BUSN20019 : Professional Business : Organizations on Business Performa

Impact of CSR on Business Performance

1. Introduction 

This report is based on the impact of corporate social activities of organizations on business performance. The major purpose of the report is to investigate how CSR activities influence the business performance. Both large and medium size firms tend to contribute to social development as their responsibility but such activities often act as a significant tool as well to enhance brand image both in domestic and global market. Thus, to understand how the implementation of CSR initiatives help brands to enhance business performance and positively reflect on the brand image, this report considers the business operation and CSR initiatives of Woolworths Australia, which is a supermarket chain located across many large cities in Australia. To meet the purpose of the report, this report presents a detailed background and the findings of existing papers. A clear presentation of research techniques used to perform the report has also been discussed.  A secondary data analysis has been performed collecting data from annual report, CSR reports, company’s blogs and other reliable secondary resources.

1.2 Background to the report 

Multiple scholarly papers have investigated corporate social responsibilities and its impact on business performance but their outcome largely vary. Even though the social drawbacks have been debated for decades and just in the recent time they have entered the mainstream management studies as the significant areas of examination. Boulouta and Pitelis (2014) mentioned that social initiatives are the heart of a business as well as social endeavour could be consistent with the business objectives for gaining profits. This should also express the values of serving the society as the soul of the business. A growing phenomena of studies on CSR in the social welfare has demonstrated that some firms have positively responded to the above stated concerns by gathering more resources to CSR. However, the major flaws in the existing studies are such as many inadequately controlled variables, lack of explanations about the particular growth areas caused by CSR. For example, it can be mentioned that CSR can be a proactive business strategy and an effective marketing tool to generate and hold competitive advantages. Therefore, the importance of performing a study on the impact of CSR on business performance lies in the exploration of areas in business that are and can be affected by CSR activities. When investigating the impact, particularly focuses on how CSR activities influence operational performance, financial performance, create platform for gaining competitive advantages and other core areas of Woolworths Group in Australia.

1.3 Research Aim

This report aims to examine the impact of Corporate Social Responsibilities on business performance of Woolworths Group in Australia.

1.4 Research Questions and Objectives 

Research Questions

• What are the potential impacts of CSR activities on business performance?

Research Objectives

• To critically analyse the importance of CSR in business
• To investigate the impact of CSR on business performance
• To provide suitable suggestions to plan for CSR to enhance business performance

2.0 Literature Review 

Social development and profitability of the company build a relationship in the present days which forms significant subjects of academic papers and research in the context of social responsibility. Tingchi Liu et al., (2014) mentioned that CSR better explains possible obligation of business to develop and protect social welfare and this is also helpful in future days, as it remains in the form of sustainable benefits for stakeholders. It is identified that when it comes to exemplified relationship between social responsibilities as well as the rewards in economy, previous studies often provide contradictory opinions on the context. Cavaco and Crifo (2014) stated the major intention of a business is to make profits and business is only additionally concerned when something is about the stakeholders. The author of this article also argues that ethical and other related consideration sometimes remain irrelevant but sometimes it becomes a concern when it affects the financial performance of the business.

On the other side, Bresciani and Ferraris (2016) presented a contradictory view by stating that business needs to consider social issue as significantly as market factors, since determining the long-term success could require a great amount of effort that required in the past in a market place.  In response to this statement, Rangan, Chase and Karim (2015) argued that sometimes social initiatives might involve additional costs which could put business at stake compared to a business which is aware in terms of social responsibilities. It is observed that such costs may come from additional activities like welfare programs, development programs for the community, manufacturing plant and eco-friendly environments. Lee,  Herold and Yu (2016) performed a study and mentioned that business’s stock market performance and social responsibility should be aligned together. Nonetheless, possible explanations provided by these studies for the findings mostly include enhanced relationship with important stakeholder groups like banks, investors and governmental setting.

The above presented study has stated the fact that a business could be profitable due to the implementation of social activities and the decisions related to the development of the environment could lead to limited cost. The example found in this study is a Ford manufacturing factory in Texas was modified to decrease excessive waste-water and this leads to limited regulatory charges for pollution and the estimation indicates the initiatives saved the firm from paying millions dollars as penalty. Furthermore, it is worth stating that such enhanced relationship could increase investment in business by the involvement of shareholders, elevate employee morale, increased customer morale, and customer goodwill. Likewise, this enhanced relationship with government agencies that minimize the regulatory cost.

2.1 Importance of CSR in business

It is identified that the term sustainability has now been essential element in business terminology along with sophisticated implications. According to Kolk (2016) when it comes to gaining competitive advantages savvy leaders better understand that they have to incorporate sustainable approaches to ensure and gain long-term success of their business. In this context, Taghian, D’Souza and Polonsky (2015) commented that irrespective of the size of business, showing a good corporate relationship could likely to result in significant business benefits. It is identified that a successful corporate social responsibility endeavour or initiatives could enhance business’s profitability and brand image by presenting it as business which is intended to remain at the bottom line. Therefore, such sort of philosophy could attract all including clients, customers, employees and partners.

2.2 Relationship between the CSR and employee turnover

Kiliç, Kuzey and Uyar (2015) mentioned that employees are their most valuable asset and that an organization’s capability to retain employees remains as a hallmark of sustainable organizational performance. Indeed, the capability to retain employees indicates that a firm is suitable place where retention of employees has a positive impact for firm’s financial performance and productivity. Rhou,  Singal and Koh (2016) mentioned that employee derive justice perception of organizations on the range of fairness shown by the businesses. Studies show that work environments or businesses that are perceived to be fair should have positive influence on organizational outcome, such as in the form of lower employee absenteeism and increasing level of employee commitment.

2.3 Empirical evidence on CSR and CFP relationship 

A major issue in corporate governance and its impact is often the effect of CSR firm’s performance. Particularly, the financial performance is most affected. A traditional perspective provides a fact that implementation of CSR initiatives could be expensive as when a business is involved in social activities, it might have to bear the additional cost (Singal, 2014). For example, a social responsible step might involve a large investment for controlling pollution, stipulated package for employee benefits as well as particularly sponsorship to the community. On the basis of the conventional perspective, it is worth stating that such expenses may deteriorate the profits of the business but lead to a competitive edge. However, a contradictory perspective derived from the stakeholder theory (Freeman1984) is the dissatisfaction of any stakeholder group, which has a strong negative impact on the business (Eccles, Ioannou & Serafeim, 2014). Corporate Social Responsibility is thus, a precondition and the author of this article that talk about the fact that organizational members or the operational bodies should consider all individuals and other stake instead of selecting a group of stakeholders only. If it is managed appropriately, stakeholders involved in a business might enhance the level of satisfaction.

2.4 Gaps in the existing literature

Undoubtedly, the existing studies have presented a broad view about the importance and implementation of CSR in business. However, most of the studies are quite vague in terms of the effect of CSR on businesses. The studies lack proper evidences about how CSR is affecting employee turnover or the financial performance of the business. The real-world evidences would have justified the facts presented in the study but they lack in the existing papers. For example, a study performed by Rangan, Chase and Karim (2015) mentions that socially responsible initiatives could generate additional cost that might put business at an economic risk compared to less socially responsible business. However, the author did not provide any supportive evidence to prove this point.

3.0 Research Methods 

Research methodology or the selection of research techniques determine the outcome of the research. In order to perform the current study, a secondary data analysis has been performed. The following sections present major principle used in the study and the approaches of collecting data for the analysis.

3.1 Research Philosophy

Research philosophy is a set of principles controlling the ways in which the information regarding a phenomenon need to be gathered and used (Mackey & Gass, 2015). Research philosophy compromises of three categorizes namely positivism, interpretivism and realism. In the present study, interpretivism research philosophy has been selected, research findings are conventionally judged against the criteria of meaning as well as casual adequacy and contextual sensitivity. Moreover, unlike other research philosophy, positivism research philosophy give importance to an in-depth and intelligible understanding of meaningful context. So, in the present study, impact of CSR cane be examined by a broad and in-depth understanding.

3.2 Data Collection Techniques 

Data Collection methods compromises of secondary data collection and primary data collection (Lewis, 2015). As the study performs a secondary data analysis, secondary data has been collected. Secondary data has been collected from books, journal articles, sustainability reports of Woolworths Group, Annual report of Woolworths and official blogs of the company.

3.3 Data Analysis

The presents study includes the qualitative data analysis method; qualitative data analysis technique is referred to non-numeric information such as interview transcripts, reports, images and text documents (Alvesson & Sköldberg, 2017). However, in the present study, images and notes have been omitted and the analysis is completely based on the text documents and reports. Particularly for performing the analysis, the study uses a framework analysis method such as charting and interpretation of data.

4.0 Research Findings 

Secondary data analysis

Theme 1: “Initiatives to a healthy environment”

When it comes to corporate social responsibility, Woolworths plays great role in environmental sustainability as the business recognizes the environmental impact that has across its value chain and work with other suppliers, service providers as well as operation to innovate for a healthy planet.  However, Richards et al., (2015) mentioned that the “initiatives toward zero food waste going to landfill” as Woolworths’ sustainability initiative has not been achieved properly. It has been identified that presently a whale of waste stream is still waste food because of the insufficient sorting at the outlet.  Nonetheless, in response to its CSR objective, Woolworths, in every year until 2020, is supposed to achieve a year-on-year increase in tonnes of food waste diverted from the landfill. This was supposed to be done through persistently reducing the waste in stock and improving the store management behaviour as well as enhancing the effectiveness of farmer’s program. Devin and Richards (2018) mentioned that when it comes to recyclability of its own brand and packaging for the contribution of circular economy, the organizations should develop more initiatives. This is because Australians are avid recyclers and customers consider it as company’s responsibility to enable them to play their part in preserving the environment by making its packaging recyclable. So, as to improve the strength of the initiative, the business needs to enhance the recyclability of its own brand packaging for the contribution of circular economy. The sustainability report also indicates that Woolworths have reviewed the packaging materials of more than 30000 own brand products and the overall products account for more than 34% of own brand sales as well as required the use of more than 323000 tonnes of packaging materials.

Theme 2: “A step toward corporate social responsibility”

 According to the sustainability of Woolworths Group, the organization tries to value diversity across its operation, from its business perspective, the customers should observe Woolworths’ people a reflection of themselves as well as their communities. In such approach, the business embraces targets which support diversity. According to the annual report, Woolworths employs more than 205,000 people from all walks of life (Woolworthsgroup.com 2018) A growing majority is in customer-facing roles. The sustainability report implies that the organization is trying to make sure proportionate representation across several businesses of women and different culture as well as indigenous groups in order to support diversity with the inclusion of culture. The organization aims to recruit and build a team that reflects Australian community and under this initiative, the organization is trying to equip its training managers as well as executives with cultural, unconscious training and gender. Thus, to enhance understanding of diversity, the business should be completing cultural an ethnic mapping of stores, which is considered to be setting the business on a path to reflect the diversity of their community.

Theme 3: “Financial performance and CSR”

According to the first quarter of financial performance, Woolworths has experienced a significant achievement which includes almost 42% of reduction in carbon emission from facilities on the basis of estimated growth levels followed by 25% or above, reduction in carbon emissions per square metre in new supermarkets, while almost 30% reduction in business car fleet emission. Consequently, almost $56.7 billion which is above 3.4% from 2017. Likewise, the net financing cost is around 20.6%, while the gross profit is around 29.5% which is driven primarily by the gross profit enhancement in Australian Food (Woolworthsgroup.com 2018).

                                  Figure 3: Financial performance of Woolworth as the result of CSR activities implementation

                                                                                (Source: Woolworthsgroup.com 2018)

4.1 Discussion 

The above presented dataset also helps to understand that by considering the importance of CSR activities, the organization Woolworths Group significant paid attention to its CSR commitments with the sub-areas of people, planet and propensity. The CSR strategy of the organization indicates that Woolworths tend to develop market centric approaches that are aligned to its CSR initiatives.  The organization has hired 197,426 employees with a diverse approach of employment, reported almost 42% in carbon emission from the facilities and the prosperity is around 114 billion. It was also found in the literature that business that has fair policies for all its stakeholders, employees prefer to work in or continue with that organizational setting (Rhou, Singal & Koh, 2016). Nonetheless, the data presentation helps to understand that organization is not able to align its financials goals with the performance of corporate social responsibilities.

The findings also indicate that Woolworths has successfully achieved 91% of the major targets and commitments in their strategy. Nonetheless, it is worth highlighting that in spite of the overall success of the strategy, Woolworth’s commitment to achieve zero food waste to landfill has not been successful. In addition to this, there is another significant fact which needs to be noted that as the strategy timeline is on the verge of completion, the firm is still not properly able to maintain a stable focus on the movement. According to () social issues could be as important as market factors in determining long-run success which deserves same attention and rigorous analysis that have been devoted in the past to the markets. Thus, when it comes to CSR, business should make and give equal amount of efforts towards all its initiatives. The organization is in the need of incorporating a model that promote a stable and prosperous business, supply chain and community.

5. Conclusion and Recommendation: 

This report reviewed existing studies and sought support for this contention and the findings of the study imply that Woolworths has many initiatives in place to fulfil and perform its social duties and some of them have achieved the goal while some are in the need of more efforts and attention. However, one significant factor that needs to be considered is that even if positive CSR initiatives do not reflect on the profitability but they could be used as a tool to reduce the risk of damage to brand evaluation in the future.

It is believed that the findings of this study performs several significant implications for future studies.

• The study particularly suggest that the social responsibility/ organization’s performance could be context specific. Consequently, the enhancement of a theoretical understanding as well as organizational implications could largely rely on the circumstantial factors that improve a healthy relationship between CR and organizational performance.
• Operational factors of business could play a significant role in building a relationship between CSR and business outcome

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Woolworthsgroup.com (2018). Retrieved from https://www.woolworthsgroup.com.au/icms_docs/186121_corporate-responsibility-report-2015.pdf