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Corporate Social responsibility.

Study Case: Unilever

Academy of Economic Studies Bucharest Andreea Burdujanu

Introduction: Corporate social responsibility (CSR), concept that has entered the vocabulary of researchers and businessmen, starting with 1950, covers a complex area of firms actions related to social responsible management of business and investments which last outcome is according to Lisbon strategy an essential contribution to sustainable development. In this paper there is presented a sharp link between the concept of corporate social responsibility on a concret exemple of the evolution of corporate social responsibility in big old multinational company. Meanwhile its possible to find here starting from a simple definitions to complicated case studies, and in the end it is concret exemples of projects of corporate social responsibility in Unilever company relies on.

Concept of Corporate Social Responsibility


The concept of corporate social responsibility (CSR) has a long and varied history. Formal writing on social responsibility, is largely a product of the 20th century, especially the past 50 years. Furthermore, although it is possible to see footprints of CSR thought throughout the world (mostly in developed countries), formal writings have been most evident in the United States, where a sizable body of literature has accumulated. Corporate social responsibility (CSR) is: An obligation, beyond that required by the law and economics, for a firm to pursue long term goals that are good for society The continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as that of the local community and society at large About how a company manages its business process to produce an overall positive impact on society Corporate social responsibility means: Conducting business in an ethical way and in the interests of the wider community Responding positively to emerging societal priorities and expectations A willingness to act ahead of regulatory confrontation Balancing shareholder interests against the interests of the wider community Being a good citizen in the community

In the Green Paper drafted by the European Commission in 2001, Promoting an European Framework for Corporate Social Responsibility, CSR is defined as a concept whereby

companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis as they are increasingly aware that responsible behaviour leads to sustainable business success CSR is about the organisations obligations to all stakeholders and not just shareholders. There are four dimensions of corporate responsibility

Economic - responsibility to earn profit for owners Legal - responsibility to comply with the law (societys codification of right and wrong) Ethical - not acting just for profit but doing what is right, just and fair Voluntary and philanthropic - promoting human welfare and goodwill Being a good corporate citizen contributing to the community and the quality of life

Not all business organisations behave in a socially responsible manner and there are people who would argue that it is not the job of business organisations to be concerned about social issues and problems. There are two schools of thought on this issue:

In the free market view, the job of business is to create wealth with the interests of the shareholders as the guiding principle

The corporate social responsibility view is that business organisation should be concerned with social issues

Free market view - a summary


The role of business is to create wealth by providing goods and services There is one and only one social responsibility of business- to use its resources and engage in activities designed to increase its profit so long as it stays will the rules of the game, which is to say, engages in open and free competition, without deception or fraud. [Milton Friedman, American economist]

Giving money away is like a self imposed tax Managers who have been put in charge of a business have no right to give away the money of the owners

Managers are employed to generate wealth for the shareholders - not give it away Free markets and capitalism have been at the centre of economic and social development Improvements in health and longevity have been made possible by economies driven by the free market

To attract quality workers it is necessary to offer better pay and conditions and this leads to a rise in standards of living and wealth creation

Free markets contribute to the effective management of scarce resources It is true that at times the market fails and therefore some regulation is necessary to redress the balance

But the correcting of market failures is a matter for government - not business Regulation should be kept to a minimum since regulation stifles initiative and creates barrier to market entry

The corporate responsibility view


Businesses do not have an unquestioned right to operate in society Those managing business should recognise that they depend on society Business relies on inputs from society and on socially created institutions There is a social contract between business and society involving mutual obligations that society and business recognise that they have to each other

Arguments for socially-responsible behaviour


It is the ethical thing to do It improves the firm public image It is necessary in order to avoid excessive regulation Socially responsible actions can be profitable Improved social environment will be beneficial to the firm It will be attractive to some investors It can increase employee motivation It helps to corrects social problems caused by business

CSR behaviour can benefit the firm in several ways


It aids the attraction and retention of staff It attracts green and ethical investment It attracts ethically conscious customers It can lead to a reduction in costs through re-cycling It differentiates the firm from its competitor and can be a source of competitive advantage

It can lead to increased profitability in the long run

Study case : Unilever Corporate Social Responsibility


1. The company Unilever's origins in the UK date back to 1885, when the Lever brothers launched Sunlight, the world's first packaged laundry soap. The product's success in the UK was quickly emulated globally, resulting in Lever Brothers acquiring many businesses worldwide. In 1930, Lever Brothers agreed to a merger of equals with the Netherlands-based Margarine Union to form Unilever, thus creating the present company Unilever is one the worlds largest multinational companies expanding their area of business to almost 180 countries. The company has employed 163,000 people at the end of year 2009 recruiting 90% of their workforce from the domestic market in which it is operating its business. It has taken the responsibility of fulfilling the needs of more than 2 billion people all around the people everyday. Unilever is a dual listed company consisteng of Unilever N.V in Rotterdam, Netherlands and Unilever PLC in London, united Kingdom. Both companies have the same directors and effectively operate as a single business. Unilevers main international competitors include: Neastle and Procter & Gamble Being a big multinational, its horizon of obligating the corporate social responsibility is much more than the ordinary small firms, because it is one of the biggest challenges of any multinational to maintain their social legitimacy. Nowadays, firms are not expected to focus partially on the social impacts but they have to operate as a premium member of the society by considering the scopes of ethical and moral behavior in their best possible manner. Corporate social responsibility (CSR) in Unilever encompasses a broad range of interactions with society. It means responsibly managing a multiplicity of relationships every day with employees, consumers, shareholders, suppliers, governments, local communities and many others in wider society. Our commitment to high standards of corporate behaviour is an integral part of our operating tradition. It is spelled out in our Code of Business Principles and is implicit in many of our business practices: agriculture, biodiversity, climate change, economic development, education, employee, health and nutrition and hygiene, environment, and water.

2. Unilevers Past Performance

In the late 19th century the businesses that would later become Unilever were among the most philanthropic of their time. They set up projects to improve the lot of their workers and created products with a positive social impact, making hygiene and personal care commonplace and improving nutrition through adding vitamins to foods that were already daily staples. Over the past 100 years, its founder had given worlds top most consumer brand and fulfilled the need of stakeholders as well. The new upgrades towards better improvement of the society and its stakeholders are in the norms of Unilever. They are neither concerned with their operations of businesses they conduct nor focusing on the idea of making and selling. The management and the executives of Unilever has performed their responsibility of corporate leadership in such manner that it becomes the worlds largest consumer products company ultimately acting in the best possible manner on behalf of its stakeholders. This company always takes it customers and society in its strategic concern of every business operation. Unilever has outstretched its business operations to more than 170 countries fulfilling the needs of 2 billion costumers on a daily basis. With such a huge product line, its customers demand the same affordability, quality, advertizing efforts etc. in all of its products. In 2004, Unilever product line was considered as the most affordable and flexible in most of the developing countries. Unilever has almost 19,000 strategic business partners worldwide according to the report of Maplecroft team (2004). Unilever has made a proper business code for its strategic partners that make them eligible to be the part of its 19% production. This code deals with the general principles with respect to the integrity of the business, the responsibilities relating to its employees, the ultimate consumer it serves and the environmental sustainability of its operations. The issues regarding with the society has always received a positive feedback from Unilever. In the past era Unilever had served more than more than 13,000 communities (Maplecroft, 2004). Unilever has analyzed the gravity of benefits that it can achieve by serving the society in the best possible way. More than 200 million people are being served directly by the communities run by Unilever.

3. The New Approach of Unilever The organization which are heavily investing in CSR activities as their strategic business operations are yielding greater competitive advantage over their competitors . Therefore, in 2009, Unilever modified its approach in achieving its ultimate vision by giving a considerable importance to reduce the impact of its operations in the environment, it is working with (Unilever, website). In 2008 Unilever developed a set of metrics for our four priority environmental impact areas across our value chain: greenhouse gas (GHG) emissions water waste sustainable sourcing.

These metrics are designed to measure the impacts of our products when used by consumers, such as grams of greenhouse gas per single usage occasion. It was a big challenge to sustain with commitment the organization has planned so far because this reduction starts from the production of goods to the consumption. The disposal of the product should be in designed in such manner that the overall impact on the environment is reduced. This can affect its turnover as well as profit margin ratio giving a kind of threat in the profits of shareholders. But the company took this challenge and made such balance that fulfill the needs of its customers as well and the stability of the stakeholders interest was also maintained. In order to accomplish this challenge Unilever took his own house of production and made its first start and became successful in improving eco-friendly environment of the factories, it owned. Over the past 15 years, they made it possible for their operations to work in the atmosphere which has low significant impact on the environment. The release of CO2 gas from energy was reduced to 41%, the consumption of water has gone down by 73% and the total waste became 23% per ton of the production as compared to the previous years of production.

But they do not stay with this much achievement, they are continuously working and planning to achieve their motto of reducing the impact more and more The operations were controlled in a significant manner that their impact was reduced considerably. The biggest challenge that came ahead was of its value chain network as the amount of emissions from its factories remained to small proportion. Raw material sourcing and consumer consumption of the products were the biggest impacts resulting from the products of Unilever. Being a food company two third of its raw material deal with the agricultural products. They made their ambition to buy these agricultural products from the sustainable sources, which resulted in Green Palm certificates by covering 15% volume of its oil products from sustainable sources. Similarly, they made their ambition to fetch the suppliers for their products which will cover the volume of 100% sustainable raw material, by 2015. As far as customers are concerned, they need to ponder on the impact generated by them as well. Unilever has recognized that the products they offer to their customers have the greatest impact on the environment. Example of its detergent use is enough to give the evidence of water and energy usage to the great extent. In this situation this organization cannot achieve its ultimate defined goal. Hence, it has taken steps to educate its customer regarding efficient usage of its product accompanied with resource efficient fashion. With a huge endeavor in its future, Unilever isnt hesitant to push their goals into actuality. According to a recent article by Environmental Leader, Unilever currently boasts the title of the single largest commercial purchaser of renewable power in Canada. Under its deal with Bullfrog Power, Unilever has purchased 59,000 MWh a year. In Ontario, Bullfrog Power derives its electricity from wind and hydro facilities that are certified as low impact under the EcoLogo program of government agency Environment Canada. This power will be used to support all of Unilevers Ontario offices and factories, which account for 90% of its operations in that country. Because of the large amount of power purchased, Bullfrog was pushed to create a new category at the top of its national ranking of Canadian green power purchasers, called the bullfrogpowered Green Index. The new category, dubbed Visionary, is for corporations purchasing 50,000 MWh or greater. Currently, Unilever is the only company in this category. According to

Greener Ideal, the amount of energy Unilever is purchasing is enough clean renewable energy to power 6,000 homes. 4. Future Commitments Unilever being a huge and one of the largest food companies are engaged with great number of commitments that it is hoping to achieve. The new approach and vision of Unilever is not enough to define its future goals with respect to society and environmental issues of achieving sustainability. Unilever has maintained its regular pace in setting higher goals with respect to society and environment. Unilever vision is to create a better future and their sustainable living plan commits us to three significant outcomes by 2020: To help more than one billion people take action to improve their health and well-being To halve the environmental footprint of the making and use of our products To source 100% of our agricultural raw materials sustainably.

In order to achieve its future goals with respect to society and its stakeholders Unilever has designed number of program through which it is achieving its vision and goals. There are number of programs on which Unilever is showing its progress and among them some include reaching of 100 million people to undergo Heart Age Test by the year 2020, guiding customers to use minimal amount of salt in their daily usage of products by reducing it to 5 g per day by 2015, and conducting regular reviews on the portfolio of its products that should meet the hygiene and nutrition requirement of its food products. Similarly, there are other commitments as well which indicates its defined social responsibility like reducing of CO2 from its manufacturing process by 25 % more by 2015, purchasing of all palm oil from sustainable sources and continuously reduction of waste production per ton obtained from its manufacturing processes.

Conclusion In a nutshell, we can say that Unilever being a biggest organization is fulfilling its need of customers and society in the parallel manner. Its past performance and present implications towards the corporate social responsibility is highlighting crystal clear snapshot of greater future implications. Unilevers stakeholders and their business concerns are in lined with its future development program with respect to society.

References Maplecroft. 2004. Company report review-Unilever Social and Environmental Reports 2004 http://www.maplecroft.com/pdf/Unilever2004.pdf (Assessed August 27, 2010) Unilever.2009.SustainableDevelopment Overview. http://www.unilever.com/images/sd_UnileverSDReport170310_amended_tcm13-212972.pdf Unilever. 2010. Engaging with stakeholders. http://www.unilever.com/sustainability/strategy/stakeholders/ (Assessed August 26, 2010) http://www.heritage.org/research/reports/2010/05/corporate-social-responsibility-standards-iso26000-bad-for-business http://ec.europa.eu/enterprise/policies/sustainable-business/corporate-social responsibility/competitiveness/index_en.htm

Appendix: Study Case1 : Brazil: Unilever & Walmart demonstrate sustainable living Unilever's sustainable house shows Wal-Mart customers how to live in an environmentally friendly way A house with a message Small changes in our living habits and shopping choices can have a huge impact on the environment and improve our lives. Unilever and Wal-Mart have launched an environmental awareness campaign in Brazil called 'Casa do Bem' (Sustainable House) to get this message across to consumers. As part of the campaign, sustainable show houses have been installed in the supermarket's Brazilian stores. Each sustainable house has four sections a garden, kitchen, laundry room and bathroom. Customers who step inside hear messages and tips on how to lead a more environmentally-friendly life. Visitors can also play interactive games to learn about recycling, natural resources and environmental conservation. The houses are built from recycled and environmentally-friendly materials. The wood is certified by the Brazilian Institute of Environment and Renewable Natural Resources (IBAMA). The furniture and floors are made from recycled tubes of toothpaste and the flowers from recycled mayonnaise containers. Water-based inks are used for painting and most of the fabrics including the guides uniforms are made from bamboo viscose. "The main objective is to show how much simple attitudes can contribute to the health of the planet and the quality of life of the consumers family," explains Adriana Muratore, Trade Category Management & Shopper Understanding Director Unilever Brazil. Working in partnership Wal-Mart is working to improve its sustainability credentials worldwide. It has selected Unilever as its lead partner in these efforts, citing our strong track record in sustainability as the main reason for this decision. The Casa do Bem campaign, which builds on the success of a similar initiative undertaken in Argentina in 2006, is one example of this partnership. It is the first part of a wider campaign designed to encourage sustainable living. As Juliana Nunes, Unilever Brazil's Corporate Affairs Director, explains: "This partnership between Unilever and Wal-Mart consolidates the concern both companies have for educating, engaging and sensitising their stakeholders to environmental issues". The campaign was launched to commemorate World Environment Day in June 2007 with a twoweek event at three Wal-Mart hypermarkets in So Paulo. The sustainable houses will roll out to eleven other stores throughout the country. Anyone who is unable to visit the selected stores can visit a virtual house online. Unilever plans to distribute more than 25 000 environmental

education booklets and 50 000 leaflets with sustainability tips during the first phase of the campaign

Case study2 : Brazil: Saving water in Latin America "Only take short showers and stop ironing your clothes or the lights will go out." Challenging factories to save water This was the message from the Brazilian government in 2001, urging its people to cut energy consumption by 20% or risk a total blackout. The lights had begun to flicker in Latin America's largest country, not because of oil shortages but because of drought. Brazil depends almost entirely on hydropower for its electricity. Crippling drought throughout the continent which continues today in many parts led to power shortages and blackouts. Unilever's top management in Latin America were determined that the company would play its part to relieve the drought-induced crisis. They issued this challenge to Unilever food factories in the region: "show me you can cut your water use by a million cubic metres in two years." Thats about 16.5% of their water consumption in 2002. Project Medusa This challenge marked the beginning of Project Medusa, which demonstrated that dramatic strides can be made by taking a number of small positive steps. Water is especially significant in making food products. At the Goinia factory, for example, fresh tomatoes are washed, skinned and cooked to make the popular Pomarola pasta sauces and Extrato Elefante tomato paste. Water is used to wash the fruit, clean the equipment and cool the machinery. In the past, the water evaporated during cooking was sent directly to the water treatment plant, but it is now used to wash equipment and for cooling. It was at Goinia, where Fabiano Vilela is the environment co-ordinator, that the two-year Medusa project was launched in 2003, with a meeting of managers from Unilevers operations worldwide to share examples of best practice. The examples were grouped into three areas: mindware training, awareness campaigns, posters, competitions and slogans; software operating procedures and job instructions; and hardware changes to equipment and recycling systems. The overriding emphasis was to get everyone in the factories involved. At the end, Project Medusa has achieved a reduction in total water consumption of 7.9% and a 14.7% reduction in the load per tonne of production.

Case Study3 : India: sustainable livelihoods

Amora

gherkins

support

A small gherkin can go a long way in India, especially when it's cultivated and sold sustainably. Unilever is supporting small-scale gherkin farmers by offering a secure income and improving farming methods while ensuring a constant supply for its Amora brand Small cucumber; big potential: "The farmer supplies the land, water and labour. We supply the seeds, fertilisers and pesticides so they can start growing gherkins for use in our products. We only charge them once they have received the money for their harvest," explains Ramesh Anadramiah, project manager for a programme that has brought significant environmental and economic benefits to farmers struggling to make a living in central and southern India.

Unilever offers the farmers a guaranteed price, fixed at the start of the season. This means they receive a secure income, while Unilever secures a supply of high-quality produce. In a good season, farmers can earn up to 40 000 rupees (approximately 560) profit per acre. "We pay the highest price," continues Ramesh. "But that is because we want the highest quality."

But it's not just livelihoods that are being improved, the environment is benefiting too. Encouraging better farming practices has cut fungicide use by 90% since the programme began and overall pesticide use has fallen 40%. Fewer inputs mean lower costs; yields, meanwhile, are up 60% since 1998. The use of drip irrigation rather than the traditional method of flooding the fields has also curbed water use. Educating farmers Unilever began working with its suppliers in India to improve gherkin farming practices following a decline in yields and quality in the late 1990s. In partnership with farmers, universities, agricultural organisations and colleagues from Unilever's Sustainable Agriculture Programme, Unilever and its seven suppliers developed an integrated pest management programme to cut pesticide use and promote sustainable agriculture techniques for gherkins. Farmers are encouraged to plant more resistant varieties of gherkins and use pesticides judiciously by only spraying when there is a high risk of infestation. Improved irrigation and delaying the growing season to avoid the monsoon has also helped to reduce fungal infections. Unilever and its suppliers have produced a straightforward guide on how to identify and control common pests without the use of pesticides. The guide includes photos and advice in local languages. Field demonstrations show farmers how to handle and store pesticides safely,

including how to use protective clothing. Bollywood-style films help convey the messages to illiterate farmers. Only pesticides approved by Unilever are permitted in the produce we purchase, and our suppliers employ trained field staff to monitor how they are used by farmers. Gherkin farming in India: Around 6 500 smallholders in the southern Indian states of Karnataka, Tamil Nadu and Andhra Pradesh have been growing gherkins for Unilever since the early 1990s. They produce around 8 000 tonnes of premium gherkins a year that are sold to our suppliers for use in Unilever brands such as Amora. The smallholders typically farm between a quarter and one acre of land. They also grow other vegetables including tomatoes, aubergines, beans and pulses for the local market and personal use