Body Shop and Its Csr-Impact of Social Responsibility on Business Profitability and Social Welfare

Introduction to CSR

As the world business environment changes, so do the requirements for success and competitiveness. Thus building deeper and more strategic relationships with customers, suppliers, employees, communities and other stakeholders (the corporate eco-system) can become central to competitiveness and even survival. According to Pallazi and Starcher (2006), building these relationships and being responsible to them rather than looking into the profit can form the foundation for a new, progressive and people-centered corporate strategy. This brings us to the increased importance of Corporate Social Responsibility (CSR).

According to World Business Council for Sustainable Development “Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life at workplace and their families as well as of the local community and society at large.”

Common observations on CSR

Some Common conceptions noted by Pallazi and Starcher (2006), are as follows;

 It is treated as an investment, more than a cost.

 It is a process of continuous improvement, which begins as small and expands over time.

 It is inextricably related to profitability, as there can be no social responsibility without profits. Profits are not only to reward investors but also to provide sustainable jobs, pay fair wages, pay taxes, develop new products, invest in services and contribute to the prosperity of the community.

The Pyramid of Corporate Social Responsibility

Source: Carroll’s Pyramid of Corporate Social Responsibility

Key Dimensions of CSR

The six key responsibilities or dimensions of CSR are: investors, environment, customers, employees, business partners and communities. CSR is basically managing these six dimensions.

Source: Corporate Social responsibility and business success By Marcello Palazzi and George Starcher

Benefits of CSR

Companies doing ethical business approach have found that it can have better financial performance, increased employee morale, retention and skill exploitation, improved consumer loyalty, risk minimization, reduced operational costs and increased business reputation . These benefits are outlined below:

1. Better financial performance. Several academic studies have shown that investing in social responsibility towards community and environment can improve the financial performance of companies. For example Unilever used its CSR initiative to market low cost salt in Ghana which led to better sales in the region (Werther, Chandler 2006).

2. Increased employee morale, retention and skill exploitation. Ethical values against employees can lead to better commitment, increase morale, retention, exploiting their skills and also to attract prospective employees (Turban, Greening 1997).

3. Improved consumer loyalty. In the new world of business, consumers are giving more importance to company’s business practices and perceived values. More companies are adopting value-based business practices to get brand loyalty among customers (Kitchin, 2002).

4. Risk minimisation. Companies that use a value-based process can proactively address a wide range of legal and ethical problems. As a result, companies can reduce their exposure to misconduct and the negative effect this can do to profit, branding and management direction. Clearly defined values, when integrated into a company’s organizational infrastructure, provide employees with the necessary tools and conceptual framework to make independent decisions in their daily operations that are consistent with the company’s underlying values.

5. Reduced operational costs. Some value based initiatives, particularly environmentally-oriented and workplace initiatives can reduce costs by cutting waste and inefficiencies or improving productivity (Gillis, Spring 2001).

6. Increased business reputation. Consumers are often drawn to companies and brands which have good reputation in CSR-related areas. A company which is socially responsible, benefits both from its reputation with the public, as well as its reputation within the business community, increasing a company’s ability to attract and raise capital and better