Corporate Social Responsibility Case Study On Ikea Management Essay

Corporate Social Responsibility Case Study On Ikea Management Essay This report identifies Corporate Social Responsibility (CSR) as a demanding topic which takes into deep understanding of CSR by depicting a road map of core subjects with related issues and implementation based on the principles of CSR and discusses briefly on its characteristics; pros and cons; theories and approaches; justifications and fundamental principles. This report gives an insight on the significance of CSR and examines in detail about the expected key potential gains from its operational use followed by the discussion on the problems and barriers that CSR generally faces .Finally the report chooses the case study on IKEA and discusses in depth about its CSR experiences by studying its development and strategy dimensions of CSR in corporate social agenda(strategic and responsive forms of CSR) and analyses IKEAs responsibilities as integral elements of strategy with a brief discussion on CSR communication. The concept of CSR has widened its scope and its increasing global de mand makes us to realize the responsibilities of a firm with its dimension towards social, economic and environmental impacts INTRODUCTION: This report identifies Corporate Social Responsibility (CSR) as a hot topic and the reason for choosing CSR is due to its high profile attainment in the academic domain and most of us feel CSR as an absolute necessity to define the roles of organizations in Society and apply their responsibilities to their businesses in terms of social, ethical and legal standards. Moreover, CSR has become a globalised concept and achieved business prominence because of its geographical prevalence from US origin to its widespread suitability and establishment in Europe. This report structures the content to understand the concept of CSR by depicting a road map of core subjects with related issues and implementation based on the principles of CSR and discusses briefly on its characteristics; pros and cons; theories and approaches; justifications and fundamental principles. This report gives an insight on the significance of CSR and examines in detail about the expected key potential gains from its ope rational use followed by the discussion on the problems and barriers that CSR generally faces .Finally the report chooses the case study on IKEA and discusses in depth about its CSR experiences by studying its development and strategy dimensions of CSR in corporate social agenda(strategic and responsive forms of CSR) and analyses IKEAs responsibilities as integral elements of strategy with a brief discussion on CSR communication. UNDERSTANDING CSR: The term CSR seem to be new but research predicts that there has been an evolution of its concept throughout many decades. Way back in 30s of last century, the focus of marketing was initially on distribution and logistic, that was about how to provide some products at minimal cost. With the total marketing, the centre of attention is to set on the selling systems on the marketing mix comprising the 4 Ps: Price, Products, Place, Promotion. Social marketing emerged in the 70s whereby the company decides on the long-term interests of stakeholders internally as well as externally. A stakeholder could be any individual or a group, who can influence or get influenced by behavioral impacts of an organization. The categories of the companys stakeholder are shown in the table below: Companys Organizational structure and location Involvement in the Business activity Internal External Direct Shareholders, investors, managers, employees Customers, Lenders, Tax agencies Indirect Consultants, Suppliers, contractors Community, NGOs, Media General public Professional bodies The impact of any organization on the society through their operations, products or services rendered by associating with stakeholder groups such as customers, suppliers, employees, investors and community and this can be displayed in the form of a diagram below Source: Mallen Baker (2007) Different terms and ideas are associated and so it is difficult to define CSR due to ambiguity in the CSR field of research. There is always a problem to stick onto universal definition of CSR as the concept ranges from mere compliance with law to pure Philanthropy. Corporation refers to group of members acting as an individual, be it for business or elsewhere. Philanthropy has little to do with CSR because philanthropy is about how a company spends its money and CSR is about how a company generates money and how responsibly they conduct their business in doing so. However, European commission identifies CSR as a broad concept and recognizes, CSR as a concept whereby companies integrate social and environmental concerns in their business operations and in their interactions with their stakeholders on a voluntary basis(Commission of the European Communities 2001). WHAT CSR IS NOT? 1. It is not an alternative for the regulation of companies! 2. It is not a replacement for how companies should manage their social, ethical and environmental impacts! 3. It will not save the world! CHARACTERISTICS OF CSR: The main features of CSR can be summarised as shown in the table below: Features Description Triple-bottom-line Economic, social and Environmental Voluntary All activities are taken up voluntarily. Stakeholders integrity Connecting all parties involved. Long-term action Carrying activities over a long-term period. Credibility Enhances the credibility of the firm. PROS AND CONS OF CSR: Arguments for CSR Arguments against CSR Enhances reputation in society. Solves the problems caused by business in society. Stabilises corporate power with responsibility. Increases long-term profitability Beyond government regulations. Adjusts to imbalanced demands of stakeholders. Improves environmental conditions. Business should be meant for profit maximization. Enforces unequal costs among competitors. Stakeholders compelled to hidden costs. Business may lack social skills. Makes to forget the aims of the business Social responsibility cannot be a legal responsibility. Places responsibility on the business but not on individual. CSR THEORIES AND APPROACHES: The focus on economic, political, social and ethical aspects in social reality aspects according to Parsons (1961) are primarily based on four features that can be perceived in any social structure such as adaptation to the environment ,goal attainment, social integration and pattern maintenance or latency. This hypothesis led to the classification of CSR theories into four types which can be depicted in the following table with their related approaches. TYPES OF THEORIES AND ITS FOCUS APPROACHES ILLUSTRATION INSTRUMENTAL THEORIES Focus on the economic aspect of the interaction between business and society Augmentation of shareholder value This theory argues that CSR is the only means to the end profits. It is based on wealth creation that is measured by share price. Strategies for competitive advantage Social investments in the context of competition Strategies based on the view of firms available natural resources. Strategies related to the bottom of the economic pyramid. Cause -related marketing Considering Socially recognised philanthropic activities applied as an instrument in marketing POLITICAL THEORIES Focus on the business power applicable in the areas of politics Corporate constitutionalism Firms social responsibilities arise from their strength of social power Integrative social contract Assumption of the existence of contract between the business and society. Corporate citizenship The firm is perceived as a citizen with participation in community. INTEGRATIVE THEORIES Focus on the integration of social demands Issues Management Firms response to the social and political issues and their impacts Public Responsibility Current legal procedures and public policies are considered as recommendations for social performance Stakeholder management Stabilizing the firms stakeholders Corporate social performance Exploring the responses from social legitimacy to social issues ETHICAL THEORIES Focus on the right factor to attain a good society Stakeholder normative theory Considering trustful duties towards firms stakeholders Universal rights Considering the frameworks related to human rights, labour rights and respect for environment Sustainable development Achievement of human progress by accounting present and future generations The common good Awareness towards the common good of society JUSTIFICATIONS FOR CSR: The prevailing justifications for CSR are shown in the picture below: Moral obligation Attaining commercial accomplishment in approaches that tribute ethical value Insufficient assistance to stabilize complicated competence related to social and economic interests. Varied personal values among managers and stakeholders Licence to operate Developing goodwill to safeguard the consent of Governments and stakeholders Licences and approvals are needed for a business to operate. However, this kind of approach will have to compromise in controlling CSR agenda to the externals that lack knowledge about companys operations and competitive positioning. Encourages defensive responses for time being. Sustainability Self-interest to encounter the present needs without compromising the future needs Efficiency on environmental issues yielding immediate economic benefits. In other aspects other than environmental issues, intangible long-term results give a weak justification for short-term costs. Existing justifications focus on the pressure between the firm and society rather than bringing coordination. These generic rationales give a trivial guidance for taking up company activities. FUNDAMENTAL PRINCIPLES OF CSR: CSR mainly relies on three fundamental principles such as Economic, Social and Environmental areas. The purpose of CSR is to integrate business activity with its culture for attaining sustainability in its economic, social and environmental areas. Each fragment of CSR includes activities, which differ depending on the type of firm and the needs of stakeholders. ECONOMIC AREA: The firm is expected to behave as a transparent enterprise .Positive relationship among the investors, customers, suppliers and shareholders is expected. Economic impacts at local, national and international levels should be monitored. Stakeholders and the activities of CSR in the economic area of the market are shown in the table below: Economic area Market Stakeholders Owners and investors Customers/consumers Suppliers /partners Regulatory bodies Media CSR activities Creates ethical codex Transparency Best practice management Practice anti-corruption Build Stockholders relations Build Customer/consumer relations Build suppliers relations Build investors relations Protect intellectual property SOCIAL AREA: Responding and tackling the behavioral attitudes to employees in the working environment and focuses on assisting the local community. The company influences the working standards, education, health safety and develops the cultural aspects. The stakeholders and CSR activities in the social area are shown in the table below: Social area Stakeholders Work location Local community Employees Unions Non-Profit organizations Public CSR activities Health safety of the employees Human resources development Get rid of child labour Follow working standards Supporting laid-off employees Assurance of jobs Supporting social integrity Corporate volunteerism Donor ship Educating Public Improving the quality life of employees Creation of jobs and develop local infrastructure. ENVIRONMENTAL AREA: The Company focuses on its impact on ecosystem and elements like land, air and water. The company feels its determination to protect the natural resources. Environmental area Stakeholders Groups related to environmental aspects. CSR activities Eco-friendly processing and manufacturing products and services. Agreement with regulatory and standards(ISO,EMAS) Renewal of energies policy by recycling and using eco-friendly products. Lessening the environmental impacts. Protecting the natural resources. ROADMAP FOR CSR: The following roadmap depicts the core subjects and CSR implementation based on the principles of Source: vi.unctad.org/russiast09/docs/millercsr.ppt CORE SUBJECTS AND ISSUES: Issues related to core subjects of CSR can be depicted from the following table: CORE SUBJECTS ISSUES ORGANIZATIONAL GOVERNANCE Shareholder activism Political economy Cross border investments by foreign investors HUMAN RIGHTS Due attentiveness Risk conditions Escaping complicity Determining grievances Inequity and susceptible groups Civil rights Political rights Employees fundamental rights Socio-economic and cultural rights LABOUR PRACTICES Social conversation Child labour Forced labour Employment relationships Work conditions Social security Health and safety at employment Training and progress in the employment ENVIRONMENT Avoidance of Pollution Maintenance of resources Mitigating and adapting climatic change Protecting the nature REASONABLE OPERATIONS Anti-corruption Sensible political implications Good competition Encouraging social responsibility in the field of influence Assessing the value for property rights CONSUMER ISSUES Awareness Market sensing Health and safety for consumer protection Consumption sustainability Consumer support and solution for disputes Data security and privacy Entry to necessary services COMMUNITY PARTICIPATION AND IMPROVEMENT Education Culture Creating employment and developing skills Advancement of technology Income generation Social investment Community health CSR DRIVERS: The key drivers of CSR are discussed in the table below: DRIVERS DESCRIPTION Profound self-interest Generate ethical, social and economical cohesion where markets, labour and communities are linked to work together. Social investment Social capitalism and contribution to infrastructure has been seen progressively as necessary part of business activity. Transparency and trust Public perceives business as low ratings of trust. Public expectation about companys openness and accountability leads to prepare a report encompassing their performance in the areas of social and environmental issues. Increased public expectations of business Public expects beyond the companys contribution to the economy by taxation and provision of employment. In addition to the above key drivers, the following list shows general drivers of CSR. Business Risk management Reputation and brand management Learning and innovation Cost savings and operational efficiency Competitiveness and market positioning Improved relations with regulators Organizational transformation and continued improvement IMPLEMENTING CSR: Each firm is unique in its operational procedures, its awareness of CSR issues and the amount of work done towards CSR implementation.Therefore; different firms adopt different frameworks depending on their CSR approach.However, it adds value to the firm when CSR is implemented in a systematic route by integrating its mission, strategy, cultural, environmental and risk profiles, processes and activities. The following framework for CSR implementation gives scope to build quality and environmental management, which follows the model of plan, do, check and improve based on ISO standards .This flexible framework can be adapted by any firm as suitable for its organization. Implementation Framework PHASES STEPS TASKS Plan 1.Perform CSRassessment Gather a CSR management team Work out the definition of CSR Re-examine corporate documents, processes and activities Recognize and connect key stakeholders 2. Build up a CSRstrategy Develop support with experienced managerial staff Investigate others tasks Design a format of proposed CSR activities Build the ideas for scheduling and the business case for them Fix on areas of roadmap, methodology and focus Do 3. Explore CSRcommitments Take a glance on CSR commitments Organize discussions with key stakeholders Design the group to develop the commitments Plan for an introductory draft Check with concerned stakeholders 4. Implement CSRcommitments Build an integrated CSR decision-making framework Prepare a CSR business plan Lay down the quantifiable goals and find out the measures of performance Slot in the employees and to whom so ever applicable to CSR commitments Propose and perform CSR training Set up workshop to address the behavioural problems Design for setting up internal andexternal communications Check 5. Authenticate and report on progress Gauge the performance Hold stakeholders Report on performance Improve 6. Evaluate and Enhance Assess the performance Discover the opportunities for enhancement Engage stakeholders Double-check: Once a cycle completes Go back to plan and go ahead with subsequent cycle SIGNIFICANCE OF CSR: The issue of CSR initiatives and the perceptions of ethical standards have gained more attention by the management in considering approaches to strategic marketing. Usually, CSR is of growing importance towards managing the business processes and is magnetizing growing company investment. Unfortunately, marketing departments lack the skills to manage even the issues related to reputation thereby narrowing the insights. For example, pharmaceutical companies were criticised in the media for arrogance and lack of transparency. In order to rebuild its reputation, Pfizer took initiative to offer free medicines to those who were laid-off during recession. So marketing strategy expects to look for opportunities for better competitive positioning in market segments through increased customer value integrated with CSR initiatives. Majority of business leaders are focusing on CSR as a tool for differentiation and competitive advantage leading to generate revenue. CSR is not only important in considering the consumer relationships but also scrutinizes business-to-business relationships (comprising supply chain partners) with stakeholders like investors, government and lobby groups. CSR is an important business strategy by giving meaning and direction to day to-day operations. Satisfying each of the stakeholder groups allows companies to maximize their commitment to another important stakeholder group-their investors, who benefit most when the needs of these other stakeholder groups are being met. The business succeeds when values within the decision-making process and objectives of the organization are met. Lifestyle brand firms, in particular, need to live the ideals they convey to their consumers. CSR as a strategy is becoming increasingly important for businesses today because of three specific trends shown in the table below: Trends Discussion Changing social expectations: Consumers and society in general expect more from the companies whose products they buy with the regulatory bodies and organizations in place to control corporate excess. Increasing affluence: A society in need of work and inward investment is less likely to enforce strict regulations and penalize organizations that might take their business and money elsewhere. Globalization: The Internet fuels communication among like-minded groups to initiate a product boycott. These three trends portend corporate success. The result of this mix is that consumers today are better informed and feel more empowered to put their beliefs into action. CSR is particularly important within a globalizing world because of the way brands are built, at a time when these values and demands are constantly evolving. CSR can therefore best be described as a total approach to business in maintaining brand dominance. KEY POTENTIAL BENEFITS OF CSR: The benefits to firms, community and environment by practicing CSR can be discussed at length in the following table: KEY POTENTIAL BENEFITS DISCUSSION Efficiency in risk management: CSR oversees and scrutinizes the corporate activities by effectively managing the risks involved in governance, social, economic, environmental and legal aspects in day-to-day complicated market, thereby safeguarding the supply for overall market stability. Impact analysis about a firm by considering the concerns of the parties involved is one of the better ways to anticipate in managing the risks. This ultimately sharpens the decision-making. Enhanced reputation management: Reputation of a firm is mainly based on values such as trust, quality, reliability, which reflect the organizations image and brand recognition and so any firm concerned about addressing the CSR issues, can manage their reputation with effective CSR management. Ability to develop the recruitment and retention of staff: Effectiveness in CSR policies improvise the human resource management which has direct impact on firms image related to its products and services.CSR indirectly aids in executing the programs that enhance the morality and loyalty of employees who are valuable resources for companys performance. Fostering innovation, competitiveness and market positioning CSR gives positive impact in avoiding the risks by tackling diverse stakeholders who are the basic sources for generating ideas for novel products and markets thereby differentiating from its competitor, which result in competitive advantage, thus developing competitive strength based on innovative business models. For instance, a certified firm with social and environmental standards improves the chance to become a supplier to specific retailers. Increased operational efficiencies and cost reductions: By implementing CSR, there is always an opportunity to transform waste streams into revenue streams by systematic approach of environmental aspect of renewable energies by reducing costs through recycling. Tangible cost savings signify the reduction in carbon emissions. Building efficient supply chain relationships: A firm is at risk to susceptibility in its supply chain. Companies with like-mindedness can build long-term business relationships with aim to increase their profits by maintaining standards and thereby tackle the risks. Larger firms encourage smaller firms with whom they are related to take up CSR approach. For example, particular retailers may require their suppliers to adopt certain codes and practices. Improved ability to tackle change: CSR aids as a radar to anticipate the emerging market trends and by regular stakeholder dialogue with customers, a company can respond to any changes that occur in regulatory, economic, social and environmental aspects. Generate robust social licence to function in the community: Better understanding between citizen and stakeholder recognition of the firms activities and objectives can render enhanced stakeholder relations, thereby giving scope for robust alliances of public, private and civilized society.CSR enhances the social capital. Enhances investment: As CSR enhances the brand reputation, it leads to raising the companys profile in the investment community. The company value can be improved through further investments.CSR approach drives the financial institutions about incorporation of social and environmental criteria into their project plan leading sharp decision-making of where to invest money and this motivates the investors to look for better CSR management. Better relations with media and government regulators: CSR indicators act as tool for the governments to decide on obtaining export assistance contracts in some countries. In many cases, though CSR activities are beyond the regulatory requirements, governments considered CSR views to expedite the approval processes for firms in order to meet their sustainability goals by recognizing the business sector engagement as a requirement. Building customer relationships: In Cause related marketing the altruistic activities of the firms can be recognized by morally conscious customers who may be flexible in paying higher prices or in reduced costs may increase their purchasing power and so CSR in broader sense has significant impact in building the long-term customer legitimacy,loyalty,trust or brand equity. Acting as a catalyst for responsible consumption: In order to combat with the ever changing consumption patterns, company has to play a key role in achieving sustainability by the way it supplies its goods and services in the marketplace to meet responsible consumerism which considers to relate consumer rights and issues and how well the relationship between producers and consumers is authorized by regulatory bodies. BARRIERS AND CHALLENGES: CSR implementation in a competitive world draws certain barriers and challenges which are due to : Difficulty in implementing CSR concurrently with other business Concerns in a balanced and remarkable manner Difficulty of transparency Lack of clear communication Economic thoughtlessness Various instability problems in developing countries especially problematic for SMEs Complexity of the issues involved and so difficulty in managing the supply chain and regulating the sub-contractors Complex set of issues as CSR covers a broad array of direct and indirect business performances, achievements, and so its impacts differ from one business sector to another International differences that may lead to lack of universal acceptance in examining the potential impacts of CSR. Misinterpretation due to CSR being judged differently in many parts of the world depending on different priorities. For example, Chinese consumers interpret social responsibility as safe, high-quality products, while South Africans consider it as a contribution to healthcare and education. In Australia, Canada, Indonesia and the UK the highest priority is to protect the environment. In Turkey, it is believed as an indicator for charitable donation. In U.S, France, Italy and Switzerland and most of South America, the highest priority is towards fair treatment of employees. Complex set of stakeholders appealing to the business for a CSR attitude the appropriate stakeholders need to be involved stakeholder involvement is important, yet difficult Always ambiguity between CSR and financial success Low voluntary acceptance of CSR can lead to green washing Lack of devices to measure, monitor evaluate and report the impacts Two myths Smaller companies think it the responsibility of the bigger ones and It is mainly a philanthropic exercise High overheads of implementing and sustaining CSR efforts. No universally accepted frameworks Some of the main internal company barriers to CSR initiatives are: Executives recommending strategic marketing programmes that focus on CSR-based positioning must be aware of the likely barriers and challenges from those who do not believe CSR as a legitimate strategic tool. CASE STUDY: CSR AT IKEA: The reason for choosing IKEA as case study of CSR work is to understand its CSR focus as a leading company, which ranks as the first in CSR in the Accountabilitys Responsible Competitiveness Index 2008 (RCI). IKEA was selected due to its long history and experience in the area and its response to several CSR-related crises and criticisms that has enabled the organization to develop structured policies and a range of collaborations and initiatives with stakeholders and could set an example for companies aiming to develop their economic and environmental sustainability. IKEA is a value-based Swedish furniture giant that has wide recognition for its focus on cost reduction and it is a progressive company that manages to integrate its cost focus with CSR issues. This report discusses in detail about how this integration is possible for IKEA and it is interesting to know its implications for other companies who want to combine CSR into their business practices. The CSR experience gained by IKEA can make other companies to realise that CSR is not necessarily a cost addition but it is a cost-cutter, which imparts increasing knowledge on how companies can be socially responsible. The aim is therefore to analyze the relationship between the value addition by CSR for a company to its corporate strategy. Public awareness about IKEAs CSR activities is only through proper communication and so this report investigates on how the CSR is communicated by IKEA. This report d