Analysis Of Tescos Corporate Social Responsibility Management Essay

Corporate Social Responsibility (CSR) is an important societal issue that also gains momentum in the food retail industry (Tulder et al., 2007). In an approach to analyze the CSR activities, this report presents the CSR activities of Tesco, which is one of the leading retailers. Further this report analyses the market and non market environment, which explains the internal and external alignment as important factors to understand the design and the development of the companies CSR activities and motivations.

The CSR business models in the retail industry are inclined towards the management of the supply chains. These models tell the firms what to do or how to do in general, to respond to the challenges and changes in the retail industry, but do not provide sophisticated analytical models to analyze the actual position of the company and delineate the trajectories to change positions. (Tulder et al., 2007)

‘CSR’ – ‘Corporate Social Responsibility’ is considered to be the future of all organizations in general and the retail industry in specific. However the firms have to be more active on the categorization of ‘CSR’ activities and on how the consistent implementation in the retail organization and in their distribution channels could be obtained. (Tulder et al., 2007)

Tesco plc is world’s third largest, British international grocery and general merchandising retail chain with operations in 14 countries. It is the largest British retailer by both global sales and domestic market share, with profits exceeding £3 billion, and the third largest global retailer based on revenue, behind Wal-Mart and Carrefour. They cater for all sections of the market, with ranges spanning from premium ranges, as well as specialist ranges such as Organic, Fairtrade and Healthy Living. They are also into Non-food ranges accounted for 21% of Group turnover in 2008 and include electrical goods, books, home-ware, sports equipment, personal finance and clothing. (Tesco, 2009)

“We understand that our success comes from behaving responsibly and earning the trust of our customers, suppliers and stakeholders. There are many complex issues that we have to face on a daily basis, from reducing our environmental impact to ensuring consistent standards across our markets.” (Tesco, 2009). Corporate responsibility represents an entire approach to business and is therefore embodied in Tesco’s governance framework to ensure that the company operates in a responsible and safe way.

In general corporate responsibility is embedded in the following categories:  

Tesco CSR Approach

Environment

Community

Supplier and Ethical Trading

Customers, choice & health

People

KPIs

Tesco CSR Activities

The above approach integrates corporate responsibility in Tesco’s day-to-day business activities by supporting fair trade and taking customers, staff, communities and suppliers into consideration, as well as the environment and society.

Education

Education is one of the key areas of Tesco’s activities including a partnership with “I CAN”, a charity that helps children with speech and language difficulties, or offering scholarships and establishing cultural community centres. A specific programme is the “Computers for Schools” programme aimed at schools. Tesco provides schools with computers and supports the use of new technologies in different countries (Tesco, 2007).

Charity

The Tesco Charity Trust was established in 1987 to support national and local communities making grants to charities within the UK (Tesco, 2007).

Tesco dedicates 1% of pre-tax profits to good causes and supports charities as well as staff fundraising. In addition the company’s supports the “Race for Life” fundraising event which focuses on cancer research and initiated the Tesco Charity of the Year (Tesco, 2007).

Every year Tesco chooses a community charity close to the heart of its staff and customers which becomes the main focus for staff fundraising and receives 20% top-up of the Tesco Charity Trust. For example the charity chosen for 2005 is “Age Concern”, an initiative concentrating on supporting older people in the UK by providing services such as day care and fulfilling information needs for topics such as care, money and finance, health, disabilities or neighbourhood issues (Tesco, 2007).

Environment

In terms of environmental protection Tesco has integrated its corporate responsibility in its environmental management including topics such as emissions, resources, waste & recycling and the company’s products. Among others the issues covered are organic food, animal welfare, green transport and travel and vehicle efficiency. Furthermore Tesco is also concerned with energy efficiency and water consumption as well as its environmental impact in terms of its operations and customers (Tesco, 2007).

“Wildlife choice” for example is an initiative requiring farmers to consider wildlife on their farms. They agree to improve operations and monitor their impact on farmland habitats providing habitats for wildlife such as a farm in the Midlands for example (Tesco, 2007). Tesco works closely with suppliers and farmers to protect wildlife.

Tesco Market and Non-Market Environment Analysis

In this report an approach to analyze the market and non market environments is done with the help of understanding and using various frame works like ‘An integrated framework (Baron, 1995 & 2005: 32)’. Also by understanding the non market environment:

” The 4Is”

Systematic Level

Organisational Level

Individual Level

An Analysis – a case analyzed by “Lets clean up fashion”

Issue related to living wages

Payment of living wages -workers being paid below living wage levels.

Tesco’s focus on primarily on productivity projects.

‘We believe that sustainable improvements to wages are most often delivered through improved productivity, up skilling workers and working to ensure our purchasing practices support our suppliers’ ability to invest in their workforce.’ (Tesco, CSR Report 2009)

It lists ‘specific wage and wage-related work’ under the following headings:

Ensuring we understand the scale and nature of the issue. Activities: Wage surveys and worker interviews in Bangladesh (Tesco, 2007).

Setting clear expectations.

Activities: Lobbying government in Bangladesh to improve minimum wages, MFA Forum (Tesco, 2007).

Supporting suppliers to improve productivity.

Activities: Lengthening lead times, producing seasonal items out of season to help suppliers plan production, rewarding ethical suppliers, expanding in-country ethical experts (Tesco, 2007).

Building long-term relationships to enable investment in workers. Activities: Consolidating the supplier base, offering business support to ‘A-list suppliers’ (Tesco, 2009).

Tesco accept that some minimum wage levels are unacceptably low and have conducted a wage survey with a supplier in Bangladesh (lets clean up fashion, 2009).

Tesco’s Plans on Living Wages

Its main focus for wages work is to continue with the ETI wages project.

This group has experienced some delays over the last year due to its focus on Bangladesh and that country’s political and industrial instability.’ However, it stated that, ‘useful work has been shared, including by us, in the areas of productivity, efficiency, worker engagement, work flow, and purchasing practices. Following the summer this group will re-convene to decide on how to move forward. Building on this work, we will review further initiatives of our own specifically in Bangladesh on productivity and wage improvements.’ (Tesco CSR Report, 2009)

In an analysis done by the ‘Lets Clean up fashion’,

“Tesco seem to have made little progress towards living wages. Surveys in Bangladesh, showing the ‘training grade’ for workers being manipulated by suppliers for extended periods of time, informed a small piece of work to improve wages but this merely brought pay packets up to the legal minimum standard and no more.

Tesco’s belief that productivity is the best route to living wages seems to have ousted a number of other options, such as support for freedom of association and a proper examination of pricing. Its focus on up skilling workers as a part of these improvements may be helpful for individual groups but doesn’t achieve an across the board rise in wages. It is also unclear how it plans to ensure more skilled and expensive workers are not replaced by new, lower paid, unskilled workers. Furthermore, Tesco makes no mention of any work to ensure worker involvement in any of its projects, which makes us even less convinced that its productivity plans are likely to lead to any real benefit to workers.

Tesco’s work with suppliers on purchasing practices; offering longer lead times, producing out of season, ensuring long-term supplier relationships, and offering business advice could bring about some improvement. Last year it also acknowledged that price needed to be examined, but no progress seems to have been made in this area and no mention was made of plans to move this forward.

Let’s hope Tesco’s engagement in the ETI Wages Project over the coming year will see it start to output wage projects of its own, and give serious attention to delivering the living wages expected from a retailer of this size and influence (lets cleanup fashion, 2009).

Tesco’s Position on Relationships with Customers

Tesco tries to keep its prices as low as possible than most of the other national superstores. Tesco has an online Price checker, to show its low prices to its customers, through which customers can compare Tesco’s prices with those of other super markets (CRR, 2006). Price, though, is not the only factor. Value for money, as Tesco describes, includes the quality of the products, the personal service of their staff and the pleasant surroundings in their stores (AR, 1995). ‘Tesco has become big by being like Britain. As Britons became more middle-class, Tesco followed them up market’ (Econ,2005).

Tesco’s Position on Suppliers

The retail sector has a high increasing purchasing power, which can be used to cut prices and put pressure on the suppliers (cf. Fearne et al., 2005). Since Tesco is one of the four major global retailers, It is said that suppliers fear to complain about Tesco as they ‘fear being struck off by the retailer’ (FT2005; FT2005). Tesco however mentions that it takes a partnership approach while working with suppliers, sharing their knowledge and listening to suppliers’ feedback, providing technical expertise, advice and insight into customer trends and making regular payment, on time (AR, 2007). Tesco monitors its relations with suppliers through the Supplier Viewpoint Survey. Their target is that 90% of UK suppliers view Tesco as being trustworthy, reliable, consistent, clear, helpful and fair (92% in 2008, 94% in 2007). In 2007 the international suppliers have started taking part in the Supplier Viewpoint Survey (88%) (AR, 2008). Tesco fully supports the legally binding Supplier Code of Practice. In March 2005, the Office of Fair Trading (OFT) audit found no breaches of the Supplier Code at Tesco (CRR, 2006) nor in 2006 (CRR, 2007). In 2005 rival companies and industry groups accused Tesco of slowing down the Office of Fair Trading’s investigation during its early stages. The OFT’s main concerns included claims that the supermarkets were slow to pay suppliers, required them to contribute to marketing costs and insisted on retrospectively changing contracts (FT, 2005). The investigation revealed that over the past five years, the amount owed to creditors by Tesco had risen by 1.5bn pounds, money it had used to help finance its growth (FT, 2005).

Motivations and collaborations

An attempt to analyze Tesco’s Motivations and its collaborations is done by using the following theories:

Strategy Theory

Stakeholder Theory

Agency Theory

Legitimacy Theory

An Analysis

Tesco is engaged in number of NGOs and charity organisations. Tesco was engaged with:

The Soil Association on extending the organic range

The Fairtrade Foundation to promote Fairtrade Fortnight and encourage more customers to choose Fairtrade

Diabetes UK on providing information for customers living with diabetes

The British Red Cross on responding to disasters and emergencies

Marine Conservation Society and Marine Stewardship Council on sustainable seafood sourcing

Greenpeace on sustainable sourcing and climate change

Friends of the Earth on palm oil, prawn sourcing and GM animal feed;

ActionAid and Women on Farms on labour standards in fruit farms in SouthAfrica. (CRR, 2006)

Tesco is a corporate partner of Forum for the Future and work together on a broad range of sustainability issues.

“we held a nationwide Community Conference in partnership with the British Red Cross and the Work Foundation. This brought together voluntary groups, charities, businesses and government to explore the role of business in local communities’ (CRR, 2008; CRR, 2007).

With regards to economic development, the 2005 ‘Make Poverty History’ campaign identified increased trade as one of three key means of eliminating poverty. Tesco sources products from farms in 15 African countries (CRR, 2006). Tesco actively supports communities trough sponsoring certain activities like the collaboration with Age Concern to raise £2 million for projects including ‘Fight the Freeze’ – buying blankets and heaters for the elderly; paying for volunteers

to regularly call the elderly to stop them feeling isolated, and raising money to pay for meals and provide company for the elderly (CRR, 2006). Tesco aims to give at least 1% of pre-tax profits to charity. In 2007 they succeeded with 1.95% (CRR, 2008) and in 2006 as well with 1.63% of pre-tax profits to charities and good causes (CRR, 2007). Tesco has also supported communities in crisis. In 2007, 250.000 pound was donated to people affected by extreme weather conditions.

Tesco is a founder member of the Ethical Trading Initiative (ETI) and expects all their suppliers to follow the ETI Base Code (CRR, 2006). The ETI Base Code includes among others freedom of association and the right to collective bargaining, no use of child labour and no excessive working hours (CRR, 2008)

Tesco has with four other global retailers formed the Global Social Compliance Programme to develop a code of practice. The GSCP has agreed a draft Reference Code between the 25 leading retailers and manufacturers currently involved. Next steps involve the development of an audit checklist to ensure the Code is interpreted consistently around the world (CRR, 2008). In 2005 Tesco appointed a Code Compliance Officer to act as a contact point for suppliers in case they have complaints and don’t want to discuss these with Tesco buyers (CRR, 2008). Tesco participates in multi-stakeholder groups on corporate responsibility issues like Business in The Community, The Ethical Trading Initiative, the Carbon Roundtable, GM Freeze Roundtable, Forest Stewardship Council Retailers Group, British Retail onsortium Corporate Responsibility Policy Advisory Group and the DEFRA Climate Leaders Group. The Executive Committee, Corporate Responsibility Committee and Compliance Committee are to help guide and monitor the set policies.

Conclusion

From the above discussions, it can be concluded that Tesco faces some severe in-coherence in its market and non market environments. On several issues such as environment the company has identified opportunities and taken many interesting (and active) initiatives, whereas in other instances the company behaves rather re-active. This corresponds with the in-coherent nature of its internal alignment strategy. The company is having difficulties with aligning some active intents, expressed through its KPIs with a re-active strategy (Tulder et al., 2007). Major challenge for Tesco, therefore, is how to create coherence through increased coordination and sustain the transition towards a more pro-active approach.

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