Corporate Social Responsibility - Unit 4

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Corporate social responsibility is the continuing commitment by a firm to act ethically and take responsibility for the company’s actions on the environment and the local community. Social auditing is the process of evaluating a firm’s various operating procedures, codes of conduct, and other factors to determine its effect on society.

There are many benefits of CSR to a business. Firstly, a company may become more trusted by the public if they are seen to be helping the environment and operating in a way that benefits the community. One such business, which operates like this, is The Body Shop. Anita Roddick, who was strongly against vivisection, set up a business doing something that she liked. Quickly, The Body Shop exhibiting increasing popularity, due to the amount of environmental awareness that has evolved throughout the world. As such, The Body Shop has seen a £66.6million operating profit in the last quarter of 2012, which is up 9.1% on that of the year before. This just goes to show that, if a business operates ethically, then it could attract more and more appeal from consumers, which therefore generates more revenue for the firm, as well as the fact that, the increased demand may mean that the organisation could gain Economies of Scale – where unit costs decrease as the business grows larger- this may mean that higher profit margins can be made. Another business which became more trusted by focusing on CSR is Innocent Smoothies. Innocent Smoothies are sold in a variety of flavours, and each bottle contains 2 of the ‘5 a day’ allowance, meaning that they are healthy. Innocent Smoothies first began to be sold at festivals, however, when Reed, Balon and Wright began to notice the demand for the product (and on public vote), they created the Innocent Brand. Innocent Smoothies saw an increase in turnover by 25.4% to £162.7million during the last period of 2011, while selling over 25 million units. As such, this has given Innocent Smoothies more profit in order to invest into other things, as well as into The Innocent Funds, in which 10% of profits go. As such, consumer confidence in the Innocent Brand has increased, which has been seen in the considerable increase in both revenue and the amount of units that were sold. This therefore enables Innocent Smoothies to become more of a reputable brand, and continue to grow in both volume and value in the future. Ethics are the moral principles that govern an organisation’s behaviour. By engaging in ethical behaviour, it means that a business could gain a better reputation in the long run, which therefore means that sales should increase, resulting in increased sales revenue and a potential increase in profits. One example of an organisation, which acts ethically, is Fair Trade; who provide goods to consumers, where the producers have been paid a fair wage. Due to the ethically sound brand name, Fair Trade is able to charge premium prices for their products, which meant that, along with the fact that the rate of sales increased by 80% from 2009 to 2010, the total revenue earned by Fair Trade in 2010 was £490 million, which increased from £273 million in 2009. Due to the dramatic increase in revenue, this has enable Fair Trade to put more money into the Fair Trade Foundation, which therefore means that, in the future, more people may be attracting to the ‘farmer friendly’ brand, further increasing both profits, revenue and the already sound brand name. However, there are instances where businesses where the ethical behaviour of a business goes wrong. In these instances, reputation is damaged quickly, which leads to a decrease in consumer trust, which results in a decrease in revenue, and therefore profits, as well as the task of getting the business back to where it was before everything went wrong. One such business is Starbucks. For year, Starbucks had been renowned for being an ethically sound business, however, in 2012; it was found out that Starbucks had been part of...
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