Fair Trade in CSR Strategy of Global Retailers

M. Stefanska, R. Nestorowicz, M. Stefanska, R. Nestorowicz, Kenneth A. Loparo, Magdalena Stefa?ska

• Publisher: Palgrave Macmillan
• Year: 2015
• Print ISBN: 9781349484355, 9781137395689
• eBook ISBN: 9781137389046
• Topic: Business
• Subtopic: Business Ethics
• Index: Business

Fair Trade In CSR Strategy of Global Retailers shows how retailers can improve the success of their fair trade strategy. Using Polish market research, the authors analyze the aggressive and detrimental competition between retailers such as Ikea, and Tesco to emphasize the benefits of CSR strategy for stakeholders and society at large.

CHAPTER 1

THEORETICAL FOUNDATIONS OF CSR IN RETAILING

Magdalena Stefańska and Grażyna Śmigielska

The Origins of Corporate Social Responsibility

The development of the concept of corporate social responsibility (CSR) is connected, among other things, with the evolution of ideas that emerged in ancient times and was related to such issues as ownership, control, and wealth that divided society into two classes: the owners (or managers) of property who derived benefits from this position, and those who did not possess property. Moral concerns relating to the idea of ownership and the consequences of this fact for both owners and nonowners have been pondered by eminent philosophers throughout the ages. More on this topic can be found in Harry Landreth and David C. Colander (1998). Thus in this chapter we will not focus on philosophical considerations or the religious context of CSR, since these aspects have already been extensively described in the literature. Instead, we will focus on more contemporary activities, arising from management theory and practice. The origins of the current approach to CSR can be traced back to the charitable activities of some entrepreneurs as early as in the eighteenth and the nineteenth centuries. People such as Robert Owen, George Cadbury, and Titus Salt implemented social programs and introduced practices that were contrary to those commonly used at the time (for example, they did not employ children, and they provided education for children and workers). These are examples of the missionary approach and a recognition of the need to tackle social problems (Bhattacharya, Sen, and Korschun 2011, pp. 27–28).

In the late nineteenth and the early twentieth century, when production on an industrial scale started to develop and the process of the accumulation of capital in the hands of a small group of entrepreneurs began, a disparity between the rich, those deriving benefits from the work of others, and the workers started to appear. At that time, a discussion began regarding the responsibility of the wealthy for their business activities and for the thousands of workers employed in their factories. A response of the owners was to undertake image-building activities, which became the foundation of modern public relations. Good examples are the great philanthropists of the late nineteenth and the early twentieth century, such as Andrew Carnegie and John D. Rockefeller, who donated their wealth for social purposes. Analyzing the roots of CSR from a historical perspective, the nineteenth century and the turn of the century marked the beginning of the development of ideas relating to the role of companies in developing free-market economies, thus providing the foundation for the modern understanding of CSR.

The actions by the precursors of CSR resulted from the fact that for many years the concept of corporate social responsibility was located in the area of public relations and treated as a necessary tool for building a corporate image. This approach is justified, considering the roots of the idea, although the contemporary relationship between business and society means that CSR is seen in a much broader perspective than being just a public relations (PR) tool. A breakthrough in the development of this idea was a publication by H. R. Bowen, named the father of CSR by A. Carroll. In 1953, Bowen in his book Social Responsibilities of the Businessman defined CSR as “an obligation to pursue policies, to make decisions and to follow lines of action which are compatible with the objectives and values of society” (1953; Douglas et al. 2004, pp. 378–395). His followers believed that business, due to the nature of its functions and tasks, is accountable to the public and that it should serve the public in an active way, which means conducting CSR activities. Bowen drew attention to the impact of hundreds of large companies on the social and economic environment and posed important questions concerning the responsibility of managers for the consequences of this interaction. In his paper he referred to a survey conducted by Fortune magazine, which showed that 93.5 percent of managers agree with the statement that the responsibility of managers involves more than just generating a profit for the owners. His approach created a new dimension in CSR: it is not only an element of PR but a comprehensive image-building system based on the relationships with stakeholders.

Another new dimension in social responsibility (SR) was associated with rapidly increasing mass production after World War II, which was quickly followed by environmental degradation. This problem was raised, among others, in the “Limits to Growth” report published by The Club of Rome in 1972, showing a vision of the future in which growth would be inhibited. This aroused public concern and prompted calls for to take measures to prevent this phenomenon. In this period the issue of CSR was fairly narrow and was restricted mainly to issues related to environmental protection and charitable activities. This approach has left its mark on the modern approach to CSR, which is still understood in this way by many companies. Expenditure on such activities was treated as costs, while the main aim of companies at that time was to maximize profits. CSR was often a reaction of large industrial companies to the social criticism directed at them. The principal aim of CSR activities conducted by companies was to prevent this criticism and build a positive corporate image through, for example, allocating funds for charitable purposes or undertaking actions to protect the environment. Philip Kotler and Nancy Lee defined SR strategy as the “long-term implementation of the objectives of a company and at the same time the company’s commitment to ethical actions, economic development, improving the quality of life of employees and society as a whole” (2005, p. 3).

The concept of CSR increased in popularity at the turn of the twentieth century because of the increasing number and the scope of the risks connected with the rapid progress of civilization and the development of consumerism on the one hand, and the increasing awareness and social pressure manifested through boycotting the products of companies that did not comply with ethical principles or that contributed to environmental destruction on the other. In many countries, consumer organizations emerged that protected the rights of shoppers. Also, social movements whose aim was to protect animals and the environment or to promote health and healthy lifestyles were gaining importance. These trends became so significant that some issues began to be formally regulated, and a company’s noncompliance could lead to lawsuits and severe financial penalties. The situation was similar in developed countries as regards workers’ rights, which were upheld by trade union organizations. However, the existing, and indeed deepening, disparity between social needs and the pressure on the part of companies to reduce costs and maximize profits is nowadays so large that the activities of enterprises very rarely extend beyond the minimum required by law in the area of human rights, workers’ rights, children’s rights, or environmental protection.

For the followers of M. Friedman, however, the sole purpose of business is to make a profit, “to make as much money as possible for their stockholders” (1970). Later he slightly softened this view, adding that a company should also provide jobs and pay taxes (1970). At the same time he emphasized that a company should make a profit in a legal, honest, and ethical manner. He believed that altruism, as promoted by Bowen, is the responsibility of governments, social security systems, and individuals, not businesses. During this time, a very similar view was also expressed by the marketing theorist Theodore Levitt (1958), who warned companies against CSR activities because in his view devoting too much attention to social problems could have an adverse impact on profitability (Caroll and Shabana 2010, pp. 85–105). He argued that resolving social problems should be the responsibility of the state and that companies should not be burdened with this issue because they are supposed to pursue other objectives. On the other hand, many social problems are generated by companies. Examples of such problems include the devastation of the environment, or unemployment resulting from transferring production to countries where human labor is cheaper. Moreover, business investment in nondemocratic countries often supports totalitarian systems by providing export revenues. However, as stated by Moir, business can only fully enrich society if it is both profitable and socially responsible. Society and business cannot be considered separately because there are too many connections between the two (2001, p. 2).

The factors behind the development of the CSR concept in its contemporary meaning include the following:

• globalization (this leads to a separation between the places of production and consumption; contributes to the transfer of knowledge, organizational culture, technology, and capital between countries, and, in accordance with the transaction cost theory, businesses reduce costs and generate higher profits; it also leads to social and cultural change, and consequently to the unification of consumption and lifestyles on the one hand, and a stronger orientation toward local traditions, customs and culture on the other);

• concentration and integration of enterprises (manifested through mergers and takeovers, as well as the organic growth of organizations; capital and organizational concentration of enterprises means that companies are able to achieve a dominant position in the market);

• economic crisis brought about by delinquencies in the housing and banking sectors in the United States (the collapse of Lehman Brothers, which started a series of bankruptcies and a crisis in the banking and capital investment sector; this dented social confidence in the financial sectors and triggered intense public debate regarding the profits of financial institutions and the astronomical, compared with other sectors, salaries of the chief executive officers (CEOs) of large corporations);

• concentration of global income in a group of several hundred companies in the world (a group of only several hundred people in the world own about 80 percent of global capital);

• increase in greenhouse gas emissions, leading to global warming;

• raising of environmental awareness in societies (for example, ecological disasters such as those in Alaska or in the Gulf of Mexico drew people’s attention to environmental pollution and the degradation of the natural environment);

• changes in the environment caused by the operations of business enterprises (unprecedented natural phenomena in some geographical areas, which are attributed to climate change, brought about by human activity);

• growing importance of social movements promoting equality and protecting human and workers’ rights; and

• development of new communication technologies and new platforms for the exchange of knowledge and opinions (for example, access to the Internet, development of mobile communication, emergence of social networking sites).

The phenomena described above also concern retail companies, which both contributed to their emergence and are influenced by them. Globalization, internationalization, integration, and concentration are concepts strongly associated with retail firms. These phenomena were co-created by the world’s largest retail companies, which now operate in several and even dozens of countries around the world: for example, in 2011 Walmart Stores, Inc. operated in 28 countries; Carrefour SA, in 33; Tesco PLC, in13; and Metro AG, in 33. The ten largest retailers in terms of sales (Walmart, Carrefour, Tesco, Metro AG, Kroger, Costco, Schwarz, Aldi, Walgreens, The Home Depot) had a retail revenue of 1,237,710 million USD. The processes of trade internationalization were significantly accelerated in the 1980s and 1990s because retailers were able to develop resources that made it possible for them to effectively compete in foreign markets (such as information and communications technology [ICT] as well as experience in terms of marketing and cooperation with suppliers). On the other hand, at that time many previously inaccessible markets became open to foreign investment, including markets in Central and Eastern Europe, but also in the Far East (India, China). Through expanding into new markets, organizing transnational supply channels, and exploiting the opportunities created by the opening of European and Asian markets, global retail chains contributed to the reorganization of local retail structures and created a new quality of competition in the sector—based on innovation, cost and image. In addition, they created a new style of consumption by offering customers goods from around the world.

For European international retail companies the opening of the markets of Central and Eastern Europe in the early 1990s was particularly important. Postcommunist European markets at the time were characterized by an outdated retail structure, high demand for goods and services, as well as a lack of those legal restrictions that can often constitute barriers to growth in the markets of develo...

Table of contents

• Cover
• Title
• 1.  Theoretical Foundations of CSR in Retailing
• 2.  Development of the Fair Trade Idea in Europe and the United States
• 3.  A Critical Look at the Application in Practice of Fair Trade
• 4.  Corporate Social Responsibility and Fair Trade in Relations of Retailers with Suppliers
• 5.  The Influence of CSR and Fair Trade Communications on Attitude, Customer Behavior, and Retailer Perception
• 6.  The Effect of Communicating CSR and Fair Trade on the Attitudes and Behavior of Employees of Trading Enterprises
• 7.  Fair Trade: Trends for the Future
• About the Authors
• Index