Environmental Corporate Social Responsibility

CHAPTER 1 - INTRODUCTION

This dissertation discusses and undertakes an analysis of some data gathered on Environmental Corporate Social Responsibility within organizations in the Fast Moving Consumer Goods Industry. The environmental social responsibility activities to be looked at within the selected companies are their water usage level, emissions, waste produced and total energy used with regard to being aware of environmental concerns. In this chapter, the aim and objectives of the study are outlined and a brief introduction is furnished.

1.1 BACKGROUND AND OVERVIEW OF STUDY

In recent times, there has been much debate about whether corporations should be socially responsible or not and also the extent to which they should be responsible. With the global recession at the moment, the future years will show if CSR has been taking on by corporations or if it is, as critics say, merely a marketing stunt designed to make their business attractive (The Independent, 2009).

The phrase social responsibility is often hard to pin down because of the fact that there are several schools of thought concerning this notion. Milton Friedman questions if companies are required to take responsibility for social issues (Kok et al., 2001, p. 286). He stressed that the sole social responsibility of any organization is to boost its profits through legal ways and that donating an organization’s funds to the society is harmful to the organization as this might reduce the organization’s profit or cause an increase in product price or, in exceptional cases, have both effects (Pinkston and Carroll, 1996). Some researchers on the other hand are of the opinion that because of the ever changing competitive environment in which businesses are carried out, it is essential that organizations incorporate some sort of Corporate Social Responsibility standard that will help foster its sustainability in the environment. Boynton (2002) asserts that social responsibility is “a value that specifies that every situation – from family to firm- is responsible for its members’ conduct and can be held accountable for its actions”. This research work supports the notion that organizations should continually engage in corporate social responsibility activities; therefore, as a conscious strategy, corporations must endeavour to incorporate environmental CSR in their diverse functions and operations.

Fast moving consumer goods (FMCG) also known as Consumer Packaged Goods (CPG) industries focus on the production of consumable goods which people require from day to day. Fast Moving Consumer Goods can be said to be “low price items that are used with a single or limited number of consumptions” (Baron et al., 1991). Examples of FMCG or CPG products are food and beverages, footwear, clothing products, tobacco and other general products. The FMCG or CPG industry is an umbrella for wholesale and retail consumer goods producing companies. A number of companies function within this industry: examples are Nestle, Procter and Gamble, Pfizer, Reckitt Benkiser, British American Tobacco, Cadbury and Smithkline just to mention a few.

According to Jarvis (2003), business organizations endeavour to maximise profits as much as they can. Fast-moving consumer goods companies cannot therefore be left out in the quest for profit maximisation as the goods they produce are sold to consumers in order to make some sort of gain. FMCG companies provide humans with day to day products they require and as such one of their responsibilities is to ensure that the manufactured products meet the required quality standard. In manufacturing their products, some FMCG companies make use of some natural resources such as water, wood, soil etc., and sophisticated machineries which in some way affect the environment. Making use of the earth’s natural resources without any provision for replacing the resources leads to depletion, while emissions from machineries pollute the environment.

Corporations implement CSR activities because they hope they will give them a competitive advantage over their rivals. Branco and Rodigues (2006) assert that CSR offers internal and external gains. The benefits are referred to as internal if engaging in social responsibility activities helps a corporation build, develop and manage its wealth and abilities, for instance: corporate culture and expertise. External benefits, on the other, are those linked to a corporation’s status, staff awareness and culture; these are essential indescribable assets which, though hard to easily replace or duplicate, can be developed or trashed depending on whether a corporation is socially responsible or otherwise. Moreover, because companies take from the environment directly or indirectly, it is their responsibility to ensure that the environment and society at large, and not only the stakeholders, benefit from some kind of social responsibility activities set up by the companies (Stoner and Wankel, 1988).

Speaking of the FMCG industry in United Kingdom, Bourlakis and Weightman (2004) assert that the industry, which includes the food and grocery sector, contributes immensely to the country’s economy as it provides employment to over 3.2 million people. This figure accounts for close to 17% of the country’s total workforce. The same authors also mention that the FMCG industry accounts for over £130 billion of consumer spending yielding, representing over 9% of the GDP.

1.2 THE MANUFACTURING SECTOR

The British Prime Minister, Mr. Gordon Brown, declares that “…for this government manufacturing not only has been, but remains and will always be, critical to the success of the British economy…” (BIS, 2008). The United Kingdom is the 6th largest manufacturing country in the world (See appendix 1 for details). It provides the economy with about £150billion per annum. The country’s productivity has increased by about 50% since 1997. The United Kingdom attracts “more foreign direct investment than any country apart from the USA” (BIS, 2009). In UK, manufacturing accounts for 13% of the GDP; also, between 1997 and 2004, the average labour productivity grew by 4% over the United States, 5% above France and also 15% over Germany. The figure below shows a graph of the growth in productivity.

Sheldon’s study on ‘social responsibility of management’ indicates that industries exist with the aim of servicing the society (Sheldon, 1923). The developments which various industries have made lately show that there is a link between the society and the industry. It can therefore be said that the purpose of creating industries is so that the society can benefit from it as well as sustain it. Sen (1999) observes that “as people who live – in a broad sense – together, we cannot escape the thought that the terrible occurrences that we see around us are quintessentially our problems. They are our responsibility – whether or not they are also anyone else’s’” (Sen, 1999). The manufacturing sector is very huge and includes a range of industries such as: Aerospace, Biotechnology, Chemical, Food and beverages, Pharmaceuticals etc. The FMCG industry is one of the sub industries within the manufacturing sector. They sometimes face a lot of problems and as such struggle with criticisms from stakeholders on social responsibility matters even though they have functional CSR agendas.

From the size of the British manufacturing industry, it is fair to say that it uses a huge amount of energy compared to the rest of the European Union.

1.3 STATEMENT OF PROBLEM

From looking at FMCG Company’s website and their social responsibility/sustainability reporting materials, it will be seen that they engage in corporate social responsibility at different levels. Looking closely at FMCG companies within the United Kingdom, it will be seen that almost all of them if not all, consider corporate social responsibility and its effect on their business operations particularly as it pertains to their corporate image, competitive advantage and even their finances. Davis (1973) in his work asserts that engaging in corporate social responsibility can improve an organization’s finances and image.

1.4 AIM OF PROJECT

The aim of the project is to contribute to the body of empirical data in the area of Corporate Social Responsibility by gathering information that will help in the analysis of environmental corporate social responsibility within organizations in the Fast-Moving Consumer Goods industry. The findings of this research should provide managers and the academic world some more information in the area of Environmental Corporate Social Responsibility.

1.5 RESEARCH OBJECTIVES

The main objective of this study on the analysis of data gathered on environmental corporate social responsibility in some organizations in the Fast Moving Consumer Goods Industry is to critically look at the steps the corporations take in being environmentally responsible and also how they measure the progress.

Also, this dissertation will be attempt to:

• To analyse the data from selected FMCG companies relating to their environmental CSR practices
• to identify the indicator/metrics used by the companies to benchmark their performance on environmental CSR in their organizations;
• to determine factors that encourage environmental responsibility practices.
• To draw some conclusions and make some recommendations about the state of environmental CSR in the selected organizations.

1.6 SCOPE AND LIMITATIONS OF THE STUDY

The FMCG industry is very large and as such it may not be feasible for the researcher to report on all the companies in the industry bearing in mind the limitation of time and adequate resources. Therefore the scope of this study will be limited to environmental corporate social responsibility in selected FMCG companies. The study will take a look at the environmental corporate social activities they have embarked on with respect to water usage reduction, CO2 emission reduction, reduction of waste produced, and total energy usage of each of the companies.

Owing to lack of time and resources, the researcher will not be able to conduct a survey of environment corporate social responsibility in all UK-based fast moving consumer goods companies. It is worth noting though that a lot of them carry out environmental corporate social responsibility activities and also report on them using indices to which some of them are benchmarked.

1.7 STRUCTURE OF THE DISSERTATION

This study is structured into five chapters. Chapter one provides an introduction/background to the research study, together with a brief introduction of the sector and industry. Chapter two contains the literature review; it comprehensively and critically reviews previous work done in this research area. Chapter three highlights the research design and data collection process employed by the researcher. Chapter four contains an analysis of the data gathered together. Some findings and discussions of the research area are also furnished. The final chapter, chapter five, contains some recommendations and conclusions based on the findings in the course of carrying out this dissertation.