EXECUTIVE SUMMARY:

The sole aim of this report is to determine the role of corporate social responsibility (CSR) in business scenario. This report begins with the definition of corporate social responsibility which is then followed by a brief history of CSR and some advantages and concerns of CSR. Two examples of BP and The Body Shop which have adopted CSR are then discussed in detail. The purpose is to determine whether CSR plays an important role for a business. For this determination, SWOT is used to analyze the internal environment and PESTEL is used to analyze the external environment. Conclusion marks the end of the report.

INTRODUCTION TO CORPORATE SOCIAL RESPONSIBILITY (CSR):

According to Holme and Watts, corporate social responsibility is the commitment of any business organization to continuously act ethically while aiming at economic development. That is, to aim at profits and at the same time to improve the living conditions of its employees and the society at large (Holme and Watts, 2000, p. 23). According to Confederation of British Industry (CBI), corporate social responsibility is an umbrella of activities covering diverse issues like human resources, environment and waste management, health and safety practices and much more. It would be correct to conclude that CSR makes all business firms accountable not only financially but socially and environmentally as well (www.cbi.org.uk).

HISTORY OF CSR:
Historically the main responsibility of business all over the world has been to make profits for its shareholders. But this role has changed over the past two decades. The role of business responsibility is now very broad and consists of responsibility for the environment, human kind, working environment and for ethical practices. CSR is often known as corporate triple bottom line, that is, the companys financial, social and environmental working. CSR consists of responsibilities towards people and planet. People consist of employees, suppliers, vendors, the Government, and community. Now these people are becoming more interested in the betterment of society and environment (Chandler, 2001).

Corporate social responsibility is simply not writing a cheque of a huge amount every few months nor is it doing voluntary work during vacations (www.news.bbc.co.uk). It is achieving positive economic results and at the same time taking ethical steps. For example, Gallaher is the worlds fifth largest cigarette maker and smoking is injurious to health. But this does not mean that Gallaher is involved in unethical actions and does not adhere to Corporate Social Responsibility. Gallaher has a policy of not buying tobacco from any developing country which uses child labour. From the above example, it can be clearly seen that CSR is a need for the society today. All business firms must adhere to CSR in order to survive and make profits (www.news.bbc.co.uk). There was an energy company based in Texas, USA in the 1990s which contributed billions to the society and regularly collected awards for this action. People began to perceive this company as one which adopts CSR and hence its reputation grew. But the business collapsed in 2001 after its CEO was found guilty of cheating its shareholders. This energy giant is known as ENRON. Hence it can also be concluded that not every company follows CSR as it must be, that is, their motives for adopting CSR are dark and mysterious (www.news.bbc.co.uk).

ADVANTAGES OF CORPORATE SOCIAL RESPONSIBILITY:

The benefit of CSR to an organization depends on the nature of business. In a research carried out by Orlitzky, Schmidt and Rynes, it was concluded that there is a positive correlation between social/environmental performance and financial performance (Orlitzky, Schmidt and Rynes, 2003, p. 403). Some of the possible advantages of CSR are discussed below: Human Resources: In the recent years awareness about CSR has risen. It has been noted that in interviews, the interviewees ask questions regarding the companys CSR. Skill labour is a valuable source and must be attracted by adopting CSR. Moreover, the policy of CSR of a company helps the company in retaining its staff which could aid in activities like fundraising. CSR also helps change the perception of the company in the mind of the working staff.

Risk Management: It takes time to build up reputation but it can be destroyed in seconds by incidents like environmental accidents like in the case of BP or by corruption scandals like in the case of ENRON. Incidents like these may draw unnecessary attention from agencies like Government, auditors and media, thereby reducing net worth of the company. Adopting the policy of CSR helps avoid such risks. Brand Differentiation: In a highly competitive business environment, in order to survive it becomes very important for any business to differentiate itself so that customers memory is filled with images of their brand name. CSR helps build in customer loyalty. Some brands which have adopted CSR are Wipro, The body shop, Kraft Foods and Vodafone. License to work: Business firms avoid stringent regulations and taxes by adopting CSR. Firms persuade governments and general public by taking voluntary action, that is, by acknowledging the importance of health of employees, by giving out huge sums of donations or charity and by reducing the damage done to the environment.

CONCERNS OR DISADVANTAGES OF CORPORATE SOCIAL RESPONSIBILITY: Some of the concerns by critics for CSR or disadvantages of
CSR are discussed below. Nature: Milton Friedman states that the only responsibility of a business organization is to use its resources to the maximum, engaging in lawful activities resulting in profits. Some people believe that social responsibility is the duty of other agencies like the Government and not of business companies. It is believed that if CSR is adopted then profit cannot be aim of business and this fact in itself is against the base of any business (Boddy, 2008, p. 156). Also, if a business invests in socially responsible but unprofitable projects then it would prove harmful to the business concern in the long run (Pettinger, 2002). Motives: Some critics of CSR believe that most business organizations undertake the policy of adopting CSR so as to avoid answering other ethical questions. For example, it is widely believed that McDonalds, BP and British American Tobacco invest in expensive advertising on environmental concern so as to avoid answering other ethical questions like the fat content in burgers served by McDonalds to

children which may cause several health problems. Recently accidents in BP caused huge environment damage. This was a case of negligence of safety and hence an ethical issue. Critics argue that BP spread awareness of environmental problems through expensive advertisements so as to gain public and government support, thereby fooling them. One more example is that of shell which had a high profile CSR policy but in the year 2004 was reported in scandal of misreporting details of its oil reserves. Ethical consumerism: With the rise of popularity of CSR, there has been an increase in the popularity of ethical consumerism. That is, consumers think about the environment and other related issues before buying a product. For example, consumers nowadays have become conscious about animal testing and avoid any product which does so. Also there are a number of Non Governmental organizations (NGOs) like People for the Ethical Treatment of Animals (PETA) which spread awareness about animal killing, thereby decreasing demands of animal products. But although ethical consumerism has risen, it is not a practice followed the world over. Globalization: Due to globalization, businesses nowadays are faced with challenges like regulations from the Government, environmentalists and different labour unions. Critics believe that in order to gain public support and face lesser scrutiny from the Government agencies, business corporations adopt the policy of CSR. Ethics training: Humans are built in with the capacity to cheat and manipulate situation so as to benefit themselves in the long term. But if such an employee is caught then it not only affects him but also the company in which he is employed. The companys reputation is tarred and many times heavy fines or restrictions are imposed on them. Hence critics of CSR believe that by providing training on ethics, such consequences may be avoided. Hence CSR becomes a necessity rather than being obligatory. Giants like Best Buy and heavy machine seller like Caterpillar are already into ethics training since years. Crisis and its results: Sometimes it takes some kind of crisis for a company to see the importance of CSR. History has seen a number of accidents happening and the company having to close down its working forever. Incidents like that of toy giant Mattel in which lead poisoning paint used in toys required a call back of millions of

toys internationally. This harmed its reputation and had huge cost and legal implications on it. The company had to then assort to risk and quality management. Hence it can be concluded that crisis forces a business organization in to CSR.

IMPLEMENTATION OF CORPORATE SOCIAL RESPONSIBILITY IN BRITISH PETROLEUM (BP) (USING PESTEL):

PESTEL analysis is a tool which helps an organization to detect any signals of danger in the external environment. The external environment is responsible for competition in the market (Henry, 2008, p. 51). If a company carries out PESTEL analysis then it may be successful in answering most important questions relating to external environment. It includes the political, economic, social, legal and technological aspects. British Petroleum (BP) is an energy giant producing bio fuels, petrol, LPG, solar power, Asphalt, petrochemicals, lubricants and various other products. It has invested more than $80 billion in various projects spread across the world. Some of its famous brands are Castrol, am pm, ARAL and Arco. It was criticized recently in 2010 because of oil spill in the Gulf of Mexico (www.bp.com). This report carries out a PESTEL analysis on BP and then links it with corporate social responsibility. Political: The latest oil spill in the Gulf of Mexico resulted in 11 human deaths, extensive loss to marine and wildlife. It also affected the fishing and tourism industry. US Government put pressure on BP by starting several investigations from various departments. Such investigations made BP to set up internal investigation and compensate people and communities. Hence acting ethically and adopting CSR. Economical: The oil spill incident of 2010 made the share price go down to the years lowest and also degraded its reputation. Because of these two reasons, BP suffered huge economic losses. BP in order to recover from financial loss and the loss of reputation took steps like responding to claims swiftly and by setting up safety management departments, thereby adopting CSR. Social: The Gulf of Mexico incidence affected the lifestyles of many people. The human deaths were 11 in number but the loss to their families was huge. Moreover

the decrease in share price affected many shareholders. The tourism industry also suffered immensely. Looking at the reports which suggested that the oil spill had taken place because of cuts in expenses and because of carelessness, BPs reputation suffered. To improve all this, it went to the society to help. It came out with plans to help restore the lives of those affected by supporting rig workers, compensating those affected and also compensating Government and other agencies and lastly set up a trust. By taking all these steps BP adopted CSR after a grave incident occurred. Legal: It set up $20 billion for claims. It is paying all its claimants and it has also cleared all fines imposed on it. Thus by abiding to law, BP has successfully incorporated the policy of CSR.

IMPLEMENTATION OF CSR IN THE BODY SHOP (USING SWOT):

SWOT Analysis is used to analyze the internal environment of a business firm. SWOT signifies strengths, weaknesses, opportunities and threats. While the former two, strengths and weaknesses are internal, the latter, opportunities and threats are external. If any organization carries out SWOT analysis then it would help them identify future problems which can be solved by taking proactive steps. It is always better to be proactive rather than being reactive to a grave situation (Henry, 2008, p. 61). Anita Roddick was the founder of The Body Shop. It was started to demonstrate that ethical behaviour could exist with a profitable business empire (Boddy, 2008, p. 160). In the year 1991, Roddick claimed that all decisions in her company are undertaken by considering the impact on society and environment. She also stated that her company had a separate Environment Projects Department. This section of the report carries out an SWOT analysis so as to study the internal environment of The Body Shop and then links it with corporate social responsibility. Strengths: Animal testing not done: It is the original natural and ethical brand. It has over 2500 stores the world over. One of its strengths is that it is against animal testing. Not even one of its beauty products is tested on animals. It has

the reputation of being the first company to be recognized by Humane Cosmetics standards. Policy of fair trade: Over the period of 20 years, this company has always indulged in fair trade, thereby providing 25,000 people work which enables them to earn a dignified livelihood. Charitable trust: It has built up the reputation of doing philanthropic work over the number of years. It has set up its own trust in the year 1990. By carrying out such work as stated above, The Body Shop has adhered to corporate social responsibility from its inception. Weaknesses: Since The Body Shop is against animal testing, it has a limited number of products which are not sufficient to satisfy the varying needs of the customers. Moreover it is still a small company as compared to other beauty companies started at the same time. After the death of its founder, Anita Roddick, there was no international celebrity face so as to fill in the gap. This affected the reputation and decreased its popularity in the long term. Opportunities: The Body Shop has products which fall in the category of bath and body, fragrance, gifts hair, makeup and facial skin care. It can increase the number of products in each category. It can offer or open franchises all over the world. The number of people having money to invest in profitable projects is huge. The Body Shop can allow such people to open business in their name, thereby charging a good amount. This would also increase their market size. One more unique characteristics of The Body Shop is that it takes a strong position on animal testing and working ethically. This can be taken advantage of by going in to the Asian continent. For example, it could enter the huge market of India where most people are vegetarian and would be against the policy of animal testing. Threats: After the demise of its founder, Anita Roddick, the working of The Body Shop became limited to just beauty products. There were no new strategies formulated so as to increase profits. The amount of charity work also decreased, thereby affecting its reputation. It divulged from the path of corporate social responsibility and was eventually taken over by a French beauty company named LOreal.

CONCLUSION:
In this report, PESTEL was carried out on British Petroleum so as to assess external environment. It can be rightly concluded from this analysis that BP took up to corporate social responsibility after the incident of oil spill in the Gulf of Mexico so as to improve its reputation. For the analysis of The Body Shop, SWOT analysis was carried out. It analyzed the internal environment of The Body Shop. It can be concluded from this analysis that The body Shop incorporated the principles of corporate social responsibility from the very commencement of its business by Anita Roddick. But still it was acquired by a French company known as LOreal. Thus adhering to corporate social responsibility is not a guarantee to long term viability of any project. From the examples of British Petroleum and The Body Shop it can be said that CSR is an enigma in the real sense which can be solved easily if the motives are not bad.

REFERENCES:
Boddy, D. (2008) Management an Introduction. England: Pearson Education Limited. Charles, H., Schmidheiny, S. and Watts, P. (2002) Walking the business case for sustainable development The Talk. Sheffield: Greenleaf Publishing Limited. Chandler, G. (2001) Defining Corporate Social Responsibility. Ethical performance best practice, Fall 2001. Henry, A. (2008) Understanding Strategic Management. New York: Oxford University Press Inc. Mitchell, J. (1998) Companies in a world of conflicts: NGOs, sanctions and corporate. Great Britain: Earthscan Publication. Chapter 1 by Philip Watts. Orlitzky, M., Schmidt, F. and Rynes, S. (2003) Organizational Studies. London: SAGE Publications. Pettinger, R. (2002) Introduction to Management. New York: Palgrave Publishers Ltd.

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