Corporate Social Responsibility (CSR) Chapter 1 Introduction Corporate Social Responsibility is a rapidly developing, key business issue. It is a concept that has attracted worldwide attention. Due to the demands for enhanced transparency and corporate citizenship, CSR started to embrace social, ethical as well as environmental challenges. Today, companies are aware of the social and environmental impacts of international production. It is accepted that Companies should not be only profitable, but also good corporate citizens.
Through globalization of the economy, multinational companies are increasingly involved with suppliers and customers worldwide, especially if they operate in developing countries. The CSR agenda has a close relationship with international development. CSR within multinational companies is seen as a vehicle through which larger, well known corporations can contribute to the well being of developing countries by operating responsibly in terms of social and environmental issues. However, the promoted “CSR” in the developing world by multinationals is “not real CSR”, despite significant contribution to development in some cases.
Very little is known about the companies’ CSR policies and practices in an international context, developing countries in particular. As reality shows, most of the larger corporations abuse the CSR and behave unethically and irresponsibly towards both society and the environment. Issues such as unsafe working conditions, unfair payment, gender discrimination, sexual harassment, toxic emissions and the hazardous pollution of water and soil have all raised fair allegations by consumers, non-governmental organizations and the larger society. Famous global brands like Nike, Coca-Cola, GAP and McDonalds are often under intense pressure from the public. Much of those pressures are due to their unethical behaviour in developing countries, where their main operations take place. Though companies operate in host countries, their reputation extends across numerous national boundaries. The actions of multinational companies in a host country can cause significant loss of reputation in the developed world, where the general public have become more sensitive to environmental issues and social impact.
The public have the power to boycott the goods and products of multinational corporations in cases of unethical behaviour where organisations are thought not to fulfil their social and environmental obligations. However, international reputation side effects are not the only reason behind the potential increased level of social and environmental responsibilities faced by multinational companies; there are many drivers for the correct implementation of CSR by business entities. However, for many companies, corporate reputation and brand image are the fundamental components of business success.
Corporate Social Responsibility in developing countries represents the formal and informal ways in which multinational business enterprises contribute to improving the social, ethical and environmental conditions of the developing countries in which they operate. However, the rational approach to the CSR in the developing world is different from CSR in developed countries. For example, developing countries represent the ongoing growth of the economy; hence the most attractive growth markets for many foreign companies.
They provide cheap labour, an absence of strong regulations and a rich availability of resources; all crucial concerns for multinational enterprises for conducting their businesses in developing world. It has been found that the public and the government are not as critical of unethical business practices within foreign companies. In addition, developing countries are where globalization, economic growth, investments and business activities are likely to have both positive and negative social and environmental impacts.
Therefore, developing countries represent a different set of CSR agenda for multinational companies to those operating in the developed world. In this research paper the CSR practices of multinational corporations will be examined. Their CSR commitment as well as irresponsible practices will
Literature review will give us the background knowledge about CSR. In chapter two, research methodology and relating this to the subject matter will be discussed. As research will be based on case study, there will be some examples of multinational corporations’ experience in developing countries. The examples of their commitments towards environmental and social sustainability as well as negative impacts caused by their unethical operations will be provided. The opinions and critics of analysts and experts will provide a clear nderstanding of companies’ CSR practices in the developing world. The well known multinational companies like Nestle, Nike, KFC, Apple iPod and many others will be examined for their irresponsible and unethical behaviour in developing countries such as China, Indonesia, India, Southeast Asia and Africa. For the main research point the Coca-Cola crisis in India has been chosen, as Coca-cola, despite its CSR commitment towards society and environment, has caused damages to both the community and environment where it operates.
From the case study, we are able to make some conclusions regarding CSR practices and make suggestions and recommendations for future of Corporate Social Responsibility, as it will undoubtedly increasingly become a major issue and integral part of business practise. Chapter 2 Literature review The 21st Century has seen much advancement in the issue of corporate social responsibility (CSR), and there has been particular interest in the impact CSR could have globally. This literature review will begin by defining what is meant by corporate social responsibility.
There are a lot of debates about the origins of CSR; however it is clear that CSR is a modern term, a consequence arising from the history of business responsibility. The modern term is considered to have western origin; however it has developed from different countries’ ideas and theories. This has created a number of definitions of CSR. This can lead to confusion making CSR less effective. It is interesting to observe that none of the definitions actually defines the social responsibility of businesses, as so famously discussed by Milton Friedman (1970), but rather describe it as a phenomenon.
The Government sees CSR as a business contribution to sustainable development. However, the modern concept of CSR has been influenced by Globalization and so CSR has developed and is taken in different context worldwide. (Crane, Matten, Spence, 2008). In addition, organizations such as the European Union (EU) see CSR as a concept integrating social and environmental concerns in business operations and in their interactions with their stakeholders on a voluntary basis.
However, others like Ethics in Action Awards (2003), describe CSR as a company’s obligation to be accountable to all of its stakeholders in all operations and activities (Dahlsrud, 2006). There are a number of debates raised in academic literature over the issue of to whom the business must have responsibility. Various authors have referred to the common approaches: shareholder, stakeholder and societal approaches. According to shareholder approach, the classical view on CSR maximizing the profits of shareholders (Friedman, 1962).
This approach can also be interpreted as being that the company should make contributions to the extent, to which it can be connected with the creation of long-term value for the shareholders (Foley, 2000). From the stakeholder theory, it is obvious that organisations should be accountable towards other groups of stakeholders, who can affect or be affected by a company’s objectives (Freeman, 1984). The last approach, which is regarded to give the broader view on CSR, argues that the organisations should be responsible to societies as a whole, of which they are an integral part.
The aim of the following literature review is to identify the most valuable academic studies and important practical investigations. The field of Corporate Social Responsibility can be divided into several parts; definitions of CSR, analysis of CSR approaches, CSR in supply chain, CSR in developed countries as well as in developing ones, the link between CSR and globalization and last, but not least the global understanding of CSR. The history of CSR The development concept of Corporate Social Responsibility (CSR) has been carried out mainly in western countries; particularly in United States.
Literature picks up the issue from the 1950s when attention was devoted to the responsibility of businessmen ( Bowen, 1953) to the 1980s when the argument with stakeholder theory took place (Freeman, 1984) and of course, to the 1990s when most studies were devoted to the analysis of the relationship between CSR and corporate financial performance (Roman et al, 1999). In the beginning of the 1950s, Howard Bowen tried to give rational and systematic arguments in favour of CSR and its connection with big corporations and their influence on social consequences and undoubtedly, their primary societal responsibilities.
The one of the earliest books on CSR, “The Social Responsibilities of the Businessman”, was written by Bowen in 1953. Bowen’s book was specifically concerned with the doctrine of social responsibility. Bowen argued that social responsibility is not panacea for all business social problems, but that it contains an important truth that must guide business in the future (Asongu, 2007). Because of Bowen’s early and very valuable work, Carroll has argued that Howard Bowen should be called the “Father of Corporate Social Responsibility” (Carroll, 2000).
The decade of the 1960s is characterized as seeing a growing interest in the formalizing or more precisely, defining the meaning of CSR. One of the prominent writers in this period was Keith Davis, who later extensively wrote about the topic in his business and society textbooks, later revisions and articles. He argued that social responsibility is a nebulous idea, but should be seen in a managerial context (Mahon, 1991). Another influential contributor to the early research into CSR was Friedman. The argument made by Friedman (1962) that the main corporation’s responsibility is toward shareholders has created much debate among academics.
It was not until 1970, that Wallich and McGowan first made attempts to demonstrate the link between corporations’ social responsibility and shareholder’s interests. They argued that the aim of corporation’s long-term interest should be linked to the environment to which a corporation belongs. If society and environment became worse, a business would lose their “critical support structure” and customer base (Keim, 1978). In the 1970s there are a wide range of references, increasingly being made to corporate social responsiveness, corporate social performance as well as corporate social responsibility.
In the 90s, literature tried to find out answers to questions such as why some companies are doing well and if CSR could be identified as a competitive advantage. Most academics and scholars started to apply the stakeholder theory to CSR, because stakeholders, other than shareholders have interest in the well-being of a company in relation to employees, customers, governments and others. This model renewed the interest in CSR and more research was devoted to this subject.
Also, there is great interest in the linkage between CSR and corporate competitiveness; but bbbthere is a shortcoming of quantitative translation of socially responsible practices into specific results affecting the income and loss of particular organization (Murillo and Lozano, 2006). Many scholars connect CSR with the competitive advantage that a company can gain. The most well-known work in this field is Professor Michel Porter’s “The competitive advantage of corporate philanthropy” in which he describes how a company is able to improve its long-term potential by linking financial and societal goals (Porter, 003). Further development in this area was made by Kramer (2003). Problems with CSR research We know very little about CSR initiatives and undoubtedly, there are some questions about both the efficiency of CSR approaches and the tangible benefits for stakeholder groups. Also, we know very little about the social and environmental impacts of CSR initiatives. For example, many business schools analyzed and devoted their works to studying the content of codes of conduct. They looked at specific issues such as child labour, but they failed to study the wider societal impacts of CSR.
The most notable study about societal impacts came from development study scholars, not from business schools. The study by Barrientos and Smiths (2007) reviled that there are, in particular in those countries where empirical investigation took place such as South Africa, India, Vietnam and Costa Rica, some benefits from codes of conduct and initiatives implementing CSR by multinational companies. However there are failures in the areas of noncompliance and ensuring the improvement of working conditions.
In addition to this, Barrientos and Smiths questioned the methods used by the business communities in investigating the societal impacts of CSR, doubting the efficiency of the tools used to monitor CSR performance. Due to the lack of empirical study and evidence regarding CSR impacts, there are still analytical limitations in the current CSR field. For example, some academics (Lantos, 2001) wrote about conceptualization of CSR, however, current field of CSR and business scholars fail to answer vital questions.
For example, how can CSR tackle a development challenge like poverty, without an understanding of the negative influence caused by multinational companies operating in host communities? Even if there is agreement about societal benefits of CSR initiatives, there is still uncertainty about the way in which CSR should be studied and analyzed. Lockett, Moon and Wisser (2006) argued that CSR knowledge should be best described as a continuing state of emergence. Indeed, many scholars study CSR initiatives without any reference to theoretical perspectives.
Milton Friedman and other authors highlighted the “agency problem” of CSR for a long time. For example, Friedman argued that the pursuit of societal and environmental objectives will undoubtedly hurt shareholders by lowering profits. However, other scholars like Margolis and Walsh (2003) oppose the arguments of Friedman. They found that, between 1972 and 2002, at least 172 empirical studies investigated the positive relationship between social responsible behaviour of an organization and its financial performance. Levels of CSR
Another main contribution to the development of CSR made by Carroll (1991), considered the economic, legal, ethical and philanthropic levels of CSR. These levels represent what is required, expected and desired for CSR strategies (Crane, Matten, Spence, 2008). According to Crane, Matten and Spence, Carroll’s pyramid of CSR is the most widely accepted definition of CSR. Until the 1980s, environmental corporate responsibility was the part of “social responsibility”, which was used as a frame term that covered a wide field of ideas. However, corporations became to understand the importance of environmental responsibility.
For this reason, the concept of “corporate environmental responsibility” has started to be used by researchers such as Rondinelli and Berry (2000) in parallel with the development of “corporate social responsibility” by Carroll (1998), Maignan and Ferrel (2000) and Zarkada-Fraser (2004). CSR and Corporate Social Reporting The great number of scholars, who have since the 1970s (Fenn, Ackerman,), analyzed the complex issue of Corporate Social Responsibility and the advantage of reporting on a wider scale, have given the possibility to evaluate social performance (Levis, 2006).
The theme of social reporting has been developed along with the CSR. The approach for researching reporting is different in comparison with past decades due to the growing number of organizations that have published a social report. (Belal, 2002; Bitcha, 2003; Weaver et al, 1999). The reason for the growing interest in this field is linked to progress in business ethics (Donaldson, 1999) and the significant importance of the stakeholder approach, which has led to an increase of interest in studying the causes and real meaning of the phenomenon.
The present approach to social reporting activities can be divided into two parts: fists, those who still think that it is a responsiveness approach and others, who argue that it is much more than communication; it is a tool of strategic management. Research in CSR worldwide Cultural differences affect CSR dynamics as well as companies practising responsible behaviour. For instance, research by Juholin (2004) reviled that long-term profitability is the prominent driving force behind CSR in Finland. Research by Fulop et al. (2000) discovered differences in CSR orientations between large and small firms.
A similar study by Uhlaner et al. (2004) suggests a mixture of CSR perspectives (economic benefits, legal, ethical and philanthropic considerations) as useful in explaining variations in CSR orientations amongst Dutch firms. Despite cross-cultural and national differences, there are differences in the variety of methodologies adopted in examining and analyzing CSR. Some studies considered CSR as a philanthropic and ethical responsibility; however other studies have made a distinction between CSR as simple legal compliance vs. CSR as conducting business with high regard for morality.
As noted previously, the debate about CSR has existed since the 1950s. In the first academic papers, a narrow concept of corporate social responsibility was used. Most of the authors like Bragdon and Marlin (1972) and Spicer (1975), tried to approach CSR through the main social and environmental problems such as pollution and contributions to the local community. The data used for their analysis was based on information issued by the Council on Economic Priorities. However they were not able to cover the whole aspects of CSR and their works were not valid for every industry (Dooley, 2004).
Later, a broader valuation and examination was provided by Moskowitz (1972, 1975). In his work he tried to cover almost every aspect of corporate social responsibility such as equal employment opportunities, charitable contributions, fair dealing with customers, product quality and more. CSR in developing world Despite the great interest in ethical and responsible behaviour in business, very little is known of the practise of CSR in developing countries. For example, Belal (2001) notes that there are a wide range of academic publications, describing CSR in the context of developed countries such as Western Europe, the USA and Australia.
Also that we still know too little about practices of corporate responsibility in ex-colonial, smaller and developing countries. He suggests doing more research into developing countries as it will give a valuable insight to the western meaning of CSR in context (Jamali, 2007). There are no large scale developmental studies of CSR in developing countries as there are in western countries. However, the CSR discussion traditionally revolved around the multinational companies operating in developing countries. The multinational companies’ response to CSR has great impact on the future global CSR agenda.
The first notions of corporate social responsibility in developing countries emerged in the 1960s amongst American companies operating in developing countries, particularly in Asia and Africa. Perhaps a simple definition, truly reflecting the responsible behaviour of current multinational companies operating in developing countries is presented by Davies, who suggested CSR as a framework for the role of business in society. The implication of this definition is that it includes any society in which the company operates, including the “global society” (Engle, 2006).
Within the Asian context, most academics paid attention to describing the governance aspects of environmental responsibility (Hong Kong: Hills and Welford; China: Bi; The Philippines: Forsyth). In contrast, in India, Mohan has focused on social responsibilities and corporate citizenships. Also, there is some research into the normative aspects of CSR such as the evolution of business ethics in Taiwanese companies (Wu). In the study of CSR in Malaysia, Teoh and Thong found that the most foreign multinational companies seemed more inclined to accept their responsibilities towards environment and society (Chapple, 2005).
CSR in the Global Context CSR and multinational corporations. Relatively little is known about management of corporate social responsibility by multinational companies (Gnyawali, 1996). In general, little is known about the management of CSR in multinational companies, either practically or academically. While many areas of research have examined the nature of cultural or business preference to social equality (Adler, 1997; George and Jones, 2002; Lantos, 2002), there has previously been no research regarding the role of CSR in the expansion of organizations into new territories or cultures.
The dominant theoretical approach to studying CSR practices among multinational companies, operating in developing countries, is the works of Bartlett and Ghoshal (1989) and Prahalad and Doz (1987), who tried to analyze general multinational companies’ management practices in CSR. This framework was then extended by Yip (1992) and Husted and Allen (2006) to cover CSR practices (Geppert et al. , 2006). The studies of these researchers enabled interesting insights such as how CSR is being managed, the potential barriers to successful implementation of CSR practices within domestic places into operation among multinational corporations.
However, mainstream research of CSR was concentrated particularly on domestic issues such as labour issues, racial discrimination, the position of women and the environment. To date there has been limited analysis in the developing countries context, in particular regarding foreign multinational companies. Further detailed analysis is needed of what instrumental, moral and relational motives exist in systems very different to the western context in which they were developed. CSR and Globalization With Globalization, CSR has been propelled into a global context.
Ruggie (2004) identified three particular aspects of social responsibility in the context of global governance. Firstly, nowadays it is expected that multinational companies will build new capacities and take care of issues such as working conditions, healthcare and education as well as respect human rights. So that, if corporations insist on setting up in developing countries, they are forced to consider challenges, normally associated with developing countries like poverty or child labour. Nowadays, most multinational companies face a lot of new and challenging problems in this era of Globalization.
According to Weber, Lawrence and Post, multinational companies are able to solve such problems. They have introduced the idea of “Three sector world”, compromising multinational companies, non governmental organizations and community. In their research, they compared both strengths and weaknesses of each sector and analyzed their contributions to solving global problems. The research method was based on comparing attempts of two multinational companies in implementing CSR in developing countries (Young, 2008).
Based on their findings, it is obvious that a collaborative partnership with community and non governmental organizations can carry better results in implementing CSR. Therefore CSR in the global context involves more than business implementation, it needs business cooperation with other organizations whose focus is greater on CSR. From the vast majority of literature, it is clear that CSR has gained major significance in the era of Globalization and multinational companies should take responsibilities for their actions worldwide, especially in developing countries.
Multinational corporations should behave as a moral leader in an area where there are no legal requirements (Scherer and Smid, 2000). CSR is considered a Western idea, which has now to be applied to problems in the developing world (Scherer and Smid, 2000). The literature review is an account of what has been published on corporate social responsibility; it acknowledges the critical points highlighted by scholars and researchers. The literature review conveys what knowledge and ideas have been established on corporate social responsibility and it enables further research to compare and contrast these ideas in order to create new theories.
Therefore a literature review provides the basis for the analytical framework of this research (Bryman, 2004). It has also helped with the interpretation of the results and has led to other questions being asked. The literature review also highlighted that there had been little research carried out on the societal impacts of CSR and implementation of CSR by multinational companies in developing world. This gives further importance and emphasis to the analysis of literature in giving rise to new questions and theories.
The literature review has provided the framework of following deep research about corporate social responsibility of multinational companies in developing countries, in particular the problems and benefits of implementing of CSR and the role of huge corporations in this issue. The literature review has helped to identify key themes within CSR by multinationals and from this more questions have evolved. Chapter 3 Methodology In this research paper the case study was employed as the research strategy.
Usually descriptive or exploratory research is associated with the case study, and this might be particularly useful when the phenomenon under investigation is difficult to study outside its natural setting. Using case study research methodology is also helpful when the concepts and variables need to be considered where experimental or survey methods are regarded to be inappropriate (Yin, 1994). Case study is used particularly in looking at the specific questions such as “how and why” that is set in the contemporary environment (Yin, 1989) Case study methodology has a lot of advantages over some other methodologies.
First, it allows the use of multiple data collection techniques in order to build a more comprehensive picture of the case being investigated. Second, this in turn leads to the ability to capture both qualitative and quantitative data. Case studies can provide a solid understanding required for hypothesis development that then leads to improved theory development. The main advantage of case based research is that results are considered to be interesting and important and can shift the focus of investigation towards a new area of interest (Scapens, 1990).
The case study is usually considered more accurate, diverse and rich, if it is based on several sources of data (Alasuutari, 2000). Advantages of using secondary data for research purposes As the research is concerned with multinational companies operating internationally, secondary data will probably provide the main source of necessary information. As our research strategy is case study, it is better to use compiled data that have already been sorted or summarised (Kervin, 1999).
Secondary data can be obtained from different sources aimed at the same geographic area, where our case study takes place such as the Coca-Cola’s crisis in India. Area-based multiple sources of data are usually easily available in different forms, especially in published forms. Also tracking the original source of secondary data is much easier, especially when time restrictions are severe. As it will be a case study, it is even preferable to use newspapers, journals and media on a regular basis, as they may provide recent events within the business world. Research will concern the specific country i. . India, data from government sources are also useful due to their high quality. Because of time constraints, secondary data can be obtained very quickly, in addition they have better quality standards in comparison with collecting own data (Stewart and Kamins, 1993). Using secondary data within collection also has a wide range of benefits, as they have already been collected and analyzed (Cowton, 1998). Unlike the data collected by myself, secondary data are permanently available and easily accessible, so that it can be checked relatively easily to others (Denscombe, 1998).
Problems with collecting primary data for research purposes Access for some primary data can be problematic and difficult. Therefore it is unlikely that gaining permission for physical access will be easy and will be time consuming. As an interview is way for collecting primary data, however it is difficult to seek access to a range of participants such as employees, suppliers, customers and other stakeholder groups. The main cause might be restricted access to company’s data either directly or indirectly (Bunchanan et. al. , 1998; Raimond, 1993).
As a full time master student, you are not able to have prior contact with huge multinational companies and you will be required to negotiate in order to gain any access to each level of information. Also, the major obstacle in obtaining primary data is time constrains. There is not sufficient time for all methods of collecting primary data, as physical access may take weeks or even months (Bunchanan et. al. , 1998). Even, if there are time allowances, nobody can guarantee that replies will be quick and contain all necessary information.
In case of opportunities for conducting interviews, undertaking questionnaires or engaging in observation, unfortunately, this would take several weeks. Whichever method will be chosen, almost all methods for gathering primary data are very time consuming (Bryman, 1988). However, due to the growing significance of the topic, many researchers have used primary data to conduct research. They collected primary data through interviews, observation and questionnaires. There are some examples of case study based research approaches.
The implementation of CSR in developing countries was examined by Christina L. Anderson and Rebecca L. Bieniaszewska in the paper “The Role of Corporate Social Responsibility in Oil Company’s Expansion into New Territories”. The aims of the study were to analyse the role of CSR in British Petroleum’s overall business strategy and to examin the benefits of employing CSR as a part of business strategy when it was operating in new territories and cultures. The case study approach was conducted through providing interviews with representatives from BP, social auditing and accounting specialists.
Recent company reports and website information were also examined. Another example came from Richard Welford and Stephen Frost’s research that provides an overview of CSR practices in Asia. The aim of the research paper is to review the benefits of the implementation of CSR in supply chains and arising obstacles. In order to collect data for research purposes, interviews were undertaken with six CSR managers working for well-known brand corporations, ten factory managers and eight CSR experts. Interviews were held confidentiality and anonymously.
All participants have extensive experience of CSR issues and provide a good overview of the challenges for CSR by multinational companies in Asia. The case study based approach showed that multinational corporations such as Gap, Nike, Reebok, operating in Asia, are still continuing to be criticized because they were not 100% perfect, failing in proper implementation of CSR as well as monitoring. Another example of a research case study came from Ian Harwood and Stuart Humby from the University of Southampton in their research paper ” Embedding corporate responsibility into supply: A snapshot of progress”.
Their research adopts a case study methodology, with specific focus on an exploratory cross-case analysis. Along with the revising literature review, methods included nine semi-structured interviews (1. 5 hours each), followed by conversations with different public and private organisations, which concerned CSR issues as well as dialogues with other universities working in the field of corporate responsibility both locally and internationally. Some participants asked about anonymity and confidentiality. Consequently, ethical issues were considered during the process of gathering data.
Nine companies were large enterprises, operating in multinational markets. The respondents were senior managers and directors in either procurement or CSR related roles. The aim of research was to identify the CSR practices in companies, the processes of implementing CSR in supply chain including the management of risk and performance management. Also, views on the problems for future development of CSR were analyzed. Corporate Social Responsibility became an important issue in the late 20th century. However, there are still several large companies, behaving unethically within society.
Many companies have emphasized that they govern their social responsibility and behaviour, but more often than not, this is only on paper. There are countless cases that can be examined for corporate social responsibility of multinational companies in developing countries. Ten well known companies were chosen, because all of them were criticised for corporate social irresponsibility and failures in fulfilling their obligations towards society and environment. Reebok case “I do not know that anybody has bought a pair of Reebok shoes because of its human rights programme.
But we are a global corporation and we have an obligation to give back to the communities in which we live and work. ” -Doug Cahn, Director of Human Rights Programmes, Reebok international limited Background US-based Reebok International Limited (Reebok) is one of the leading footwear companies in the world. With over a hundred years of operations in the footwear industry, Reebok has operations in over 170 countries across the world, most of which in developing world (Reebok, 2009). Reebok has its own Corporate Social responsibility; however Reebok joined the companies that were accused of human right issues.
Reebok instituted a Code of Conduct, also known as Reebok’s Human Right Production (appendix 1); to regulate working conditions, especially in developing countries. However, despite measures and regulations taken by the company, the company still have several allegations against them concerning human violations, for example in Chinese factories. Analysts felt that the measures taken by company were not appropriate and that Reebok should regulate this problem in order to enhance its image as a socially responsible company (Aaron, 1999). CSR of Reebok
Reebok established and become a member of Business for Social Responsibility; they monitored human right abuse through audit and video camera facilities. They launched a project called Educational Assistance in Pakistan and Workers Communication System in Indonesia in order to avoid working violence and conducted training programs for factories in developing countries. All theses initiatives helped the company improve its social image. Reebok’s problems in China Like most of its competitors, Reebok has a wide range of sub-contractors in China due to low production costs.
Independent research agencies reported violations occurred in most Chinese factories. They highlighted the ineffectiveness of Reebok’s monitoring system. They revealed that wages were not paid according to laws, overtime wages were also violated, women were not treated properly and the absence of any workers unions. It was also found that children aged between 13 and 15 were being employed. In addition workers suffered not only mentally, but also physically due to the lack of any appropriate conditions at work and unsuitable accommodation (China Labour Watch, 2002).
All of these issues deprived workers of their human rights. Criticisms Since such problems were identified, Reebok tried to take measures immediately. Through these measures Reebok attempted to solve the problems including forced labour, low wages, child labour, physical and other types of abuse. However, many reports continued to be published showing human violence in factories. For example, China Labour Watch argued that in order to prevent human abuse, the actions were not sufficient and violations were still occurring (China Labour Watch, 2002).
KFC (Kentucky Fried Chicken) case “The chicken they serve is full of chemicals, and the birds are given hormones, antibiotics and arsenic chemicals to fatten them quickly” -Nanjundaswamy, founder-leader of the Karnataka Rajya Ryota Sangha. Background By 2004, KFC emerged as one of the world’s most popular chicken restaurant chains. With more than 11,000 restaurants in nearly 80 countries, KFC served nearly eight million customers worldwide every day (KFC, 2009). KFC in India KFC is one of the multinational companies entering the Indian market.
However, a lot of economists and nutritionists opposed and criticised KFC for many reasons. They argued that first; it was threat to domestic business and a cultural invasion Secondly it would cause a high rate of obesity, heart disease and cancer due to the sodium and cholesterol contained in fast food. For example, the Municipal Food Inspector found out that some of KFC’s chicken contained three times more monosodium glutamate than regular chicken (Ray, 1995). For the first time, KFC was accused processing “Junk food” in a poor country like India, where malnutrition problems are severe.
PETA (People for Ethical Treatment of Animals) accused KFC of cruelty to chickens and not providing care for the birds in its factories despite the fact that KFC has published standards to guarantee humane treatment for its birds. PETA also said that because of such cruel attitudes towards animals, KFC must not enter India (Ecologist, 1995). As Pankaj Batra, director of Indian sub -continent pointed out that KFC was obligated to require its suppliers to follow the welfare guidelines for proper animal treatment (Thaiindian press, 2003).
However, some opponents like the Indian Government tried to justify KFC by saying that multinational companies like KFC would create more employment and improve infrastructure. Though, in reality as Nanjundaswamy argued, fast-food companies brought jobs only for a handful of educated people and the poorest people are left without job opportunities. Apart from the threat to local agriculture, there is another threat as mentioned by Nanjundaswamy. This is that the company gives chemicals and antibiotics to the chickens in order to fatten them quickly.
He called the chicken “chemically poisoned” (Newindpress, 2003). Ecologists also participated in the activities against KFC. They claimed that opening new fast food outlets meant more trash like paper cups, bags and plastics on the streets. Wal-Mart case “As one of the largest companies in the world, with an expanding global presence, environmental problems are our problems”. -H. Lee Scott, President & CEO, Wal-Mart Stores, Inc. “We don’t know whether Wal-Mart’s environmental changes are real or a Machiavellian attempt to green-wash a declining public image.
But its long record of irresponsible behaviour forces one to be sceptical” -Chris Kofinis, Communications Director, wakeupwalmart. com Background Wal-Mart, the world’s large retailer, operates in many developed countries as well as developing ones like China, Costa-Rica, Honduras and others. Its ultimate aim is being a fully environmentally sustainable business. The company planned to use more renewable sources of energy, recycle waste, and sell more organic food in its store. However, analysts highlighted that Wal-Mart’s international operations had mixed results.
There are a lot of criticisms from environmentalist, traders and even politicians. Wal-Mart was accused of violating environmental laws, indulging anti-trade union policies, paying low wages, sourcing cheaper products from outside US and indulging in sex discrimination (Butler, 2006). Wal-Mart’s initiatives As a leading world retailer, Wal-Mart launched many programmes and initiatives in order to achieve its goal to be sustainable towards society and environment. They established “Sustainable value networks”, started to sell organic food at prices that were lower in comparison with its competitors and formed health oriented programmes.
Experts’ opinions Some critics saw Wal-Mart’s activities as a tool, an investment in its reputation rather than in sustainability. They felt that the sustainability measures were the tool to divert public criticisms such as environment abuse, violation of air and water pollution laws, which faced the company. They argued that company lacked its long-term commitment to the cause (Butler, 2006). However, in spite of some criticisms, some environmentalists were truly optimistic that Wal-Mart was going to become an environmentally sustainable entity.
Also many analysts urged the company to work toward better wages and healthcare benefits. Wal-Mart has to show the results on the ground in order to prove its commitment towards sustainability and continue with sustainability initiatives, if it wants to improve its image as a corporate socially responsible multinational enterprise (Roberts, 2006). Nestle case “As a responsible food company, I don’t like to have an image that I am behaving unethically? ” Peter Braberk, CEO of Nestle, 2003 Background Nestle is one of the largest multinationals, with over 200 factories worldwide.
Nestle had been accused several times of selling genetically modified products without appropriate labelling, for supporting the use of child labour in some factories and for other reasons. Most of the controversies that Nestle was embodied have involved developing countries. Nestle in its corporate social standards, committed itself as a responsible, sustainable business entity, promising good working conditions, health, nutrition, and support for the community. However, as reality shows, Nestle carried out socially irresponsible practices in most developing countries.
Nestle’s social irresponsibility Analysts argued that the main reason practicing corporate social irresponsibility by Nestle in the developing world was overlooked was because laws and procedures are considerably more lax compared to those in more developed countries. The company was criticized for its unethical practices such as using infant milk powder (which is harmful to health) in developing countries. By providing free samples, Nestle defended itself as being socially responsible and doing it for the benefit of poor women in developing countries.
Also, Nestle failed in providing good working conditions, as it had promised previously as well as child labour was employed on plantations (Megan, 2001). For example, UNICEF studies revealed that over 200,000 children worked on the plantations during the harvesting of cocoa and coffee beans (Unicef, 2008). One of the more disturbing revelations was that most of the workers had been trafficked i. e. bought and sold, making them practically slave labour. Nestle purchased cocoa from these farms despite its awareness of the conditions of the labourers.
Nestle was also accused of reselling products rejected in Europe to developing Asian countries (Sinha, 2000). Kimberly-Clark Corporation case “This is a company that claims to be a leader on the environment front. Unfortunately, when you dig into the claims, you come up with a very different story” -Richard Brooks, a campaign coordinator at Greenpeace, 2006 Background Kimberly-Clark Corporation (K-C), the paper-based consumer packaged goods giant, take a top position in the Dow Jones Sustainability World Index (Faircompanies, 2008). K-C has a good history of CSR and takes a leadership position in corporate sustainability.
However, it has faced a lot of criticisms from its stakeholders and in particular from environmental protection groups such as Greenpeace who alleged that the company used virgin fibre from forests instead of using recycled fibres (Baue, 2005). CSR of Kimberly-Clark Corporation As any multinational company Kimberly-Clark has policies protecting the environment such as development an environment plan from product design to disposal. The company also adopted energy conservation programs, Child Labour and Worker exploitation policies in most developing countries.
In each report, K-C outlines its responsibilities as a good corporate citizen. K-C emphasized that sustainability and good environmental practices are keys to doing good business. Criticisms Despite many environmental initiatives, K-C had been accused of destroying ancient forests for manufacturing, using only 19% recycled material instead of 60% used by other companies (Greanpeace, 2008). For such attacks K-C defended itself by arguing that they used virgin fibre only for producing facial tissues. There are some anomalies between that claim made by the company in its environmental reports and its actual record.
It appeared that in reality, they used wood fibres from ecologically significant established areas, though the company previously considered it as protecting such environmentally significant areas (Ethical Consumer, 2007). Nike case “Nike is being hypocritical in its support of children’s programs in public schools while exploiting child labour in its factories” -The Canadian Catholic Organization for Development and Peace Background Nike is the one of the biggest sports shoe manufacturers, having suppliers around the world, mostly in developing countries.
Nike repeatedly claimed that it was not going to tolerate worker maltreatment in its Asian factories. It had its own Code of Conduct and required its suppliers to obey on issues like wages and working conditions, written into the company’s corporate standards. However, Nike did not show any real interest in addressing those issues. It was accused of unethical treatment of workers by supervisors, of payment that is below the legal minimum wage and sexual abuse of several female workers at Nike’ shoe factories. In addition, Nike did not take adequate health and safety measures and turned a blind eye to child labour.
Nike violated overtime wages, night shift wages and weekend and holiday wages. Nike had been accused by California’s consumer law agency that it had mislead the public about working conditions for its Vietnamese, Chinese and Indonesian workers. For example, female workers in Vietnam were abused physically, verbally and sexually by factory managers (Vietnam Labour Watch Report, 1997). Nike’ response Nike, as a famous, well known, multinational corporation, denied that it employed unfair labour practices. In order to defend itself, Nike tried to convince the public that they operated in socially responsible manner.
Nike showed videos of working practices in Indonesia, Thailand, China and Vietnam factories. As Nike’s manager said, they are a very open company and do not have anything to hide from the public and community in which Nike operates (www. nike. com). But in spite its initiatives, Nike was not effective in monitoring and regulating. In reality Despite Nike’s claims about sustainability, Nike workers were still paid wages that were below that legal minimum. As Leila Salazar, Global Exchange’s corporate accountability director said, Nike still abuses workers right like harassment, violence, long overtime hours and others (Richman, 2001).
Analysts said that in spite of its good image in the USA, Nike was a very different company in Asian countries (Herbert, 1997). According to Patrick Coughlin, one of the lawyers, fighting against Nike, argued that Nike has to either disclose its attitudes towards workers or change working conditions (Josh, 2001) Apple iPod case “Apple has a zero tolerance policy of any instance, isolated or not, of any treatment of workers that could be interpreted as harsh… ” -International Herald Tribune (IHT, 2006) Background
Apple is the worlds leading multinational enterprise, producing and selling electronic products such as computers, software and other electronic equipment. As any large corporation, Apple has its own manufacturers in China and as practice shows, Apple has received a lot of criticisms from civil society organizations regarding workplace standards. Criticisms on iPod in China Despite the fact that Apple was trying to ensure that its working standards were implemented in all factories, there is still evidence about working hours, payment and other workplace issues including the use of hazardous chemicals.
The “Mail on Sunday” in June 2006 alleged that iPods were made in poor working conditions. The newspaper claimed that Apple employed 16 years old workers, provided one dormitory for 100 persons, required to work 15 hours per day and last, but not least had military-style drills in factories (Joseph, 2006). Tanya Klowden (2006) analyzed Apple’s irresponsibility and concluded that Apple iPod should put at least some marketing budget into to trying to promote itself as a socially responsible company, towards movement in implementing working ethics in its suppliers premises (Klowden, 2006).
Another critic came from “China Business News” reporting that the factory did not provide simple seats for workers and made workers stand for up to 12 hours while working (Soong, 2006). Since such events, in addition environmentalists have accused Apple of not having a computer recycling program. Apple’s response As any well known brand corporation, Apple tried to defend itself in front of the public. It had posted its own findings in the media and online. Several points were worth noting.
Apple claimed that audits found some violations to its Code of Conduct as well as other areas for improvement and that Apple was working with suppliers in developing countries to address these issues. However, some analysts argued that Apple must ensure in providing good working conditions before such incidents took place (Kahney, 2006). As mentioned in their Code of Conduct, Apple iPod committed itself as a socially and environmentally responsible company, ensuring that the people around the world work under safe, fair and legal conditions. However, in reality Apple could not protect workers’ rights.
Gap case “It is easier for the Gap to cancel its orders and move someplace where there are no unions than to say they will make sure that the rights of their workers are protected” -Deisy, ex-Gap worker who lost her job for being a union organizer in El Salvador Background Gap Inc is a leading international retailer, operating through 3070 stores across the world with suppliers and factories in many developing countries in Asia as well as in Africa. Gap took several initiatives in order to support communities in which it operates. It has its own Code of Conduct.
However, there were some serious questions raised about the working conditions in developing countries, which operated in behalf of Gap. Several human rights groups accused Gap for maintaining factories where workers were treated badly and where there was no hint of social responsibility. They found that low wages, various restrictions (contracts that forbade workers to quit, marry or organize and join labour unions), unhealthy and unsafe working conditions were commonly in practise (Engler, 2004). Such issues happened in most developing countries such as Indonesia, El Salvador, etc where Gap has its factories.
Gap’s Corporate Social Responsibility and initiatives Gap’s name was closely tied with the scandals about abuse of human rights in most developing countries. There were a lot of aggressive global movements and strikes for worker’s rights in developed countries as well as in developing ones. Gap started to implement Code of Vendor Conduct in all factories manufacturing Gap’s products. Gap also maintained monitoring programmes and collaborated with partners worldwide in order to solve such problems. Criticisms of Gap’s CSR When Gap started to face a boycott against its products, it started to produce CSR reports.
However, CSR reports are subjected to criticisms from agencies for just being a public relations activity. Also, critics noted that Gap did not provide reports for its whole range of factories. Gap did not publish its suppliers’ names, but critics believed that this was a tool to resist outside monitoring. Even though there were a lot of activities against unethical practices in Gap’s factories, it seemed that several retailers remained to be unaffected by public allegations and continued to behaviour irresponsibly (Engler, 2004).
Cocoa Industry case “We need to be permanently concerned with where cocoa comes from, the impact of coca on the environment and how the workers are treated. That’s where the industry has changed, permanently and forever” -Larry Graham, the President of the Chocolate Manufactures Association, the American industry trade Group Background Child labour, child trafficking and slavery became prevalent and held within the cocoa industry in West Africa. The increased campaigns raised its awareness of child labour abuse.
This is crucial question and issue and in order to raise public awareness of child labour abuse, most consumers boycott of chocolate fabrics products. The problem of Child Labour in West Africa 70% of cocoa beans are produced in West Africa, especially in Nigeria, Ghana and Cameroon, which are the major producers and exporters of cocoa (Antislavery report, 2004). In 1998, International Labour Organization revealed that the practise of child slavery occurred in the cocoa fields (Rawfoodinfo, 2008). UNICEF reported that in Ghana over 200,000 children were sold into slavery (Global Exchange, 2006).
Since such events have come to light the international civil society organizations, governments and the cocoa industry acknowledged that it is necessary to address the child labour issue and implement some initiatives. Corporate Social Responsibility initiatives The cocoa industry recognised that it needed to address labour issue in order not to damage the image of industry. All multinational manufactories and retailers using cocoa from Africa such as Nestle, Mars, Kraft Foods and Starbucks Coffee Company contributed and became members of World Cocoa Foundation, whose primary aim is to destroy the practice of child exploitation.
The chocolate industry launched programmes for eliminating child slavery and certifying that no form of child labour would be employed in the production of cocoa and chocolate. As US Senator Tom Harkin said, it was good evidence that any chocolate or other cocoa products were not made by children’s’ hands (Chatterjee, 2001). The objective of this CSR initiative was to enable children to go to school, instead of working full-time in order to help their families. Criticisms Despite all above mentioned, analysts pointed out that the cocoa industry’s promises were still unfulfilled.
There were no signs of progress even after three years since the first steps were made. Analysts claimed that it was a public relation tool, not an attempt to tackle problem of child labour and multinational companies also did not show their willingness to participate in solving and destroying child labour problems (Peel, 2004). As social scientists emphasised, even if consumers continue to boycott the goods made by child labour, such measures are unlikely to eliminate the problem at all.
Economists and researches like Pham Hoang Van and Kaushik Basu pointed out that total elimination of child labour might cause much worse consequences such as acute hunger or starvation, or even worse “occupations” like “prostitution” (Basu, 1999). Without doubt, such controversial issues need to be solved or at least to be changed. Philip Morris case We don’t want kids to smoke. We’re intensifying our efforts that we started a number of years ago by launching this new smoking-intervention, starting with these ads” -Michael E. Szymanszyk, chairman and CEO, Philip Morris USA Background
Philip Morris is the world’s largest tobacco company, owing the world’s largest-selling cigarette brand since 1972. As any tobacco company, Philip Morris singed the agreement for not targeting young people. However, as it was observed, Philip Morris continued to target the younger population. For example, the company sponsored concerts where an auditorium was attended fully by young people, or it advertised cigarettes being offered to young girls and boys. This is considered to be irresponsible; such advertisements can have impacts on young immature minds.
Many critics argued that even Philip Morris tried to take measures; however it was only made in order to create positive publicity rather than actually reduce youth smoking. For example, Kathryn Kahler Vose, the communications director of Campaign for Tobacco- free Kids, pointed out that Philip Morris tried to buy respectability, though in reality it was a Public Relations exercise (Tobaccofreekids, 2003). All of attacks came from the media despite the fact that the company previously acknowledged itself as socially responsible and promised to sponsor independent research on public health.
Criticisms Philip Morris as a harmful tobacco company is the centre of public, media and government attentions. “The Wall Street Journal” in an article, accused the company of being the major cause of people’s deaths. As a survey showed, a 50% share of the market belongs to Philip Morris Company (Alsop, 2001). Critics claimed that the multinational tobacco companies were using large marketing budget to attract customers, especially young people. The government emphasized that the company was misleading the public about the risks of passive smoking and so called “light cigarettes” (Economist, 2004).
They charged that the company lied to customers about the hazards of smoking and tried to hide scientific evidence about it. They charged that they intentionally made people addicted to nicotine and sold cigarettes to smokers who were below the permitted age as well as causing many diseases like cancer, heart disease and so on (Economist, 2004). Philip Morris’ initiatives As any multinational company operating worldwide, the image and reputation of its brand is a very important intangible asset. So scandals regarding a company’s social responsibility can significantly damage a well known brand.
The first reactions of Philip Morris were to improve its reputation, as it was surely expected. The company intended to reposition itself as a socially responsible business entity through new anti-smoking campaigns. In order to prevent teenagers from using cigarettes, the company cut down its advertising and started to responsibly pay attention on what it advertised, its impacts and the targeting population. However, many analysts are confident that despite the company’s efforts towards establishing corporate social responsibility, it is a simple tool for refurbishing its negative image (Tobaccofreekids, 1999).
Some experts remarked that if Philip Morris honestly wanted to reduce youth smoking and to be a responsible company, it had to end its marketing practices that attracted young people (US. newswire, 1999). However, in reality, it is appeared that they increased their marketing campaign to young people. Chapter 4 Findings and Discussions Coca-Cola case “Coca-Cola India undertakes a diverse range of activities for the benefit of the community across the country. As part of our CSR strategy, sustainable water management remains our top priority” -Deepak Kaul, Regional Vice-President, South, the Hindustan Coca-Cola Beverages Pvt.
Ltd. , in 2007. “It is India where the company’s abuse of water resources have been challenged vociferously and communities across India living around Coca-Cola’ bottling plants have organized in large numbers to demand an end to the mismanagement of water… In response to the growing Indian campaigns against Coca-Cola, the company has decided to promote rainwater harvesting – a traditional Indian practice – in and around its bottling plants in India. Touting rainwater harvesting initiatives is now central to Coca-Cola’s public relations strategy in India” -Amit Srivastava, Coordinator of India Resource Center, in 2007.
Background Coca-Cola established its first plant in India in 1950 and remained on market till 1970s. Because of the Indian Government’s request to share the “secret formula” of coke, Coca-Cola left the Indian market. After an absence of about 16 years, Coca-Cola re-entered the Indian market in the early 1990s, when economic liberalisation took place in India (CokeFacts, 2009). Nowadays, Coca-Cola is the largest multinational corporation operating in India and is considered to