which a corporation has responsibility. Freeman, R.E.
(1984) described a shareholder as:
‘Any group or individual who can affect, or is affected by, the achievement of
the organisations objectives.’
A more precise explanation of the stakeholder theory, and how it relates to
CSR was later provided by Evan W.M. and Freeman R.E. (1993). They
suggested two simple principles:
- Corporate rights, which demands that the corporation has the
obligation not to violate the rights of others.
- Corporate effect, companies responsible for the effects of their
actions on others.
These theories were the first ideas that the main stakeholder for a company is
not always the shareholder, and that they’re a number of different groups that
are influential towards a businesses success. In regards to CSR, a company
should be socially responsible to each of its stakeholders for the following
reasons:
- Customer, they are the people buying the product. Being more socially
responsible could increase sales,
- Employees, looking after the people who work for you could make
productivity better,
- Shareholders could mean higher investment for return of higher
dividends.
Supermarkets and CSR
In recent years supermarkets have been forced to become more ethical not
only with the products they are selling but with employees rights and how the
company is acting as a whole. This is mainly due to the abundance of
negative information that was given to the public on giant corporations in the
early 2000’s. A surge in the demand for fair-trade tea or coffee and organic
free-range meat forced supermarkets to re-think their current products. The
following will look into supermarkets that have recently been in the news
concerning CSR issues.
Sir Terry Leahy Tesco’s Chief executive released a ten-point plan ‘Tesco in
the Community’ in June 2006, which covers a variety of CSR problems for
which they were previously attacked in UK Parliament. The plan was released
a month after the UK’s Office of Fair Trading decided to refer the grocery
sector to the Competition Commissions over allegations the supermarkets
operators are exercising too much power (Unknown, Ethical Performance
2006).
Tesco Ten Point Plan;
- Halve energy use by 2010
- Double customer recycling by 2008
- Ensure all carrier bags are degradable by the end of 2006 and carrier
bag use cut by 25% over the next two years
- Introduce nutritional labelling on all 7000 Tesco own-brand products by
2007
- Launch a healthy eating and nutritional education programme for
families in deprived areas
- Get 2 million people running, cycling or walking in events in the run up
to the 2012 Olympics
- Reduce the frequency and noise of deliveries to Express stores
- Increase local community consultation before building new superstores
- Help small suppliers by holding open days across the UK
- Improve local sourcing by introducing regional counters into stores and
improve labelling to highlight local produce.
(Baker, Mallen 2006)
Although this plan is undoubtedly moving the grocery sector in the right
direction and will help the community, many observers had reservations
around Tesco’s motives. Andrew Simms, a policy director at the New
Economics Foundation said that Tesco’s plans were not far reaching enough
and the company was using diluted CSR in a calculated way to maintain
market power (Unknown, Ethical Performance 2006).
This type of criticism has been thrown at many corporations publishing these
plans to become more socially responsible and that the only reason for these
ideas is to gain and maintain market share and in turn make higher profits.
However Tesco argued back that the 10-point plan would be beneficial for
many stakeholders, it will create more jobs for communities and of course
help the environment.
Tesco have also recently released a new wine sourced from the Enaleni
community- a South African black empowerment programme in Western
Cape. The firm is using social media to choose, design and name the new
wine (Smith, Steve 2013). This project is designed to help provide a
sustainable revenue stream to a farming community. Having social media
simply create this product will undoubtedly create very positive press for
Tesco due to amount of information that will be available to a vast amount of
people through Facebook and Twitter.
In 2011 Sainsbury’s unveiled a new CSR strategy called the 20x20. The plan
was similar to that of other supermarkets actions, and included driving down
the energy use in supermarkets, doubling the amount of British food sold from
the current £4 billion a year, increasing sales of fairly traded products to £1
billion and making sure suppliers of meat, poultry, eggs and dairy goods
follow higher welfare standards. Sainsbury’s is currently the world’s largest
fair trade retailer and the largest retailer of MSC certified fish and RSPCA
Freedom Food certified products. Internally the company also plans to create
50,000 new jobs by 2020 (Smithers, Rebecca 2011).
Sainsbury’s received little criticism for their plans even though they were
published 4 years after Tesco and Marks and Spencer had made theirs. David
Cameron (Smithers, Rebecca 2011) welcomed the announcement saying
Sainsbury’s scheme was a good example of the government Every Business
Commits project, which is encouraging businesses to help build a ‘big
society’.
Morrison’s is the UK’s fourth largest supermarket and recently is becoming
more popular due to its low prices and the increasing quality of its products.
Steven Butts head of CSR at Morrison’s stated that the company is aware of
how much customers are now caring about quality, service and value when
choosing a supermarket, but that now they are now caring about responsible
sourcing, nutrition, welfare, environmental and ethical issues.
In 2013/4 it released the following CSR overview of actions taken over the
past year and the firms plans for the future.
(Butts, Steven 2014)
Morrisons in 2008 was also the first UK or Irish company to sign up to a new
ethical scheme. The scheme was set in place to empower workers in
developing countries so they are able to talk freely about poor pay, working
conditions and any other issues (Mcdonald, Henry 2008). This will allow
Morrisons to find out the working conditions of their suppliers and also their
own company. Dermot Kenny (Mcdonald, Henry 2008) one of the projects
founders said the scheme was designed to highlight health and safety issues
such as whether or not workers have access to clean drinking water and have
the correct breaks whilst working.
However Morrisons received little press recognition for this initiative, mainly
due to supermarkets like Waitrose leading the market in being ethical towards
their staff and suppliers. Unfortunately stories concerning how supermarkets
like Morrisons, Aldi and Lidl are driving farmers to bankruptcy discredit the
industry as a whole. In one example concerning milk, these corporations
were accused of paying farmers 25p for a litre of milk, 5p below the minimum
price that producers can survive on. RABDF chief executive Nick Errington
(Collinson, Patrick 2012) found that supermarkets used to make just 2.3p
profit a litre but now it is as high as 26p, and this margin was something
supermarkets just didn’t deserve. ‘The processor has to do all the
pasteurisation, bottling and delivery to the supermarkets. All they do is put it
on the shelves and collect the money.’
Marks and Spencer released their CSR strategy as Plan A. The aim of Plan A
was to make M&S more efficient, more rewarding and more engaged, and to
change the typical pattern of the doing kind of this business (Kondraciuk,
Joanna 2014). Currently this sustainability strategy has racked up £135 million
worth of savings in 2014, which was a 29 per cent increase on the previous
12 months. 45% of their products now come under the Plan A programme, in
that they are Fairtade, organic, carbon neutral, or made from recycled
material. Marks and Spencer also recently revealed that they have decreased
carbon emissions 23% since Plan A was originally produced in 2007. Waste
levels are also down by 28% and water use has fallen by 27% in the same
period (Nichols, Will 2013).
Additionally Plan A has been a very powerful brand change for the company.
M&S have helped 75,000 employees and 2000 suppliers to see the links
between activities as disparate as taking trans fats out of foods, reducing
energy and promoting Fairtrade. Externally it has also helped them
demonstrate to stakeholders, 10% of which are ‘green crusaders’ that the firm
is absolutely committed to playing a leading role on sustainability (Barry, Mike;
Calver, Lucy 2009).
EMR also discovered that Marks & Spencer is considered to be the most
recognised brand for CSR, followed by the Co-operative and the BBC
(Creighton, Jennifer 2014).
What differentiates M&S’ Plan A is the measurability and the fact they are
rapidly achieving targets set in 2007. EMR have stated that Marks and
Spencer is considered to be the most recognised brand for corporate social
responsibility (Creighton, Jennifer 2014). Out of the 180 targets 139 strategies
have been ticked off and another 31 are on target to be achieved by 2015.
Only 4 are behind schedule, four have not been achieved and one plan has
had to be cancelled concerning electrical products they have taken out of their
product range (Barry, Mike; Calver, Lucy 2009).
How strong are the motives behind supermarkets CSR?
Milton Friedman was a Nobel Prize winning economist whose ideas over
social responsibilities became very influential in America during the 1980’s
and the 1990’s (Fisher, Colin; Lovell, Alan 2006). Friedman wrote an article
concerning why the only social responsibility of business is to increase profits,
and not to indulge in social interventions and ‘good deeds’ (Fisher, Colin; Alan
Lovell 2006). He described any donations made by these corporations as
commercial investment, that they are almost forced into following any bad
press they may have received. He also argued that any money invested
would come at an expense to shareholders or employees and this in itself was
unethical. The company therefore had to make sure their CSR strategy would
make them money.
More recently many critics have also commented on the motives behind
corporations CSR strategies. An article on Corporate Watch found that in over
80% of corporations CSR decision-makers were very confident in the ability of
good CSR practice to deliver branding and employee benefits (Unknown,
Corporate Watch, no date). Similar to Friedman’s argument they believe that it
was a cheap way of getting very good advertising. This is contrary to the
claims of many pressure groups constantly harassing big corporations, who
assert that companies involvement in communities help them develop a
personal connection with their customers, and in turn create brand loyalty
(Unknown, Corporate Watch, no date).
Conclusion
Overall corporate social responsibility is having a positive impact on society,
despite the questionable motives of businesses. The increase in businesses
becoming more socially responsible will help address other broader concerns
on the environment, like pollution and responsible sourcing of produce. In
addition, thanks to these initiatives employees, not only in the UK but also in
many developing countries, now benefit from better pay and working
conditions.
Jon Burchell (2008) discussed the expansion in both the number of
companies undertaking CSR activities and the increase in the nature and
extent of these activities, and suggested that maybe CSR is becoming a
concept that may help reshape the values of the contemporary company. He
suggested this extends to the subsequent behaviour and practice that such
values engender (Burchell, Jon 2008).
However the question that will continue to be asked is whether CSR will
actually mark a deep-rooted value change in company activity or whether the
changes we are currently witnessing are nothing more than current PR
(Burchell, Jon 2008).
References
Baker, M. (2006) The big supermarkets- now competiting on price, quality...
and trust[Online] mallenbaker.net. Available
from: http://www.mallenbaker.net/csr/page.php?Story_ID=1635 [Accessed
February, 2015].
Barry, M. & Calver, L. (2009) Marks and Spencer describe its journey from
corporate social responsibility to sustainability[Online] Marketing Magazine.
Available from: http://www.marketingmagazine.co.uk/article/948198/marks--spencer-describes-its-journey-corporate-social-responsibilitysustainability [Accessed February, 2015].
Burchell, J. (2008) The corporate social responsibility reader. 1st ed. Oxon:
Routledge.
Butler, S. (2014) Asda outperforms supermarket rivals with 5% profit boost
last year[Online] The Guardian. Available
from: http://www.theguardian.com/business/2014/oct/10/asda-supermarket-5percent-profit [Accessed January, 2015].
Butts, S. (2014) Corporate Responsibilty Review[Online] Morrisons. Available
from: http://www.morrisonscorporate.com/Global/corporate/MorrisonsCRReview201314_NEW.pdf [Accessed February, 2015].
Collinson, P. (2012) Dont buy milk from Morrisons, Aldi, Lidl or Londis, say
dariy farmers[Online] The Guardian. Available
from: http://www.theguardian.com/money/2012/jul/27/dairy-farmersmilk [Accessed February, 2015].
Crane, A. & Matten Dirk (2007) Business Ethics. 2nd ed. Oxford: Oxford
University Press.
Creighton, J. (2014) Marketers judge companies on strength of CSR
performance, claims report[Online] Marketing Magazine. Available
from: http://www.marketingmagazine.co.uk/article/1307351/marketers-judgecompanies-strength-csr-performance-claims-report [Accessed February,
2015].
Evan, W.M. & Freeman, R.E. (1993) Ethical theory and business. 3rd ed.
Englewood Cliffs, NJ: Prentice Hall.
Fisher, C. & Lovell, A. (2006) Business Ethics and Values. 2nd ed. Essex:
Pearson Education Limited.
Freeman, R.E. (1984) Strategic Management. A stakeholder approach. 1st
ed. Pitman: Boston.
Holme, R. & Watts, P. (2000) Corporate Social Responsibility: Making good
business sense[Online] WBCSD. Available
from: http://research.dnv.com/csr/PW_Tools/PWD/1/00/L/1-00-L-2001-010/lib2001/WBCSD_Making_Good_Business_Sense.pdf [Accessed January,
2015].
Kondraciuk, J. (2014) The 2013 Marks and Spencer Plan A report[Online]
CSR International. Available from: http://www.csrinternational.org/2013marks-spencer-plan-a-report [Accessed February, 2015].
Mcdonald, H. (2008) Supermarket signs up to ethical audit[Online] The
Guardian. Available
from: http://www.theguardian.com/world/2008/sep/07/fairtrade.morrisons [Acc
essed February, 2015].
Nichols, W. (2013) M&S Plan A sustainability strategy savings reach
£135m[Online] Business Green. Available
from: http://www.businessgreen.com/bg/news/2273234/m-s-plan-asustainability-savings-reach-gbp135m [Accessed February, 2015].
Pettinger, T. (2014) The battle for market share in UK supermarkets[Online]
Economics.Help. Available
from: http://www.economicshelp.org/blog/11947/economics/market-share-inuk-supermarkets/ [Accessed January, 2015].
Robinson, M. (2014) The slaying of the big supermarkets: How battle with
budget chains sent share in Tesco, Sainsbury's and Morrisons into freefall in
2014 and sparked price war that will last well into 2015[Online] The Daily Mail.
Available from: http://www.dailymail.co.uk/news/article-2874292/The-slayingbig-supermarkets-battle-budget-chains-sent-shares-Tesco-Sainsbury-sMorrisons-freefall-2014-sparked-price-war2015.html#ixzz3QbZAezQM [Accessed January, 2015].
Sexton, R. (2014) Organic Market Report[Online] Soil Association. Available
from: http://www.soilassociation.org/marketreport [Accessed January, 2015].
Smith, S. (2013) Supermarkets and CSR[Online] Emerging Spaces. Available
from: http://emergingspaces.co.uk/supermarkets-and-csr/ [Accessed
February, 2015].
Smithers, R. (2011) Sainsbury's launches sustainability plan[Online] The
Guardian. Available
from: http://www.theguardian.com/environment/2011/oct/12/food-food-anddrink [Accessed February, 2015].
Stark, A. (1994) Whats the matter with business ethics. 1st ed. London:
Harvard Business Review.
Unknown, B. (2006) Supermarkets in competition probe[Online] BBC News.
Available from: http://news.bbc.co.uk/1/hi/business/4753707.stm [Accessed
January, 2015].
Unknown, C.W. (no date) What's wrong with Corporate Social Responsibility?
The arguments against CSR[Online] Corporate watch. Available
from: http://www.corporatewatch.org/content/whats-wrong-corporate-socialresponsibility-arguments-against-csr [Accessed February, 2015].
Unknown, E.P. (2006) Tesco counters critisim with ten point plan[Online]
Ethical Performance. Available
from: http://www.ethicalperformance.com/news/article/3984 [Accessed
January, 2015].
Unknown, S. (no date) CSR and Ethics[Online] Smartbiz. Available
from: http://www.smartbiz.nu/pages.asp?PageID=654&Base=1&MenuID=696
[Accessed January, 2015].