Effect of Corporate Social Responsibility on Consumers

1.1 Research Background and Motivations

Throughout the history of cosmetics (Appendice B), substances of all sort were utilised to produce products to enhance beauty and social lives, however with time certain substances were found to be hazardous, dangerous and poisoness.

The cosmetic industry of the twenty-first century has evolved to adopt a more structured model of regulations in regards to which substances may and may not be utilised in the manufacturing of products. However, it is an industry that has become accountable to consumers and society in terms of how the products are produced (Eg. No testing on animals, chemical free, etc) and the effects of these products on consumers, society and our environment.

Thus, CSR is becoming a vital issue in determining a company’s performance and how it manages its economic, social and environmental impacts, as well as its contribution to society.

CSR can be best explained as business practices or strategies that has the aim of satisfying the financial interests of organisations while positively impacting society (Foran et al., 2005). Though, CSR may involve certain investments for an organisation, it can also provide a source of opportunity and may; in certain circumstances; lead to building and sustaining competitive advantage.

Many research on CSR has focused on the organisational business side and few have focused on the influence of CSR on consumers. However, consumers are essential to the success of CSR and understanding their attitudes towards CSR can enable companies to determine if their CSR business strategies are efficient, and the extent to which consumers are affected by these. Companies have also realised that consumers are making consumption decisions based on their personal ethical values, and according to Tallontire et al. (2001) ethics in consumption choices has become a growing phenomenon that underpins ethical trade activities.

Many studies by scholars and practitioners when identifying and assessing the components of CSR, often refer to Archie B. Carroll’s CSR pyramid (Ibrahim & Parsa, 2005; Schwartz & Carroll, 2003). However, there is very limited research in regards to the concept of CSR relating to that of consumer behaviour, and more precisely taking into account factors such as consumers attitudes and ethical beliefs.

Therefore, the purpose of this study is to provide a better understanding of the concept and role of CSR, and explore how it is applied by the main local players within the CCI in France. The study focuses on examining the extent to which CSR affects consumers’ attitudes, and how their ethical beliefs may influence their attitudes towards CSR.

1.2 Context of the Problem

Defining the problem is one of the most important steps in the research process and enables to indentify the specific marketing decision area that will be clarified by answering some research questions (Koerner 2006; Zikmund 1989).

Growing pressure from governments, NGO’s and consumer movements for companies to account for their impact of business operations on society and the environment; has lead more companies to invest in CSR initiatives and in managing more efficiently their SRI.

However the issue arises in understanding whether consumers are actually aware of CSR practices adopted by companies, to which extent do they consider these when making a purchase decision, how are their attitudes affected, and in which manner do their ethical beliefs play a role in their decision making and their perception of CSR.

1.3 Research Aims and Objectives
1.3.1 Aims

The aim of this dissertation is to investigate the role of CSR and its’ affect on consumers’ attitudes and ethical beliefs, within the CCI in France. The study also aims to determine if an association exists between CSR, consumers’ attitudes and ethical beliefs, and whether this may have an influence on consumers’ purchase behaviour.

1.3.2 Objectives

Research Objectives provide guidelines in determining which steps must be undertaken in the research and if objectives are achieved the research information is considered sufficient to solve the problem (Hair et al. 2006). The main objectives of this research are the following :

(1) To provide facts about the demographic characteristics of consumers who purchase colour cosmetics, as well as insights into their purchase behaviour,

(2) To provide a better understanding of the role of CSR and examine the different frameworks, approaches to CSR,

(3) To explore to which extent CSR affects consumers’ attitudes and whether consumers ethical beliefs plays a role,

(4) To examine if relationships exists between consumers’ attitudes, ethical beliefs and Caroll”s four dimensions of CSR,

(5) To determine what are the factors and information sources considered important when judging a company, and;

(6) To determine what are the social issues consumers are most concerned about.

1.4 Hypotheses

The previous research objectives constitute the basis for establishing the hypotheses of the study in order to measure the effect of CSR on ethical beliefs and consumers’ attitudes within the Colour Cosmetics industry in France:

H1. There exists a positive relationship between Ethical beliefs and Awareness of CSR

H2. There exists a positive relationship between Ethical beliefs and Feelings towards companies adopting CSR

H3. There exists a positive relationship between Ethical beliefs and Considering CSR in purchase decision

H4. There exists a positive relationship between Ethical beliefs and Ethical purchase behaviour

H5. There exists a positive relationship between the Affective component of attitudes and Awareness of CSR

H6. There exists a positive relationship between the Affective component of attitudes and Considering CSR in purchase decision

H7. There exists a positive relationship between the Affective component of attitudes and Ethical purchase behaviour

H8. There exists a positive relationship between the Cognitive component of attitudes and Considering CSR in purchase decision

H9. There exists a positive relationship between the Cognitive component of attitudes and Ethical purchase behaviour

The development of these hypothesis will be reviewed in Chapter 3, Section 3.6 of this dissertation.

1.5 Scope and Limitations

This dissertation will cover the concept of CSR and will investigate the relationship between CSR and consumers attitudes and ethical beliefs. The study will also providing a brief overview of the main companies present in the local French market, and the extent to which they adopt CSR policies.

The sample unit is limited to that of French consumers, having the following characteristics : female consumers , above the age of 18 years old and residing in France.

Consideration must be taken that the author has attempted to present references the most frequently cited in the literature reviewed.

The author attempts to make the link between the concept of CSR and consumers attitudes and ethical beliefs, hence for the purpose of this study, the models applied have been limited to that of the CSR Pyramid Model proposed by Carroll (1979) , and the Tricomponent Attitude Model. However, there is very limited research that exists linking these two models, and thus the literature reviewed may be limited in certain areas.

1.6 Organisation of the thesis

The dissertation was divided into six chapters:

– Chapter One, provides the significance of the study, context of the problem, aims and objectives, states the hypotheses, scope and limitations of the study, and the present organisation of the thesis.

– Chapter Two, presents facts and informations issued from the secondary and exploratory research in regards to the CCI, and CSR practices of the main players within the local French market.

– Chapter Three, consists of a review of relevant literature and theoretical models in regards to the concept of CSR, implementing and measuring performance of CSR. It will also provide relevant literature reviewed in regards to linking CSR to consumer attitudes, and thus will also address the theory of attitudes, through the Tricomponent Attitude Model.

– Chapter Four, presents the research philosophy, research methodology and methods adopted for collecting, analysing and discussing the relevant data obtained for the purpose of this study. The design and implementation of the questionnaire survey, and the reliability, validity, limitations and ethics of the research will also be adressed.

– Chapter Five presents research findings in regards to primary data collection, and presents the results regarding the validity of the stated hypotheses.

– Chapter Six, provides the final conclusions of the study conducted, limitations and future recommendations. References, bibliograpgy, appendices, s, graphs and tables follow Chapter Six.

chapter 2 : colour cosmetics industry review

This chapter will define cosmetics in the context of this dissertation and will also present an overview of the CCI in France (section 2.2, and Appendice C), as well as its main players (Section, 2.3 and Appendice D).

CSR practices adopted by the main local players and whether these companies provide a CSR policy will also be addressed.

2.1 Defining Cosmetics

According to the current EU legislation cited in Morganti & Paglialunga (2008), a cosmetic product is ‘any substance or preparation intended to be placed in contact with the various external parts of the human body with a view exclusively or mainly to cleaning them, perfuming them, changing their appearance and/or correcting body odours and/or protecting them or keeping them in good condition’.

The word ‘cosmetic’ in greek derives from the word ‘kosmetikos’ and the meaning allocated is ‘to make for beauty, especially of the complexion, or beautifying’. The meaning over time has evolved into that of ‘ masking, concealing, cover up or that of camouflaging’ . Cosmetics consists of products such as personal care creams, makeup, perfumes, deodorant, shampoos, etc.

The term ‘make-up’ is more often used when speaking of colour cosmetics and according to Oumeish (2001) means ‘to use cosmetics and apply them to color and beautify the face, and to other parts of the body.’

This dissertation will be focusing on the Category of Colour Cosmetics, which involves: (1) facial make-up, (2) eye make-up, (3) lip products, and (4) nail products.

2.2 Colour Cosmetics Industry in France

The French Colour Cosmetic dominates the European market and 15,7% of the European market value. It holds the second largest market value in Europe behind that of the United Kingdom. (Euromonitor International, 2009). The local French market is largely dominted by major players such as L’Oreal SA that holds 38,80% of total market shares, followed by Chanel S.A with 13,40% and LVMH Moet Hennessy Louis Vitton S.A with 9,40% of market shares (Datamonitor, 2008). Other players present in the local market include Estee Lauder, Beiersdorf-Nivea Beauté, Clarins S.A, Coty, Yves Rocher, and Shiseido. (Appendice C)

The colour cosmetic market consists of 4 subsectors, that of (1) facial make-up, (2) eye make-up, (3) lip products and (4) nail products.

The facial make-up category dominates the sector with 36,40% of market value, followed by eye make-up with 34,40%, lip make-up with 19,70% and nail make-up with 9,40%. The fastest growing category in 2008 were facial make-up which had a growth of 4% and eye make-up, by 3% (Euromonitor International, 2008 & 2009).

According to Datamonitor report (2008), distribution of products are mainly through Supermarkets/Hypermarkets, with 45,7% and specialised retailers with 39,5% of the market’s distribution, and other channels of distribution represent 14.8%.

Many French women are now more inclined to mix premium and mass brands (Euromonitor International, 2009). However with increase awareness of consumers attitudes towards toxic chemicals having negative aspects on health, the premium segment is becoming more popular amongst females who are in search of more safe to use products, and environemntally friendly.

The legal environment also oversees the French industry by adopting strict regulations towards ingredients which are allowed to be utilised in the cosmetic product, or those that may be considered dangerous in regards to health aspects. Examples such as adoption of Directives 93/35/CEE (1993), Directives CEE (2004), European International Nomenclature of Cosmetic Ingredients. Since 2009, the European Union has also put legilsatives in place banning animal testing within the E.U and also sale of any product that has been prior tested on animals (Kumar, 2005).

2.3 Colour Cosmetic Companies and CSR Practices

The following will provide a brief overview of the 3 major colour cosmetic players in France (L’Oreal, Chanel and LVMH), and discuss whether these companies have adopted CSR activities within their business strategy, and will state if a formal (written, printable report of their CSR policy) or informal CSR policy (only available on their corporate website) has been adopted. Other players present in the local market such as Estee Lauder, Beiersdorf-Nivea Beauté, Clarins S.A, Coty, Yves Rocher, and Shiseido, are also presenetd, in Appendice D of this dissertation.

L’Oreal S.A – In France, L’Oreal S.A accounts for 38,80% of total market shares (Datamonitor 2008). It is the world’s second largest manufacturer of cosmetics and toiletries. L’Oreal operates through three business divisions: cosmetics, the Body Shop, and dermatology. Its’ main colour cosmetic brands are : L’Oreal Paris, Gemey Maybelline Garnier, Lancome and The Body shop.

L’Oreal acquired The Body Shop in March 2006, which enabled to position itself in the ethical cosmetics market, to reinforce this positionment. L’Oreal also acquired a leading french company Sanoflore, which is specialised in organic cosmetics. This strategy enables L’Oreal to develop into the organic and natural cosmetics market (Euromonitor International, 2009).

L’Oreal invests largely in CSR practices, and provides a formal CSR policy which enables to support its’ disclosure and transparency to the public in regards to its’ business operations. L’Oreal addresses an extensive lists of social and ethical issues such as contributing to the society and community, addressing issues of sustainability, preserving the environment, labour and human rights, actions against animal testing, donating to charities and natural disasters, developing education, supporting medical research, adopting ethical standards throughout the entire company and subsidaires, it’s employees and having strict ethical requirements for its’ suppliers.

Chanel S.A – was established in 1924 by Coco Chanel, and is owned by the Swiss company Pamerco. It is a privately held company and is not obligated to release any financial results. It is specialised in a wide range of products such as fashion, watches, eye wear, fragrances and beauty products.

In France, Chanel S.A accounts for 13,40% of total market shares in the cosmetics market. It operates in Europe, Asia and USA (Datamonitor 2008), with the highest shares of market value in that of Western Europe (Euromonitor International 2009). Its colour cosmetic products are distributed unders the brands Bourjois and that of Chanel.

In order to improve financial results due to the economic downturn, community projects such as ‘Mobile Art Tour’ have been stopped in order to focus investments on other strategies.

However, no information in concerns to CSR practices nor that of any formal CSR policy was publicly available on their corporate website. However, it cannot be assumed that they do not invest in CSR, but may have chosen not to make publicly available their CSR policies.

LVMH Moet Hennessy Louis Vitton S.A – Is an international group of companies with principal activities focused on the production and sale of luxury goods. Its main divisions are : wines and spirits, fashion and leather goods, fragrances and cosmetics, jewelry and selective retailing sectors. LVMH operates about 1,859 stores worldwide (Datamonitor 2008).

In France, LVMH group accounts for 9,40% of total market shares in the colour cosmetics market (Datamonitor 2008). Its’ main brands in the colour cosmetic segment include : Christian Dior, Guerlain, , Hard Candy, Benefit Cosmetics, Urban Decay, Fresh, Make Up for Ever and Dior Addict. (Datamonitor, 2009, LVMH Group 2009).

LVMH adopts an informal CSR policy which is publicly available on their corporate website. The company is largely invested in the french community and believes in promoting french culture, art and heritage. It allocates important investments towards community projects, and is involved in many initiatives to promote french cultural heritage.

chapter 3: literature review and theoretical framework
3.1 The Concept of CSR

The section 3.1 will provide the literature review in regards to the background of CSR, its purpose, how CSR is defined, implementing CSR and monitor CSP, as well as the criticism of the concept. It will also focus on presenting the different dimensions of CSR through Carroll’s CSR Pyramid Model (1979).

3.1.1 Background of CSR

During the eighteenth century companies took little responsibility for their impact of business operations. According to writings of the Scottish philosopher of the eighteenth century, Adam Smith (1776) many corporations limited their operations according to the rules of pure competition. This gradually evolved and companies started taking full responsibility for their business impact on society, the community and the economy.

Many academics believe that the roots of CSR originated from nineteenth century U.S industrialist, Andrew Carnegie, in his writings from the ‘Gospel of wealth’, where he was the first to express publicly his beliefs that that the most fortunate members of society should ensure that money was used to aspire the less fortunate members (Carnegie Corporation New York).

The early twentieth century, saw businesses adopt more responsibility in regards to society and the community which was mainly represented by CP. According to Carroll (1999), and Hopkins (1999) cited in Leal (2007), the discussion about SR of businesses began to become more prominent from the 1930’s, with authors like Chester Barnard, J.M Clark, Theodore Kreps and Merick Dodd.

Prior to the 1960’s, business ethics was rather left to theologians to discuss issues of fair wages, unfair labor practices, and the morality of capitalism (Lantos, 2001).

From the 1960’s, companies were more focusing on generating profits that outweighted largely over moral principles. It was during this era that consumers began to manifest their mecontentment against unethical business behaviour. During the 1960’s Milton Friedman, Nobel Prize winner in economics in 1976, raised an issue by stating that the ‘only obligation a business had was to generate profits for its sharehlders’.

It was only during the 1970’s, that the concept evolved when CP was supplemented by corporate initiatives and activities, and businesses taking a more responsible attitude towards societal needs. It was considered that companies should not pursue profit without taking into consideration business ethics, acting in a social responsible manner and being a good corporate citizen.

In the 1980’s, R. Edward Freeman (in contrast to the views by Milton Friedman), argued on the issue that CSR is a question of managing stakeholders, and that values and ethics are necessarily a part of doing business.

The last decades, growing interest has been more towards environmental issues (Eg. Global warming, climate change, pollution index, etc), and how companies are addressing such issues through adoption of sustainable development.

3.1.2 CSR in France

In France, the concept of CSR surfaced during the late nineteenth century. Early twentieth century, professional organisations as well as commercial undertakings have been adopting texts containing social standards that employers must observe (Segal et al., 2003).

During the 1980s, the concept was mainly issued from the idea to combine economic and social policy, and on the basis of promoting the concept of the ‘corporate citizen’. There was great involvement on the part of undertakings in civic life, such as lobbying to exert an influence on the decisions made by the public authorities or providing sponsorship to support social, cultural and sporting activities (Segal et al. , 2003).

According to Segal et al. (2003), the CSR movement from the United States did not reach France until the early 1990s, however, companies in France referred more to the term ‘corporate citizenship’ (in french ‘citoyenneté d’entreprise’), which was more familiar to them, than CSR. Due to cultural differences, some aspects of the CSR concept as it was constructed by Anglo-American background, did not adapt well into the French cultural landscape, such as the idea that all stakeholders should be taken into account, or the fact of a responsibility that merely complements that of companies. This is explained by the fact that the State and the Law are regarded as the only guarantors of a principle of SR that applies to all, whereas initiatives emanating from civil society are perceived as campaigns and suspected of concealing vested interests (Segal et al. ,2003).

CSR, in France is exercised within an increasingly precise legal framework, particularly because the law encourages undertakings to adopt standards of SR.

It is a frequent custom for the people in France, to turn to the public authorities demanding that they ‘face up to their responsibilities and lay down the laws’ recognising a new social problem and addressing it, rather than provide laws that define minimal thresholds for companies (Segal et al., 2003).

3.1.3 The Purpose of CSR

With the increasingly pressure received from Governments, NGOs, consumer movements, activists, shareholders, the public and the media has lead companies to account for their social and environmental impacts of their activities. As a result the twenty-first century is seeing CSR emerging as an important area in business strategies.

Advocates of CSR have used four main arguments to justify the reason for CSR : (1) moral obligation of companies in adopting an ethical and responsible behaviour; (2) sustainability in terms of the TBL, (3) license to operate in terms of companies identifying social issues important to stakeholders and taking approrpiate related decisions, and (4) reputation by investing in cause-related marketing campaigns (Porter & Kramer, 2006).

Porter & Kramer (2002), also suggest that CSR practices can provide economic benefits if the social improvement has been related to the company’s business. Companies often willingly engage in socially responsible behaviour because it enhances shareholder value by keeping a business on the right side of the law (Martin, 2002). Companies can serve shareholder interests while also serving those of a larger community.

Most CSR practices implemented by firms are largely based on Philanthropy activities, and used as a purpose to promote the the corporate image. It can also contribute to improving the community by developing education, health, provide safe products, preserve the environment, improve employment, and on the long-term can aid in building strong ties with governments, official organisations, partnerships, and build trust within the community.

According to Burke and Logsdon (1996, p. 496), ‘CSR (policy, program or process) is strategic when it yields substantial business-related benefits to the firm, in particular by supporting core business activities and thus contributing to the firm’s effectiveness in accomplishing its mission.’

3.1.4 Defining CSR

There is no formal universal definition of the concept of CSR. Many believe it concerns what corporations give back to society in return from the benefits they have gained, others tend to believe it is based on how ethically corporations behave, towards society and the environment, and in regards to its stakeholders. Often, CSR is also referred to as the ‘triple bottom line’ in which it refers to the corporation’s financial, social, and environmental performance in conducting its business.

There have been numerous attempts by organisations, institutions, corporate executives and academics to clarify the constructs and concept of CSR (Dahlsrud, 2008, Lantos 2001, Tywoniak & Bartlett, 2008, Van Marrewijk 2003, 2005), resulting in many definitions towards a more humane, more ethical and transparent way of doing business (Van Marrewijk 2003, 2005).

Prior research by Dahlsrud (2008), reveal that there is not ‘one’ standard definition of CSR but that a variety of definitions exist. In his research he anyalysed 37 definitions of CSR, and results showed that, even though most definitions are different from one another textually, they are nevertheless constantly referring to the the same five dimensions: (1) environmental, (2) social, (3) economic, (4) stakeholder and (5) voluntariness.

Davis (1975) describes that SR implies that companies should not only make a decision based on their own interest but are also obliged to take actions that protect and enhance society’s interests. According to Sethi (1975) the concept of CSR has different meanings according to time and the cultural context and is more based on the corporate actions that enable to determine whether corporations are meeting societal expectations.

According to Carroll & Schwartz (2003), definitions of CSR fall into two general schools of thought, those that argue that business is obligated only to maximise profits while respecting the legal requirements and minimal ethical constraints (Friedman 1970, Levitt, 1958), and those that believe corporations are accountable on how they conduct their business toward society.

CSR is concerned with businesses being morally accountable to its stakeholders, and thus that values are necessarily and explicitly a part of doing business (Freeman, et al. ,2004), and that it is a voluntary commitment by companies to exceed the explicit and implicit obligations imposed on them by society’s expectations of conventional corporate behavior (Falck & Heblich (2007)

Others such as Davies (1960), Andrews (1973), McWilliams and Siegel (2001), Kotler and Lee (2005) refer to CSR as being an obligation to improve community well-being through transparent business practices, contribution of corporate resources, corporate decision making and actions extending beyond the firm’s direct economic or technical interest, and that which is required by law. In this context, CSR can therefore be seen as the voluntary assumption of responsabilities beyond that of just economic or legal (McGuire, 1963).

Authoritive institutions have also attempted to define CSR. The World Business Council for Sustainable Development (2000, p.3) defined CSR as : ‘… the continuing commitment by business to contribute to economic development while improving the quality of life of the workforce and their families as well as of the community and society at large’. The European Trade Union (2004, p.1), on the other hand, defines CSR as ‘companies integrating social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis’.

And on its’ part, the Organisation for Economic Co-operation and Develpment (OECD) on their website, describe CSR as : ‘The most important contribution of business is the conduct of business itself, and its core responsibility is to yield competitive returns to shareholders by identifying and developing promising investment opportunities – and must comply with legal requirements and, respond to societal expectations not written down in law books.’

3.1.4.1 Carroll’s CSR Pyramid Model

For the purpose of this dissertation, the author has chosen to focus on Carroll’s Pyramid Model ( 3.1) in order to identify the main dimensions of CSR. Carroll’s Pyramid Model was selected on the basis that it seems to be the framework the most frequently referred to in the literature reviewed, in terms of managing social issues.

In Carroll (1979, 1991 & 2000), Carroll & Schwartz (2003) CSR, is defined as:

‘The social responsibility of business encompasses the economic, legal, ethical, and discretionary (philanthropic) expectations that society has of organisations at a given point in time.’

The following sections will provide an overview of each individual dimensions of Carroll’s CSR Pyramid Model.

3.1.4.1.1 Economic Responsibilities

The environment of global trade is becoming a more competitive arena and faces economic challenges (Kehoe (1998), cited in Carroll, 2000, p.35), and thus, the economic responsibility of business remains very important (Carroll, 2000).

Companies’ business operations contribute largely to the economic unit in society. It has the responsibility to produce goods and services that society wants and to sell them at a profit, and all other business roles are predicated on this major assumption (Carroll, 1979).

Economic responsibilities is characterised by companies willingness to perform in a manner consistent with maximising earnings per share, must be committed to being as profitable as possible, must maintain a high level of operating efficiency and competitive positioning and that the success of the company be defined as being consistently profitable (Carroll, 1991).

3.1.4.1.2 Legal Responsibilities

Society expects business to achieve its economic operations within the framework of legal requirements. It goes on the assumption that economic responsibilities and legal responsibilities coexist and must be met simultaneously, as they represent fundamental precepts of the free enterprise system (Carroll, 1979, 1991).

According to Carroll (1991), legal responsibilities can be viewed as “codified ethics” in the sense that they integrate the basic notions of fair operations as established by lawmakers, and are characterised by companies performing in a manner that is expected of them by government and law, and thus, that the success of the company is defined as one that fulfills its legal obligations, and to provide goods and services that meet legal requirements (Carroll, 1991).

Accordoing to Carroll (1991), the Economic and the legal responsibilities are the most important components in the Pyramid Model. However, this may cause confusion when applying the framework as both components are located at the very bottom of the Pyramid. (Carroll & Schwartz, 2003)

3.1.4.1.3 Ethical Responsibilities

In addition to fulfilling their economic and legal responsibilities, businesses are expected to fulfill ethical responsibilities as well (Carroll 1979). ‘Ethics’, are the driving forces behind every creation of laws or regulation, there are not necessarily codified into laws but are expected by society (Carroll, 1970), and concerns standards, norms, or expectations that reflect a concern for what consumers, employees, shareholders, and the community regard as fair, just, or in keeping with the respect or protection of stakeholders’ moral rights (Carroll, 1991).

Carroll (1991), describes that the main components of ethical responsibilities of companies are to perform in a manner consistent with expectations of societal norms mores and ethical norms; to recognise and respect new or evolving ethical/moral norms adopted by society; to prevent ethical norms from being compromise