Corporate Social Responsibility Reporting in Developing Countries - Case Study Example

?Research Project – Corporate Social Responsibility Table of Contents Introduction 3 Potential Benefits of CSR 4 Importance of CSR Relative to other Corporate Objectives 5 Influencing Determine which Responsibilities are accepted by a Business 6 Factors Determining the Extent to Which a Business is socially responsible 7 Value and Limitations to Businesses and Stakeholders of Social Reporting 8 Government Influence 9 Conclusion 11 References 12 Introduction This study aims at identifying the benefit of corporate social responsibility (CSR) and analyzing the fact whether CSR can be only determined through product designing and manufacture or some other criteria. In the process of evaluating so, the study would initiate with a brief overview on the companies chosen for the research. Further, the significance and influence of CSR would be scrutinized to discuss the limitations and value of CSR in business. The study would also include government’s influence on CSR activities. Before moving on to the discussion, the concept of CSR needs to be understood. CSR signifies sustainably doing business in line with society and environment. To analyse and discuss the different facets of CSR in the present scenario, two companies have been chosen, namely Nestle, and Mars Incorporation. Both of these companies belong to the same food processing industry. Nestle was established in 1905, in Switzerland. It produced dairy products, pet foods, ice-creams, chocolates, Maggi. Nestle has around 328,000 employees around the world. Mars Incorporation on the other hand is an American food processing company established in 1920 in Minnesota. Mars Incorporation also sold products like confectionary, pet food, etc. Mars Incorporation has more than 70,000 employees. The basic concept of CSR may be the same for both Nestle and Mars Incorporation, but since both of these companies have diverse visions, and mission, so they are bound to have different approach towards CSR. Nestle follow a pyramid model which has three levels. The first level is compliance, environmental stability, and creation of shared value. On the other hand, Mars Incorporation follows Five Principle models, which consist of elements like quality, efficiency, responsibility, freedom, and mutuality1. Potential Benefits of CSR In the digitally fast world, every business whether big or small should have CSR program, as it is beneficial for them in many ways. The expectations of the customers, community and the employees from the companies have changed. It is no longer only tied to money or profit, so CSR in this scenario assist companies to meet the expectations of its stakeholders. CSR activities ensure satisfied employees, as employees feel proud of their organisation for the activities they are involved in. It ensures satisfied customers because customers want themselves to be associated with those companies which have a strong goodwill in the market for its social service. CSR creates positive PR for the companies by enhancing their goodwill in the market through word of mouth. It reduces cost and assist in availing more business opportunities, leading to long-term sustainability of business. CSR activities conducted by the company involve high costs, but at the same time companies utilising CSR framework in a strategically correct manner has been also successful in reducing cost. For example reducing carbon footprint has increased the efficiency of the companies, leading to an increase in production capacity and profitability. Nowadays companies are trying to present CSR activities as cost to the company and save tax, but it is actually a part of profit that they are returning to the stakeholders. The stakeholders are those individuals, groups and the society which gets affected by the actions that the organisation undertakes. As far as Nestle is concerned, stakeholder’s engagement plays an important role in their company. The company organises stakeholder converging in order to discuss and identify the concern and expectations of their stakeholders. The discussion included concerns such as obesity, scarcity of water, climatic change and adaptation, etc. For Mars Incorporation stakeholders engagement programs are in form of people, planet and performance. It is similar to the program organised by Nestle that is focusing on mutual benefit of stakeholders through CSR, just the approach is different. This also signifies that fact that CSR has lot more to cater than just eco-friendly product manufacturing2. Importance of CSR Relative to other Corporate Objectives Corporate objectives or strategies are the milestones that any business venture wants to achieve. Business strategies are developed in order to ensure that the firm achieves those corporate objectives. The corporate objective of the company percolates through different level to the basic level, so that it is segregated into short-term goals, and becomes easily achievable. The mission of the company moves down to analyst where the business strategies are formulated, then it diverges and shift down to functional level, team level and individual level in the organisation3. The mission of Nestle is “Good Food, Good Life”, which is driven by the competitive advantage strategies, operational pillars, and growth drivers of the company. These strategies are not for selling products, but for the betterment of the society, which in turn signify that sustainable companies do not set their corporate objective to only mint money, but mainly serve the society in a better way. The objective of Mars Incorporation on the other hand is to generate mutuality of advantage for conducting business in sustainable ways that also benefit people and planet. Now if the objective of Mars Incorporation is compared with its CSR principle, it can be seen that the five principle model of Mars Incorporation perfectly fits to the business model. In order to attain sustainable business processes quality, freedom, mutuality, responsibility and efficiency is the key ingredient4. A general notion is that profit-making manufacturing companies’ foremost corporate objective is to earn profit, but as it can be seen it reality is different. Serving society, attaining sustainability and satisfying the stakeholders takes in the front seat in present organisations, which once again prove that CSR is beyond what product the company sells or manufactures. Influencing Determine which Responsibilities are accepted by a Business As mentioned previously CSR activities of the companies affect or influence the society in economic, environmental, and social manner. Similarly the companies get economically, as well as socially influenced by these activities. CSR influences stakeholders and the companies economically because firstly, it assist the companies in reducing their cost through formulation of better strategies, increasing efficiency, reducing misuse of useful resources, engaging people in activities which will serve the society and also generate profits for the company. CSR influence business and stakeholders environmentally, of course because companies are coming forward to save energy, reduce wastage, landfills, eliminate the emission of CO2 and other greenhouse gases, and invent renewable sources of energy for them and for society. CSR is also influencing businesses on social front because companies are involved in voluntary CSR services such as charity, providing free education, supporting people suffering from poverty and children from malnutrition, etc. This is influencing the society, and improving the standard of living of people5. Nestle organises various health and awareness programs in order to ensure good health for children suffering from malnutrition, assist farmers in growing crops better through advices, promote human and labour rights, etc. They produce eco-friendly, nutritional product to ensure that quality food products is offered to people, and simultaneously the greenhouse gas in reduced. Mars Incorporation on the other hand focuses on climate change and utilising renewable sources of energy to run its factories such as solar panels, saving water in production process, which is beneficial for environment and for society. The company has also established an efficient supply chain framework to reduce carbon footprint and as far as production is concerned the processes are skilfully designed to produce quality products that offers a healthy future to its stakeholders, which proves that there are far more significant issues that CSR focuses on than products6. Factors Determining the Extent to Which a Business is socially responsible There are various factors which assist in determining the extent to which a company is socially responsible such as it corporate objectives on which the business strategies are formulated. The organisational culture and ethics of the company on which the employee attitude is developed, activities and programs that are designed to serve customers, employees, shareholders, and other stakeholders, and the initiative of the company towards the environment and country in which it is conducting business. As far as these factors are concerned, it would be better to explain the extent of these factors with the help of example drawn from the company chosen for the study. Nestle maintains its corporate objectives Good food and good people through its sustainable competitive advantage, environmental friendly social activities, and through assistance to stakeholders for their growth and development7. Mars Incorporation on the other hand follow their five principle model which includes maintaining quality and safety of food products, saving water, responding to climate change, ensuring efficient supply chain, and distributing profits to stakeholders as remunerations, and dividends. The factors which have been explained state to what extent Nestle and Mars Incorporation are socially responsible, and also reveal how the concept is CSR is much wider than just production8. Value and Limitations to Businesses and Stakeholders of Social Reporting Big corporations communicate through social reports nowadays. This involves social auditing, accounting and reporting. This lengthy process is undertaken by the companies in order to inform the shareholders, employees, customers and investors regarding the social activities undertaken by the company, expenditure on those activities, and efficiency attained. It is a complete sustainability report of the company. The companies also want their stakeholders to know about their corporate social performance for attracting investors and in this way tax evasion can be eliminated too. Corporate social reporting holds similar importance as that of the annual report of a company. The social reports reveal the actual CSR activities that the company has undertaken. Actual CSR activities are mentioned here because generally in order to promote products or brand companies create hype or spread rumours of their social activities, which sometimes are false, but when they are documented in report form, false claims cannot be made. Companies cannot evade tax in the name of CSR activities because of social reporting. The investors will get the right idea of the social contributions of the company. The employees will feel proud for some genuine activities of their company and shareholders would be benefited too9 . As far as the limitations of the social reporting are concerned, the major limitation would be the expense that the company had to bear for CSR, which not only includes associated cost but employee training cost. Another challenge is that the shareholders expect companies to maximize their return and they sometime identify the expense of the company on voluntary CSR as unnecessary spending. Nestle and Mars Incorporation both have properly designed CSR framework and they regularly issue their sustainability reports for their stakeholders to know about their CSR performance. However, like every company, these companies too have to face several criticisms from time to time for mistakes which revealed grave results. Government Influence Government of every country has a significant role to play monitoring and controlling the CSR framework of companies because most of the companies are channelling their profits in other countries for CSR activities and saving tax, which is affecting the revenue or economy of the host country. Governments need to monitor that tax activities are not mixed with CSR framework. More importantly the society is not harmed due to the result of CSR activities. Though Nestle’s policy is to work in close union with the government for the betterment of the society but it has been held responsible in China for adulterating baby milk, in which traces of melamine was found. Similarly Mars Incorporation also got tangled in issues of child labour in cocoa fields from where they exported cocoa. However, the government should involve themselves to see that regulatory and ethical norms are followed, but they should not indulge themselves into every activity because generally it has been seen that the government officials become corrupt and indulge in bribery.10 Conclusion The research was stated with the question whether the usage of CSR is confined to production or not. The answer to this question was found through a comprehensive discussion in the report. CSR is a wider concept, manufacturing process, and products for betterment of the society are only one step towards CSR. There are environmental, social and economic signifies of CSR, which benefits the organization and the society. With the example of Nestle and Mars Incorporation this fact was also proved CSR integrated companies function on the mission and vision of sustainability and not profitability to become market leaders. References Ataur Rahman Belal, Corporate social responsibility reporting in developing countries: the case of Bangladesh (Farnham: Ashgate Publishing, Ltd., 2008), 125-127. Ella Joseph and John Parkinson, New business agenda for government (London: Institute for Public Policy Research, 2003), 55-58. Malcolm McDonald, Marketing plans: How to prepare them, how to use them (Jordon Hill, Oxford: Butterworth-Heinemann, 2007), 277-278. Mars Incorporation, ‘Defining our Approach’, Mars Incorporation, and it’s Affiliates [web page] (2012) < http://www.Mars Incorporation.com/global/about-Mars Incorporation/Mars Incorporation-pia/our-approach-to-business/defining-our-approach.aspx>, accessed 21 may 2013. Mars Incorporation, ‘People, Planet and Performance’, Mars Incorporation, Incorporated and it’s Affiliates [web page] (2012) < http://www.Mars Incorporation.com/global/about-Mars Incorporation/people-planet-performance.aspx>, accessed 21 may 2013. Mars Incorporation, ‘The Five Principles of Mars Incorporation’, Mars Incorporation and its Affiliates [web page] (2012) < http://www.Mars Incorporation.com/global/about-Mars Incorporation/the-five-principles-of-Mars Incorporation.aspx>, accessed 21 may 2013. Nestle, ‘About us’, Nestle [web page] (no date) < http://www.nestle.com/aboutus >, accessed 21 may 2013. Nestle, ‘Introduction’, Nestle [web page] (no date) < http://www.nestle.co.uk/csv2012/introduction>, accessed 21 may 2013. Nestle, ‘Our approach’, Nestle [web page] (no date) < http://www.nestle.co.uk/csv2012/introduction/ourapproach>, accessed 21 may 2013. Subabrata Bobby Banerjee, Corporate social responsibility: The good, the bad and the ugly (Cheltenham: Edward Elgar Publishing, 2009), 6-8. Read More