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Corporate social responsibility CSR plays an important part in business operation, society and environment protection.. Vietnam dairy products JSC Vinamilk company has the CSR campaign w

BOLTON BUSINESS SCHOOL

Faculty of Well being and Social Sciences

Module title: Contemporary Management Issues (CMI)

Assignment title: Corporate Social Responsibility essay (2500 words)

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date18/10/2012

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Corporate social responsibility (CSR) plays an important part in business operation, society and environment protection Thus, a developing country like Vietnam, its government has found out the important CSR’s role and has programs for CSR hosted by Vietnam Chamber of Commercial Industry (VCCI); especially, Ha (2012) the CSR award 2012 was celebrated in Hanoi with the purpose to improve the knowledge about CSR and encourage enterprises to do CSR as business strategy for sustainable growth Of the companies carrying out these programs, Vinamilk was considered the big success Vietnam dairy products JSC (Vinamilk) company has the CSR campaign with the title “12 billion VND for milk foundation Vietnam development” Post this campaign, Vinamilk became top well-known brand-name milk in Vietnam (Vinamilk annual report, 2010)

However, there are many critics about CSR’s characteristics by scholars For Critics, CSR is just a tool for public relation and window dressing And it is not CSR

Therefore, the following part of this essay will take a look closer for these arguments and the difficulties of translating CSR in Vietnam

Although the concept of CSR has been popular since 1950s’ in the last century, Bowen (1953) cited in Löber (2012) defined that there would be general social and economic benefits that would accumulate to society Besides, CSR is still defined by other views such as Elkington (1999) ,the triple bottom line (TBL) theory which mentions profit, people, planet For him, CSR is business ethics in practice because

it requires company to take responsibility for not only economic but also the society and environment because it is core value for consistence development and long term profit Moreover, TBL has been used as a measurement to evaluate CSR

achievements earned from companies According to Schwartz and Carroll (2003), economic, ethic, legal are the most common factors of CSR (Carroll, 1999);Hart ( 1995) claimed that when company put its profit behind social’s interest, it will become a good citizen in society Also, Holme and Watts (2000); McWilliams and Siegel (2001), agreed that Company should focus on financial status and stakeholders’ value Michael Hopkins (1998), CSR is concerned with treating the stakeholders of the firm ethically or in a socially responsible manner Winston (2012), because company can make a lot of money in business, they should share the moral responsibility as well

Nevertheless, Friedman (1970) had different views, he stated that there is always the conflicts between CSR`s projects and companies’ finance As the nature of business

is to maximize profit, the opposite ideas claim that CSR is stable growth and long run business strategy Anyway, its final purpose still aims to profit Gallagher (2005) agreed with Fiedman’s points that company is only responsible for its shareholder not to society And all under circumstances, shareholder’s wealth is always the top mission of firm’s operation

Also, McGuire et al (1988) pointed that for companies engaging in CSR expenditure, they get economic disadvantages compared to the firms less responsible for CSR When CSR is invested, it could take a huge cost; thereby it’s against shareholder’s benefits

In the aspect of profit from TBL theory, CSR brings the potential benefits by operating perspective such as reducing cost, recycling products For example, General Mills (GM) is one of the large food production companies in USA, it has program reduction of energy usage by 20% to 2015 after installing energy monitoring meters on its equipment at Covington, Ga.plant, and GM saved estimated $2.5mil in

2011 (General Mills environmental sustainability, 2011) With the savings cost, it could be used to re-invest or keep reserving account to prevent abnormal situations Furthermore, CSR is adopted as competitive advantage tool when the other competitors are influenced by factors or scandals; for instance, economic downturn, unhealthy products or harmful environment activities etc In particular, General Electric, an electricity company, has released fluorescent light bulbs which are friendly environment and consume less energy in comparison with normal bulbs (GE EcoMagination report, 2005) these products brought for GE $10.1 billion earning before tax This shows that for a company whose products and services are preferred than others already has good CSR

Moreover, Company applying CSR well often takes the initiative in innovative products which create brand differentiation among the competitors since the differentiation will make unique and special position in customer’s mind as well as the customer loyalty, trust in products and services

Hart (1995) said company should strive to minimize the environmental impact and

product stewardship Namely, Toyota automobile firm Ohnsman&Hagiwara (2012),

has invented type of cars called Prius that can both reduce 10% air pollution and consume less gas Consequently, these cars made by Toyota take cutting edge over others and get global top 03 sales

In addition to, corporates which have a good application of CSR can avoid the potential risks or minimize them by communicating the code of conduct, ethics in business as well as building up the culture “doing the right things” among staff Worldcom telecom is a case study of poor corporate governance Worldcom did fraudulent bookkeeping and its profit had been inflated by $3.8bn.; as a result, 17000

employees lost their jobs (BBC ,2002) That‘s reason why company needs good risk management to prevent such these similar things happening

On the other hand, firm has consolidated or protected its image, brand name and reputation since they’re the most valuable intangible asset “Corporate image is a result of everything a company does or does not do” (Smith & Taylor, 2002)

A well-established CSR company can survive and stand longer than others without engaging CSR in both normal economic as well as the crisis time

In the point of view about human, if company has a good well-known brand name, it will attract and retain the talented staff and qualified workers As a result, staff’s turn over and training cost are reduced, besides the company which has good working condition and policy will not only motivate moral also improve working performance ,output and loyalty

(Smith, 2003) companies which has good CSR manner are preferred by employees Base on survey conducted in 2007 (Scotiabank, 2007), if companies did not engage social responsibility seriously, their staff would speculate on quitting jobs The result took from 70% respondent in Canada

In addition, CSR is used as a norm method about human rights to protect labor in developing countries from multinational companies where the law for protecting labors is poor Kenyon (2000) Nike footwear company shoes is a good example for sweatshop; it hires child labors and let them work in poor working condition in Cambodia, which is discovered by Panorama team; consequently, Nike faced the criticism for those actions After that Nike issued first CSR report (CSR wire, 2001) about the labor rights and working condition Nike tried to recovered image and

reputation; however, its goodwill is already damaged in the public eyes

Another view about planet is that CSR makes firms more perceptive of habitat protection and its importance Companies such as General Mills and General Electricity know how to combine product and environment, and all of their products are environmentally friendly and emits less pollution to the air; consequently, they get both profit and reputation It’s win-win situation

However, Apple is another story for making maximize profit without engaging CSR This case study supported Friedman‘s argument

Duhigg & Kocieniewski (2012) Apple Inc , a computer company, took billions of profit offshore in Ireland, Netherland and China by tax evade Instead of operating in USA where Apple has to care much about higher wage, working condition and code of conduct obligations, it contracts supply chains in developing countries where it benefit greatly from low tax and fewer law protection to save cost, expense and increase profit Gewizt (2012), from Peter Oppenheimer CFO, $64bilions Apple’s income was offshore

Karnani (2012) said that some companies do not take responsibility for public`s interest still get profit This is fundamentally flawed For example, Blanchard (2012), Foxconn factory where most of Apple’s products were assembled, had three workers who died in a blast last year when polishing iPads ignited, and 18 workers committed suicide in 2010

After those scandals, Blodget (2012) workers still want to work there, because they need money even the harsh working condition Apple doesn’t have social responsibility and ethics in business, but it still attracts employees and keeps people buying its products Lynley (2012) Apple has been one of five best tech companies to

work for On the other words, CSR is used as public relation, a green-wash method

to polish company’s image and cover up the negative information

Duke energy is another story about applying CSR as a fashionable mantle Duke Energy is the company considered to have a profound effect on achieving a sustainable energy revolution, renewable-energy, and its top management is commitment to greenness and sustainability Despite kind words about environment protection, Duke is one of the US utilities still building coal-fired power plants which emit the great amount of pollution to the air (Greenwash+20, 2012)

In case, CEOs who use firm’s revenue to support the social activities will be considered as thieves since it is the shareholder’s wealth and asset of organizations not private property Since executives are hired by the shareholders, their top priority duty is to aim to owners and shareholders’ benefit Actually, the managers want to show their social responsibility, but it just looks like they’re imposing tax to shareholders and forcing company to follow the decisions they make So it will be better if they spend their own money while participating in CSR

Karnani (2012) said that government‘s major role is to take responsibility for the public and observe firms’ activities much better than any CSR campaigns Because once government is corrupted, nothing will be protected such as money laundry, human rights violation and air, water pollution In this situation, CSR is just theory itself

In the context of Vietnam, Post “Doi Moi” 1986, Vietnam has opened door policies and achieved the economic growth in two past decades and became WTO’s member

in 2007 (WTO, 2007).However, there are still many social issues remained such as the gap between wealth and poverty, corruption, and pollution In order to address

those problems, the government has committed to stable growth and the environment protection; As a result, Vietnam Agenda 21 was issued On the other hand, government strongly encouraged firms to join to protect environment, improve labor condition and safety workplace (Ministry of planning and investment, 2008)

Despite the positive government actions, there are still many challenges and difficulties in implementing CSR.Firstly, government has less law enforcement to ensure firms to do right things as well as their cooperation (NREN ,2009) Thi Vai river was polluted by VeDan Company was taken as a good example for lacking of watchdog groups and local corruption

Dien (2010) At that time, there was a huge boycott for claiming compensation due to poisoned river and destroyed habitat The government forced Vedan to make up for the lost they caused; however Veda still postponed paying damaged to resident

Secondly, the main reason companies do not implement CSR is that they don’t understand its meaning as well as its key role to company’s growth

One-third of 400 companies 39.8% have no idea about the CSR, the other one-third have little bit knowledge and just 10% know about it Less than one-fifths of them were certified with ISO9000 while the company certified with SA8000 or ISO14000 made up 10% (Baseline survey report, 2010)

Moreover the Vietnamese stakeholder’s awareness about CSR is quite poor Only Service and Export enterprises such as leather and footwear, garment and textile carry out CSR seriously because of high requirement from foreign partners (Baseline survey report, 2010)

Thirdly, Kim (2011) 98% companies are small and medium sized (SMEs) in Vietnam; and Tuoitre (2012) 53000 SMEs go bankrupt in H1/2012 due to capital shortage,

inventory products and high interest rate Actually, surviving, improving financial performance, paying debt and entering into the market are their top goals because of economic downturn in recent years Hence, CSR implementation is not their big concern anymore

Whereas, thanks to CSR, there also some companies overcoming obstacles mentioned above

For instant, Vietnam Dairy Products JSC (Vinamilk) revenue reached $1billion in 2011; according to Ms Lien chairwoman, Vinamilk keeps focusing on employees, corporate governance and maximizing profit by cost savings in 2012 (Vinamilk annual report, 2011) Vinamilk becomes one of the top brand milks in Vietnam This success showed that if doing well its bottom line, it will bring out intangible benefit that’s able to support and boot company’s performance to get over the difficult time and achieve sustainable growth

However, price of products is still the basic factor for customer when making decision

on purchasing Pham (2011) survey, 69% of respondents still buy products from immoral companies and 70% are unwilling to pay higher for goods/services from CSR companies Thus, CSR knowledge and perception should be informed commonly to people When the customer benefit from CSR products, the demand for them will be increasing; as a result, companies will be aware of adopting it in practice,

“Who is not starting to think about CSR in time will miss an opportunity or even loose his business” (Florian Beranek, 2010) Therefore, CSR should be done step by step because if the firms get the outcome, it will motivate them to proceed next step

Government not only strengthens the law and regulation but also creates more watchdog groups and NGOs to inspect companies’ activities On the other hand, government has policy to encourage enterprises to implement social responsibility such as imposing low tax, subsidiary products

In conclusion, CSR improves corporate`s long term profitability, reduces risks management and inefficiency, builds up the company’s image, reputation and attracts perspective and good employees to organization It helps to create competitive advantage, make company have more innovation in its products and establish brand differentiation in the customer’s mind and loyalty However, CSR is supposed a green wash, type of marketing strategy to deliver brand recognition and public relation

On the other hand, CSR can violate profit and make the conflicts between shareholders’ wealth and stakeholder Government’s role for protecting society and environment is still the most important In fact, the real CSR doesn’t have purposes and fraud actions

In Vietnam, the code of conduct is less strict in spite of having positive actions from state There is lacking of understanding and being aware of CSR well as well as capital, technology from small and medium enterprises

Recommendation, this essay reviews the CSR`s importance, its negative impacts on global business, and the difficulties of adopting it in Vietnam where CSR concept is quite new and hard to understand

This essay has some limitations because it only focuses on some aspects of CSR, which is considered key points and major topic for arguments in the real world Some