Corporate Social Responsibility of PepsiCo - Case Study Example

Corporate Social Responsibility: PepsiCo Table of Contents PepsiCo – corporate social responsibility 3 1 PepsiCo – overview and performance 3 1.2 Aims and mission of the company 3 2. Impact and implications of the company’s actions on society and stakeholders 3 2.1 PepsiCo and stakeholders 3 2.2 How well does PepsiCo impact on society and its stakeholders? 4 3. Conclusions about the company’s performance in society 6 References 7 1. PepsiCo – corporate social responsibility 1.1 PepsiCo – overview and performance PepsiCo is one of the leading firms in the ‘snacks, food and beverages industry’ (PepsiCo, The Company 2011). The firm’s revenues – from its retail sales in its major 19 brands – in 2010 were estimated to $1 billion/ per brand, i.e. about 19 billion in total (2010 Annual Report, p.16); the firm’s employees have been estimated to 285,000 in the firm’s branches worldwide (PepsiCo, The Company 2011). 1.2 Aims and mission of the company The firm’s mission is clearly stated in its website; in accordance with its mission and vision statement, the firm’s key mission is to become the leading firm in its industry – worldwide. At the same time, emphasis is given on the firm’s visions, which include the improvement of the firm’s ‘social, economic and natural environment’ (PepsiCo, The Company 2011). Moreover, it is made clear that profitability is not the key aim of the firm; expansion in the world market is among the firm’s priority but this expansion needs to be combined by the promotion of the interests of the firm’s stakeholders – as noted in the firm’s mission and vision statement (PepsiCo, The Company 2011). 2. Impact and implications of the company’s actions on society and stakeholders 2.1 PepsiCo and stakeholders In order to understand the relationship between the company and its stakeholders, it would be necessary to describe primary the term ‘stakeholders’, as being used in regard to organizational activities. When referring to the organizational environment, the term ‘stakeholders’ includes the following groups of persons: shareholders/ owners, employees, customers, suppliers, the state (government) and the public in general (Asongu 2007). In PepsiCo, the firm’s stakeholders are defined as follows – in accordance with the firm’s website: ‘consumers, communities, associates, retail customers, investors, partners and suppliers’ (PepsiCo, Stakeholders 2011). Therefore, the relationship between PepsiCo and its stakeholders implies the policies that the company has promoted in order to respond to the needs of the above groups of persons; it also implies the views of stakeholders (as described above) on the practices of the firm. These views can be identified through the following ways: the level of the firm’s profitability (in case of high profitability, the acceptance of the firm’s corporate social responsibility policies by its stakeholders is assumed) and the market research (developed by the company, by its competitors or by independent researchers). Having identified the firm’s stakeholders, the examination of their relationship with the firm could proceed. Two are the key questions that should be addressed: which are the main needs of the firm’s stakeholders and how well has the firm managed to respond to these needs. Reference is made to an indicative example of the firm’s corporate social responsibility, showing its ability to respond to the needs of its stakeholders: the response of the firm to the accident (Oil spill) by BP in the Gulf of Mexico. These issues are analytically presented in the section that follows. 2.2 How well does PepsiCo impact on society and its stakeholders? In order to understand the relationship between the firm and its stakeholders it would be necessary primarily to present the interests of these stakeholders (as described above); then the practices of the firm for protecting these interests could be presented and evaluated. Referring to each particular category of the firm’s stakeholders (see previous section) their interests could be described as follows: a) the interests of the firm’s customers are related to the quality and the price of the firm’s products, b) the interest of communities is related to the effects of the firm’s operations in regard to the economic and social life of each community; the environment within each community is also likely to be affected by the firm’s activities, c) the associates of the firm have interest from securing their position in the organization (the level of employees’ rewarding and the conditions in the workplace are also parts of the firm’s responsibilities towards its associates), d) regarding its retail customers, the firm is responsible from keeping their terms of cooperation standardized, ensuring the fairness of the relevant terms; e) the investors of the firm have interests related to its profitability and its brand name, i.e. the firm’s position in the international market; in this way, their wealth, i.e. their investment on the organization, is not threatened, f) the partners of the firm have also interest to secure their cooperation with the organization; their interests are mostly financial; however, the position of the firm in the market is also important for its partners ensuring the continuation of their cooperation with the firm (in the terms that in case of reduction of the firm’s profits, redundancies would be unavoidable – referring to partners but also to employees of all organizational levels); g) the suppliers of the firm have also interests related to the firm’s performance, meaning that in case of standardization of the firm’s profitability its cooperation with its suppliers would be continued with no problem. The interests of the firm’s stakeholders – as described above – are addressed by the firm through a series of appropriately customized policies, analytically presented in its website (PepsiCo, Stakeholders 2011). The performance of these policies can be evaluated by referring to an indicative example where the firm managed to respond effectively to the interests of its stakeholders, which were threatened. The Oil spill in the Gulf of Mexico in 2010 has been a major indication of the importance of the rules of corporate social responsibility in PepsiCo. The accident occurred in 22 April 2010 – and lasted for many days; the details of this accident can be retrieved through a relevant article of BBC News, where graphs and images of the accident are also presented helping to understand the level of the damage for the environment (BBC News, 10 May 2010). PepsiCo has been among the firms that mostly contributed to the limitation of the effects of the accident. More specifically, the firm developed the ‘Refresh Project’ in the context of which individuals were asked to submit their ideas for supporting the communities that most affected by the above accident. The company has donated in total $1.3 million – through monthly grants for these ideas/ plans (PSFK 2010). The participation of the firm in the limitation of the effects of the accident has been indirect but critical, as noted by experts worldwide (PSFK 2010, Ethical Corporation 2005). In fact, the above initiative of the firm, as part of its corporate social responsibilities efforts internationally has been highly appreciated, positively affecting its brand image (Silverstein 2010). The form through which the firm promoted its corporate social responsibility framework has been quite valuable, having choose to intervene in a crucial environmental event instead of developing activities of just informative nature, for instance, seminars or dialogues on environmental issues, a common phenomenon of modern market where CSR is usually regarded as a way to promote the operational activities of firm, not of supporting the needs of stakeholders (Aragon-Correa and Rubio-Lopez 2007). In the above case, the interests in risk were that of the local communities, a part of the firm’s stakeholders, as explained above. 3. Conclusions about the company’s performance in society In order to evaluate the firm’s performance in regard to its corporate social responsibility it would be necessary to identify the level at which manages to achieve its targets in the specific sector. The example of the firm’s response to the crisis in the Gulf of Mexico will be used in order to develop the above task. The views of the public, as presented through the articles published on this issue will be used for judging whether the firm’s CSR policies are effective or not. The literature published in the specific field, the CSR, will be also used, as appropriate. In accordance with Cramer and Bergmans (2003) the ways used by each firm in order to respond to its responsibilities towards its stakeholders (as reflected in the firm’s corporate social responsibility framework) are not standardized. This fact is also emphasized in the study of Evans and McKee (2010) where reference is made to the practice of firms to promote their CSR policies only for marketing purposes, i.e. just to increase their profitability, even if in many cases, these policies do not actually protect the interest of corporate stakeholders. Of course, the above practice, i.e. the use of CSR as a marketing tool can be, sometimes, opposed with the business ethics, especially if the CSR initiatives promoted do not respond to the reality (Ferrell, Fraedrich and Ferrell 2006), a fact which is not involved in the case of PepsiCo as proved through the example provided above. A similar approach on corporate social responsibility is presented in the study of Melewar (2008). The above researcher refers to the use of CSR as a means for improving the firm’s reputation in its local or the international market. In the case of PepsiCo such trend can be identified. The specific fact is made clear in an article published by Financial Express (in 2009). In the particular article the firm’s emphasis on corporate social responsibility is related to its efforts to improve the image of its brand worldwide; a relationship between the firm’s initiatives on CSR and its efforts to enter the Indian market – which has significant prospects – is established. In practice, it seems that the firm’s initiatives in CSR are quite effective. Moreover, the promotion of these initiatives to the public is well designed. In a relevant research, the firm’s marketing campaign has been characterized as one of the most effective ones in terms of the promotion of the firm’s CSR policies (Taylor 2010). At this point, the following issue should be made clear: does the firm CSR actually serve the needs of its stakeholders or it is rather used for promoting its activities, i.e. for supporting its profitability? In accordance with Schwalbach (2010) the primary target of CSR policies would be the protection of the interests of stakeholders; however, the support of the organizational performance through appropriately customized CSR cannot be rejected or negatively criticized (Visser, Matten and Tolhurst 2010). Indeed, it seems that the promotion of the CSR policies of organizations is considered as a common method for supporting organizational performance (Polonsky 2005). From this point of view, the firm’s CSR behavior could be evaluated as follows: The firm has managed to protect effectively the interests of its stakeholders, as proved through the case presented above, without setting in risk its profitability. This means that the funds invested on CSR will be paid back, referring to the perspectives of the firm in the international market and especially the Indian market, but this prospect should not be negatively criticized. References Aragon-Correa, Juan. Rubio-Lopez, Enrique. 2007. Proactive Corporate Environmental Strategies: Myths and Misunderstandings. Long Range Planning. 40(3): 357-381 BBC News. 10 May 2010. Oil spill in Gulf of Mexico in maps and graphics http://news.bbc.co.uk/2/hi/8651333.stm Cramer, Jacqueline, Bergmans, Fred. 2003. Learning about corporate social responsibility: the Dutch experience. Amsterdam: IOS Press Ethical Corporation. PepsiCo’s reporting: A sustainable advantage? 2 August 2005 http://www.ethicalcorp.com/content.asp?ContentID=3814 Evans, Dave, McKee, Jake. 2010. Social Media Marketing: The Next Generation of Business Engagement. West Sussex: John Wiley and Sons Ferrell, O., Fraedrich, John, Ferrell, Linda. 2006. Business ethics: ethical decision making and cases. Belmont: Cengage Learning Idowu, Samuel, Filho, Walter. 2009. Professionals ́ Perspectives of Corporate Social Responsibility. New York: Springer Melewar, T. 2008. Facets of Corporate Identity, Communication and Reputation. Oxon: Taylor & Francis Pepsico. Stakeholders. 2011 http://www.pepsico.com/Purpose/Performance-with-Purpose/Our-Stakeholders.html Pepsico. The Company. 2011 http://www.pepsico.com/Company.html Polonsky, Michael. 2005. Stakeholder thinking in marketing. European journal of marketing. 39(9-10): 952-1216 PSFK Conference. 21 July 2010. CSR Done Right: Pepsi’s Oil Spill Activity http://www.psfk.com/2010/07/csr-done-right-pepsis-oil-spill-activity.html Rendtorff, Jacob. 2009. Responsibility, Ethics and Legitimacy of Corporations. Copenhagen: Copenhagen Business School Press Schwalbach, Joachim. 2010. Corporate Social Responsibility and Stakeholder Dynamics. Wiesbaden: Gabler Wissenschaftsverlage Silverstein, Barry. 21 July 2010. Pepsi Wins Praise for Refreshing the Gulf http://www.brandchannel.com/home/post/2010/07/21/Pepsi-Gulf-Accolades.aspx Taylor, Victoria. 7 September 2010. The Most Imaginative CSR Ad Campaigns http://www.forbes.com/2010/07/09/pepsi-macys-twitter-tide-levis-advertising-responsibility-cmo-network-imaginative-csr.html The Financial Express. 17 November 2009. Pepsi adds fizz to social responsibility. http://www.financialexpress.com/news/pepsi-adds-fizz-to-social-responsibility/542359/ Visser, Wayne, Matten, Dirk, Tolhurst, Nick. 2010. The A to Z of Corporate Social Responsibility. West Sussex: John Wiley and Sons, 2010 Werther, William. 2010. Strategic Corporate Social Responsibility: Stakeholders in a Global Environment. London: SAGE Read More