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Financial benefits of corporate social responsibility

Abstract

This paper critically examines the role of Corporate Social Responsibility (CSR) in the financial performance of British Airways. The paper posits that as much as CSR is meant to give back to the community where the company operates; this is seldom the case in today’s business environment.Many companies use CSR as a marketing stance or to maintain relevance in todays green business, and technology.

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British Airways has a strong and distinct CSR; it stands out in the airline industry. This paper examines the principles that form the basis of this CSR and analyses their effectiveness in attracting benefits to the company. This analysis is aimed at proving that British Airways has greatly benefited financially from its CSR, and it will continue to do so. The airline company has attracted used CSR to establish an efficient human resource and has successfully created meaningful partnerships that have brought tangible financial rewards. The analysis points at the fact that despite having CSR as beneficial to the communities where British Airways operate; it directly benefits the company, as well.

Introduction

British Airways has a well laid out Corporate Social Responsibility agenda that is a key component of its business plan. The company has defied all odds in regard to the recent economic challenge, and fully protected its resource level in order to maintain its commitment to the most important destination, the Corporate Responsibility programme. This makes it easy to assume that British Airways is a head of competition due to its distinct CSR programs. British Airways, on its website describes their CSR as “being a good neighbour, concerned for the community and environment” (British Airways, 2013). These CSR principles are built on environmental issues such as carbon efficiency, elimination of emissions, noise reduction, recycling and fundraising (British Airways, 2013). The airline’s commitment to this mission is demonstrated through its innovative and creative execution of its sustainability agenda (Bowman, 1975). This is shown by its partnership with Solen on bio-fuel development. It is in the light of these developments that this paper critically discusses the financial benefit of CSR to British Airways.

CSR and Employee relationship

The implementation of CSR strategy for British Airways has multiple benefits and specifically for the fact that it differs in importance according to its operations. In the era of green revolution and technology, emission reduction is viewed as a positive marketing strategy for most companies. This is more so in the airline transportation industry that is responsible for 2 percent pollution worldwide (Krukowska, 2013). This can be seen as a driver of competitiveness as it results in increased company reputation as well as staff satisfaction (Anttila & Kretzschmar, 2010). For British Airways, a good employer reputation is a way of differentiating it from its competitors. The company is establishing a solid, distinctive and attractive that can resonate with potential employee’s identity. This could translate as pre cursor to the way British Airways would treat potential employees or an indication of how the airlines has a deeper congruence between individual values and those portrayed by the company. Today it is common for employers to focus on their corporate social performance especially in regard to recruitment (Turban & Greening, 1996). According to Bevan et al. (2004), there is a significant correlation between employees who thought they had a responsible employer and organizational effectiveness. In this regard, British Airways seem to value its employees; the company claims that Genuine and effective consultations with other staff members is essential in empowering them provide efficient service that makes it an ideal to work (British Airways, 2013).

The company undertook an employee survey in 2012; a response to colleague feedback and one that featured few, but relevant question. The survey was done by ORC International, an independent research company and it gave a confidential means for every staff member to air their views on their feelings about working at the airline firm. This survey according to British Airways (2013), attained a response rate compared to none. The airline company was pleased with the response as there was an indication that an overwhelming number of employees were committed and proud in the airline. In 2013, British Airways established a partnership with the University of Glamorgan. Through this partnership, students in the Aircraft Maintenance Engineering department will be given an opportunity to receive industry-standard training that will be incorporated in their BSc degree, and this will be done at the British Airways facility in Cardiff (British Airways, 2013). This is consistent with Turban and Greening (1996) claim that

Large companies go to considerable lengths to get potential graduate recruits by showing their CSR credentials. Nonetheless, in this partnership, engineering staff at British Airways will also get a rare opportunity to study academic modules from the institution at both undergraduate and postgraduate level (British Airways, 2013). The airline claims that, by 2012, there were 50 new graduates introduced to its operations (British Airways, 2013). It further claims that graduates are important for the airline’s long term plans and alumni from this partnership scheme are many in the company. Furthermore, this scheme has been in operation for little over five years, and this is consistent with British Airways history of recruiting and developing graduates; most of the senior positions in the company are held by these alumni (British Airways, 2013). In addition, there is a statistical significant correlation between employee loyalty and a company’s CSR rating among those employees who are ethical (Bevan et al., 2004). British Airways has taken this as an option for it sustainability agenda, employees who are satisfied result in customers who are satisfied and ultimately to higher revenue (Rucci et al., 1998). This is creative capitalism as British Airways can not claim to be socially responsible, it is done to benefit the company(Kerr, 2009)

CSR and Efficiency

British Airways CSR principles are built on environmental issues such as carbon efficiency, elimination of emissions, noise reduction, and recycling (British Airways, 2013). This is an indication that the company is committed through practice to these principles. It is obvious that, with such a commitment, it would definitely have an improved operational efficiency and cost savings as a benefit. This begs the question, whether this CSR is genuineAccording to Khanifar et al., (2012 ), in this commercial era, businesses are under pressure to play an active role in society, but this is not for the society, most companies have intelligently used this opportunity to gain publicity and enhance their revenue. It is evident that the British Airways is a leader in the implementation of a responsible approach in regard to the effects of aviation on the environment. However, it claims that this approach is not only important for the environment; it is the ideal approach in saving on cost considering the economic hardship marked with high fuel costs (British Airways, 2013). This calls for efficient management approach and continuous examination of the operational process; this is a sure way of conserving energy as well as turning waste into revenue. British Airways (2012), claims through its CSR report that it made an operating profit of ?274 million, in addition to maintaining non-fuel costs flat.

CSR and Partnerships

In addition, CSR is an ideal way of improving business connections, there is always the possibility of the emergence of meaningful, long term partnerships. British Airways partnership with Solena Fuels Corporation is one such partnership as a result of its CSR agenda. The two companies are establishing a bio-jet facility, the first one in Europe and one that will propel the planes in the near future (British Airways, 2013). This has opened a new channel from which the airline will source sustainable fuel at market competitive rates. In addition, British Airways CSR has created synergies; in 2012, it successfully made cost synergies one of its partners in the industry, airline Iberia. This was an indication that British Airways had done better in its revenue synergy targets for the second year. Flammer (2013), claims that CSR is a mgnet that attracts business from customers as well as shareholders. Consequently, British Airways raised its revenue and cost target to 560 million Euros from 500 million Euros in 2011, where it delivered the cost and revenue synergy worth 13 million Euros (British Airways, 2012).

Conclusion

British Airways with its strong, distinct and elaborate CSR makes it stand out among its competitors. It appears that, with this well laid out CSR agenda, it is a major component of the airline’s business plan. The company has defied all odds despite the recent economic difficulties and protected its resource level in order to maintain its commitment to this important activity. However, evidence suggests that CSR is not just giving back to the community, but also runs a performance agenda. Most of the people working at the management levels are alumni of a scheme started by British Airways as a CSR activity. In addition, the airline has partners who have continually provided it with direct financial benefits such as Solen. British Airways has taken advantage of its CSR to strengthen its position in the market.

Bibliography

Anttila, T. & Kretzschmar, A., 2010. Application of CSR Programs in the Airline Industry. International Business.

Bevan, S., Isles, N., Emery, P. & Hoskins, T., 2004. Achieving high performance CSR at the heart of business. London: The Work Foundation.

British Airways, 2012. Corporate Responsibility Report 2012. [Online] British Airways Available at: http://www.onedestination.co.uk/wp-content/uploads/BA_CRR_Full_Report.pdf [Accessed 20 December 2013].

British Airways, 2013. British airways social & environmental policy. [Online] British Airways Available at: http://www.britishairways.com/cms/masterEN/content/company_information/ community_and_environmental/social_and_environment_policy.pdf [Accessed 19 December 2013].

Flammer, C., 2013. Does Corporate Social Responsibility Lead to Superior Financial PerformanceA Regression Discontinuity Approach. MIT Sloan School of Management .

Kerr, J.E., 2009. The Creative Capitalism Spectrum: Evaluating Corporate Social Responsibility Through a Legal Lens Abstrac. Social Science .

Khanifar, H., Nazari, K., Emami, M. & Soltani, H.A., 2012. Impacts Corporate Social Responsibility Activities on Company Financial Performance. Interdisciplinary Journal Of Contemporary Research In Business, 3(9).

Krukowska, E., 2013. Global Emissions Plan for Airlines Gets First UN Approval. Bloomberg , 04 October.

Rucci, A.J., Kirn, S. & Quinn, R.T., 1998. The employee-customer-profit chain at Sears. Harvard Business Review, pp.83-97.

Turban, D.B. & Greening, D.W., 1996. Corporate social performance and organisational attractiveness to prospective employees. Academy of Management Journal, 40(3), pp.658-72.

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