Understanding Corporate social responsibility and its effects

Understanding Corporate social responsibility and its effects What is the Corporate Social Responsibility? business encompass the economic, legal ethical and discretionary expectations that society has of organisation at given point in time. [Carroll A B 1979 (497-505) a three dimensional conceptual model of corporate performance; a academy of management review]  ²societal expectation of corporate behaviour, a behaviour that is alleged by a stakeholder to be expected by society or morally required and is therefore justifiably demand of a business ². [ Whetten D.A.Rands, G. Godfrey P {2002} what are the responsibility of business to society]. To be a socially responsible corporation, a company must be more than legal and ethical person also. CSR is not always a legal necessity; increasingly it is an obligation. However a company has to be socially responsible even though it is not a legal obligation The corporate behaviour pyramid: [Aras G Crowther D (2008); The social obligation of corporation; Journal of Knowledge Globalisation1 (1), 43-59] The shareholder view: The social responsibility of a business is to make profit. (Friedman) The justification for this are: Pursuing profit will result in increase employment, generate economic growth, stimulate innovation, increase the tax take and generally raise living standards. Making profit is therefore itself a public good and is a sufficient purpose of business. Directors should be acting on behalf of shareholders. CSR too often means that directors are being charitable with other people money. Shareholders are free to use their dividends to contribute towards CSR if they wish. Business is not competent to deicide moral and ethical matters. Where is the domestic connection between what a business decides to spend money and efforts on and where that money and efforts are actually needed or wanted by society? Are CSR projects chosen simply because they are areas where directors, or their spouses, are personally interested? (ACCA study text-Business Analysis) The longer-term self-interest view: It is in the long-term economic self-interest of business to act in a reasonably responsible manner. (Drucker) Failure to do so will prompt legislation. Failure to do so will damage the business and even the industry. The public relations and enhancement of reputation arising from CSR will increase profit in the long term. CSR is therefore seen and justified as expenditure that helps to generate long term profits. (ACCA study text-Business Analysis) The stakeholder view: This view assumes that shareholders are simply one stakeholder among many, and that their interests are not necessarily paramount. There may be circumstances where shareholder interest has to be sacrificed for the greater good of other stakeholders. Quite how it is decided which stakeholders deserve generosity at any particular time is not clear. There is a danger that the stakeholders that benefit are those with most power which is not necessarily the same as the stakeholders who might deserve attention. (ACCA study text-Business Analysis) Workplace: The British Airways develop to supply a working environment that motivates, engages, supports and develops their colleagues. The intend of airline workplace is to encourage their colleagues to be committed to corporate responsibility and all colleagues onboard one destination. The airline is trying to work with new way. The airline aspiration to be the best is by safety of the people and functioning excellence with culture values. Equality and Diversity: Legislation, voluntary codes of practice and equality initiatives have resulted in some progress towards equality of treatment for minority groups at work, but there remains inescapable evidence of continuing discrimination. More recent approaches under the banner of management of diversity include the economic and business case for equality, the valuing and managing of diversity in organisations, culture change and mainstreaming of equality initiatives. (Torrington, Hall and Taylor, 2005 p.529) The British Airways is committed equal opportunity. Their policies aims to that no job applicant or employee receives less favorable treatment on the basis of their age, sex, creed, disability, full or part time status, nationality, or ethnic origin, race, religion or sexual orientation. Dignity and respect is at the hub of British airways diversity initiatives, focusing on the relationship between colleagues and customer, irrespective of their background, religion or culture. The airline ran a diversity week, holding a series of events to raise awareness of differences to help create a more positive and productive work environment. (International Air Transport Association (IATA) Airline employees 2008. City Business Library London) (http://www.iata.org/membership/airline_members_list?All=true) Employee retirement age: It is unlawful for an employer to discriminate against someone on the grounds of age, i.e. against someone of a particular age or someone in any age band. The age discrimination legislation provides for a default retirement age of 65. Compulsory retirement ages below 65 are unlawful unless objectively justified. In addition, employees have the right to request to work beyond that age. Employers have a duty to consider such requests. (www.businesslink.gov.uk) The airline make an effort to fulfill new Age Decimation Act, The airline were operating crew and pilot retire age 55 but now are 60 and in future it will be exceed to 65. Training programmes: The airline deliver 211 to 215 days of training during the year, including 4,500 training days to cabin crew to enable them to deliver the very highest level of services to our customer travelling in premium cabin and 2,248 days to ground staff. Online mandatory training course for all colleagues was introduced this year. The premium services training programme allows approximately 11,000 cabin crew to receive expert training on services and the food and beverages offered on First, Club World and Club Europe. Development programmes: Strategy of airline is to develop workplace at level which leads the business through on current challenging operating environment. High Performance Leadership (HLP) is embedding a high performance culture amongst airline leader. The leadership capabilities that are needed to lead the business were defined and communicated and individuals performance against measured during the year. The capabilities are communicating a common vision, agreeing accountabilities and motivating and inspiring other. Employee induction: The purpose of induction in organisation to settle the new employee as quickly and efficiently as possible. The airline is trying to achieve the objective of induction and have introduced a new process to ensure that this happens. Employee relation: The airline is working with total of three trade unions demonstrating colleagues across the business. The new Human Resources (HR) model has been implemented. HR business partner now focus on good people management and employee relation and are responsible for day to day industrial relation matters. In addition, 15 effective IR (Interpersonal Relation) skills workshops were provided throughout the year, with 118 delegates presence. Line manager and trade union representatives were able to come together at these workshops to focus on joint problem solving. A further 75 manager attended our new introduction to industrial relation courses. Reward: The carriers cabin crew could see their pay docked by up to  £5,000 each as part of proposals put forward by the airline to cut costs. BA wants to cap the amount its 14,000 crew members can claim in allowances for working long haul flights. The proposal is in addition to changes to working practices that BA will impose from next month (Time online 28 October 2009) The British Airways is claiming in Corporate Responsibility report 2008-2009 that the airline developing good salary structure in the organisation help to create an environment that encourages sustainable high performance. The airline developed salary structure not only that salary costs can be managed more effectively, but also that salaries are internally equitable across roles and differences in roles and differences in responsibility, skill and performance can be recognised and reward. The airline is also functioning bonus scheme using a of financial and non financial performance indicator. Since 2005 airline Employees Reward Plan (ERP) has allowed non management employees to share in the success of the business based on achievement of corporate measures and targets. However, due to unfavourable trading condition, the scheme did not manage in 2008/2009. (Source: www.britishairways.com) Marketplace: Market is human activity directed at satisfying need and wants through exchange processes (Kotler, 1986, p-6) There are two main pillars of marketplace customer and supplier. The airline is encouraging commitment to corporate responsibility and to build sustainable business. The airline is operating over 33 million customers and 2000 supplier. The airline is focusing on customer and supplier to secure the position as a global premium airline. 1-Supplier Its social responsibility for the airline to pay its supplier according to term. In reference that the airline paid their supplier on average, 91 per cent were on time in the UK for the year ended March 31, 2009.The airline aim to exceed in next year. The airlines are party to the Confederation of British Industry (CBI) code of practise on supplier payment and are dedicated to paying the supplier on agreed term. The number of days purchases in creditors at March 31, 2009 is calculated in accordance with the provision of the companies Act 1985 and was 32 days (2008: 33 days). The airline carry on to reduce the carbon footprint with the acquirer of environmentally capable aircraft (A380) and airline will have taken delivery of its first three by the end of June with a further 36 aircraft on order. Particular concern has been given to ensuring environmentally efficient and lightweight materials will be used in the construction of both. The airline also working in long term with Grundon, using their energy from waste plant to produce electricity for the National Grid 2-Customer In the market place customer are broken down into group with different ideas of what they want. The largest group is the one looking for a low-price, no frills services- but of course low prices often go hand in hand with low profits. The group who are prepared to pay for exceptional quality small, but probably more profitable as individual. The company has to decide where its own strengths lie in terms of meeting customer expectation, and then decide whether it is able to meet the needs of its chosen target group better than the competition can do it (Jim Blythe, Principle Practice of Marketing, 2005, p-178) In these different groups of customer the British airways lies in the group D, which customer are willing to pay more for exceptional quality, because the airline are operating at premium services. Premium customer also wants reliability and consistency in the services and customer also like the increased flexibility and the wider choice of movie, TV programmes, audio and interactive games. The main problem is that the airline failure to achieve the profit in the particular segment. British Airways World Cargo continues to focus on providing premium products. The airline people play a crucial role in providing the upgrade travel experience. They are committed to excellent services and are investing heavily in training customer facing colleagues. Some of customers are unhappy because the British Airways will start charging passengers up to  £60 to reserve a seat as part of the airlines plans to cut costs and increase revenues. (Time online, 25 September 2009) British Airways focuses on offering online services to retain old customers and to attract new customers. It has made several upgrades to the e-services offered on its website, www.ba.com.The online portal is helping British Airways to drive down costs and increase revenues. Almost a third of all the companys bookings are made on ba.com, with almost half of all European leisure fares sold via the UK site, as a testimony to its popularity with customers. The customers are also provided with the option to book hotels and hire cars through the website. In FY2009, the company introduced a new feature allowing customers to upgrade their booking at any time between buying a ticket and checking-in online. British Airways had launched a new service, allowing customers to check-in or access real time arrivals and departures information through their mobiles. Therefore e-services help the company to attract more customers, enabling it to generate more revenues its allows airline customer to offset the carbon emissions of their journey with all proceeds going towards UN-certified emission reduction projects. (Source: www.britishairways.com) Community welfare programmes: Philanthropy encompasses those corporate actions that are in response to societys expectation that businesses be good corporate citizens. This includes actively engaging in acts or programs to promote human welfare or goodwill. Examples of philanthropy include business contributions to local communities, building education centre and charitable donations (Carrols model, ACCA text book P1 Professional Accountant) The airline continues to promote the community which one of the stepped to build a Community Learning Centre (CLC). Around 50,000 young people and adult learners on range of education programmes since its opening in 1999.The course are run in the Community Learning Centre with partnership of the United Nation International childrens Emergency Fund (UNICEF) focus on information and communication, Technology and the environment. The airline staff including (retired 3,500 and current) donated over  £630,000 ,their chosen charities through the airline giving Scheme directly from their payroll and airline also supported Children in Need and Red Nose Day across the airline raising over  £13,000 for charities in the UK and Overseas. Preceding years BA fun run raised in excess of  £55,000 for Cancer Research UK; during 2008/09 the airline World Cargo team collected and delivers over 95 tonnes of high quality gift, donated by employees from across the airline. The airline working with partnership United Nation International childrens Emergency Fund (UNICEF) has raised over  £26 million since in 1994 and has changed the lives of helpless children across the world. The a (Source: www.britishairways.com) Environment programmes British Airways impact on the environment involves the following: Climate Change The Climate Change Programme is CSR because it is about taking actions to reduce its impact on the environment. Climate change is a growing threat to the environment and to societies everywhere. British Airways actions on climate change go beyond compliance, demonstrating that it is taking voluntary actions to reduce its contribution to carbon emissions and better understand its impact on climate change. The British Airways climate change programme is focused on the following main areas: 1-Long term CO2 target: The airline develop long term plan to reduce CO2 by require the improvements in operational efficiency, investments in new aircraft technology, development of sustainable aviation fuels and investments in low emission technology in other sector of the economy through carbon trading. This trading is illustrates in figure below 2-EU and UK Emission Trading System (EU ETS): Airline will be fully sheltered by the EUs Emission Trading System from January 2012.The British Airways emission target has been set at 97 per cent of average annual emission in the reference period from 2004 to 2006. From 2013 the target is tightened to 95 per cent. British Airways set a target of total reductions in annual emissions of 125,000 tonnes of CO2, to be achieved over the five years 2002-2006. In 2004 the company agreed with the UK government to increase the voluntary target. 3-Carbon Efficiency: The airline is continuous try to reduce carbon by removing unwanted items from the aircraft to reduce the fuel burn, by developing light weight aircraft and modifications and simple changes such as the IFE spares pack removal, modifications to the World Traveller seats and the removal of the air stairs on 737 aircraft have already generated savings in excess of 6,500 tonnes of CO2. Carbon efficiency shows in following from 2006 to 2008. Airline is also developing procedure for the aircraft to taxi-out to the runway with an engine shout down wherever possible. This reduces fuel burn, CO2 and NOx emission. As comparison with Virgin Atlantic airline, on 24 February 2008 its become the first airline in the world to operate a commercial aircraft on bio fuel blend. The Boeing 747 flew a short flight from London to Amsterdam, using a 20% bio fuel and 80% kerosene blend in one of its four engines. Carbon Footprint: The airline is using the Greenhouse Gas Protocol corporate standard to measure the carbon footprint. The GHG (Greenhouse Gas) Protocol Corporate Standard provides standard and guidance for companies and other organizations preparing a GHG emissions inventory. It covers the accounting and reporting of the six greenhouse gases covered by the Kyoto Protocol- carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydro fluorocarbons (HFCs), per fluorocarbons (PFCs), and sulphur hexafluoride (SF6) (http://www.ghgprotocol.org/standards/corporate-standard) The below graphs represent how the airline manage its carbon footprint year by year. Global ground emission footprint: The airline global ground operation generated a footprint of 164,535 tonnes of carbon dioxide emissions, arising from our building, vehicles and ground equipment. Global ground emission footprint (tonnes of CO2) (Source: www.britishairways.com) British Airways producing 8% (1,626,262/ 20,670,517) CO2 emission of the total airlines. Virgin Atlantic Airways producing 1.8% (372,552/20,670,517) CO2 emissions of the total airlines in world. C02 emission by sector aviation is second highest CO2 emission producing in the world and most one energy industries. 5-Noise and Air Quality: Quota count is a system used by Londons Heathrow, Gatwick, and Stansted airports to limit the amount of noise generated by night-time aircraft movements Noise restrictions for a plane during take-off: 94 decibels (Maximum level) during the day. (Add times) 7am 11pm 89 decibels (Maximum level) in the shoulder period. (Add times) 6am -7am and 11pm to 11.30pm 87 decibels (Maximum level) at night. (Add times) 11.30pm to 6am These limits set by the Department of Transport (DfT) apply at 6.5km from the start of the roll, i.e. the point on the runway where the plane starts to move in order to take off. Planes that break the noise limits on departure at specific locations are fined by BAA:  £500 for the first 3 decibels over the limit and  £1,000 above that. (Source: BAA website 2008) EPNdB over 101.9 = 16 Quota Count EPNdB 99 101.9 = 8 Quota Count EPNdB 96 98.9 = 4 Quota Count EPNdB 93 95-9 = 2 Quota Count EPNdB 90 92.9 = 1 Quota Count EPNdB less than 90= 0.5 Quota Count EPNdB less than 87 is exempt =0 Quota Count (^ National Air Traffic Services (2007-02-02) (PDF). London Heathrow, London Gatwick and London Stansted Airports Noise Restrictions Notice 2007. http://www.boeing.com/commercial/noise/notamfeb2007.pdf. Retrieved 2007-10-28) The airline noise energy has remained the same over the last three years regardless of an increase in the use of our aircraft fleet. The airline continuous achieved noise level of Department of Transport (DFT) which is Quota Count 0.5(EPNdb90-87=0.5 Quota Count) and also the airline has objective is to reduce the average noise per flight by 15 per cent by 2015. Airline already achieved a reduction in NOx emission through the adaption of Boeing 747 (RB211) engines and Boeing 777 (GE90) engines. Its plan to further modify Boeing 737 engines delivering a 20 per cent reduction in NOx. For all routines take off airline use reduced take off thrust which significantly reduce NOx emission. 7-Waste: Currently the airline is developing the procedure to recycling paper, cardboard, plastics, pallets, carpets, batteries, drinks cans and have removed general waste bins in many office areas to encourage recycling and with transporting components, the airlinehave reduced or replaced non recyclable packaging material with recyclable material. A paper crusher is used to produce packaging, which is used to protect aircraft components during transportation. In 2007 airline recycled 35% of its waste at Heathrow and Gatwick (up from 30% last year). (Source: www.britishairways.com) Airline target is the recycling 50% of its waste by 2010 and the amount of annual waste managed through its contracts at Heathrow and Gatwick disposed to landfill reduced by 7.2% from 3,688 tonnes to 3,424 tonnes. At Virgin Atlantic also aim to achieve the recycle or reuse level 50% by 2012. To do this airline are choosing more items that are reusable recyclable or biodegradable and sourcing that use fewer materials. Business ethics What is ethics? Ethics is the set of rule prescribing what is good or evil, or what is right or wrong for people. What is business ethics? Business ethics means honesty, confidence, respect and fair acting in all circumstance. However, such values as honesty, respect and confidence are rather general concepts without definite boundaries. Ethics can also be define as overall fundamental principle and practices for improving the level of wellbeing of humanity. [David Crowther Guler Aras 2008 corporate social responsibility,p54] Ethical stances: The extent to which an organization will exceed its minimum obligations to stakeholder (Johnson, Scholes and Whittington) British Airways is committed to the highest standard of corporate behaviour from its Directors and employees. British Airways requires its entire people to perform their duties with efficiency and diligence and to always behave to customers and other people alike with courtesy and decorum. British Airways procurement process has strong controls to ensure that any dealings are open and transparent, avoids any suspicion of conflicts of interest, misuse of information and opportunity, confidentiality, fair dealing with customer and suppliers, proper use of company asset, compliance with laws and regulation. Conflict of Interest: A conflict of interest occurs when an individuals private interest interferes or appears to interfere with the interest of the airline. As a matter of airline policy, employees must not leave conflict of interest unresolved unless approved by airline. In particular employees must never use or attempt to use their position at the airline to obtain any improper personal benefit for themselves, for their families, or for any person. Confidentiality: The airline has strict policy that all employees to maintain the confidentiality information about the airline, its customer, suppliers, or joint venture parties. Employees must maintain the confidentiality of all information so entrusted to them, except when disclosure is authorised or legally mandated. Confidential or proprietary information of our Company, and of other companies, includes any non-public information that would be harmful to the relevant company or useful or helpful to competitors if disclosed. Fair Dealing: The airline does not seek competitive advantages through illegal or unethical business practices. Each employee should endeavour to deal fairly with the companys customers, service providers, suppliers, competitors and employees. No employee should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any unfair dealing practice. Protection and Proper Use of Company Assets: All employees should protect the airline assets and ensure their efficient use. All airline assets should be used only for legitimate business purposes. (source:www.bashares.com/phoenix.zhtml?c=69499p=irol-govconduct) Benefit of become good citizen The British Airways can obtain great number of benefit by fulfill the corporate social responsibility policies to the entire stakeholder, including the enhanced airline image (this in itself can lead to increase sales), health and safety benefit, ease of attracting investments and lowered cost of such investments, better community relationship (this can lead to easier and quicker approval of plans through the planning process), improved relationship with regulator, improved morale among workers (leading to higher productivity, lower staff turnover and consequently lower recruitment and training cost), general improved and relationship with customer. In particularly which include; 2009 2008 Goodwill  £m 4  £m 4 No of employees 42098 42121 Passenger revenue  £m 7836  £m 7600 [www.bashares.com/phoenix.zhtml?c=69499p=irol-reportsannual] Impact on key stakeholder What is a stakeholder? Any group or individual who can affect or is affected by the achievement of the organisation objective [ACCA course book P1 Professional Accountants] The classification of stakeholder There are two main way to classify the stakeholder, Internal v external: Internal stakeholder are those include within organisation such as employees, manager and director etc and where as external stakeholder are such group customer or suppliers who are generally not be of part of the organisation. Voluntary v involuntary: Voluntary those who have choice to engages with the organisation (employees, most customer, suppliers and shareholder) and involuntary those who have not choice to engages with organisation (local communities, neighbours, the nature world, future generation). [David Crowther Guler Aras 2008 (p30) corporate social responsibility] The corporate and social responsibility policies of British Airways greatly affect the stakeholders. The stakeholders of British Airways are the key customers, shareholders, employees, trade unions, lenders, Central Government, media, local community, pressure groups, local government and individual householders. I used Mendelowss Matrix for mapping the impact British Airways corporate and social responsibility policies on the stakeholders listed above. High Power Low Key Players E.g. key customer, active major shareholders, trade unions, employees, secured lenders. Involve Keep Informed E.g. Local Government, pressure groups, local media, local community, individual shareholders, individual customers. Consult / Inform Keep Satisfied E.g. Central Government, passive major shareholders, national media. Consider impact of action / inform Minimal Effort E.g. Individual shareholders living nearby. Ignore High Interest Low (ACCA study text-P1 Professional Accountants) Key Players: Key players are those stakeholders who have high interest and have high powers. The organisations strategy must be acceptable to them. Many business customers fly the same route on a regular basis. They want BA to do well so they can continue to use their service. Due to excellence of Terminal 5 the customer recommendations increase 61% to 65% But the shareholder little worried about the company performance because last two years the company was in loss. Keep Satisfied: Keep satisfied are those stakeholders who have low interest and high power to influence the policies of the company. The British Airways behaving these stakeholders are very well because the airline fulfill the requirements, like government and local community need good environment and less carbon emission which the airline successful are reducing carbon by 50% at end of 2050 years. Keep Informed: This group has high interest and low powers in company, but this group can be move to key player Colum. The British Airways ensure before every investment that laws and policy is full fill. Minimal Effort: This group has low power and low interest in the company. As British Airways can ignore them. These are individual shareholder or living near to airports. Conclusion It was a great idea to analysis the corporate and social responsibility policies of a division who is greatly involved in the production CO2 emissions and highly responsible for the climate change. During my research, I came crossways a number of facts, which I believe will help me to give a conclusion of my report. The facts are as under: The company started the operation in 1974 with the name of British Airways. During this period British Airways has build up an image as premium airline through its policies and positive image of its brand in the public. FY2009, Europe, the companys largest geographic market, accounted for 62.5% of the total revenues. I realise that the British Airways are more focus on Corporate Social Responsibility it might be effect on the company financial performance because its made loss in last two years. It is unethically for the sum of shareholder who wants profits from the company. British Airways is well behaving with their employees; who include the Induction, training, health and safety, promotion, high performance leadership, good salary structure and reward (ERP). At market place the British Airways failed to get reasonable profit from customer segment (premium customer), due to the airline did not report profit in last two years. Although the airline maintain good relationship with supplier through follow the code of practise (CBI). The airline maintain the position as Philanthropy (Carroll model), due to the airline continuously support poor world, people and working with UNICEF, UK Cancer and Research. The real fact is that the airline only make plan for reduction of 50% Carbon Emission (CO2) in 2050.But currently the CO2 more than last years. To achieving this objective the airline is need to invest in new aircraft technology, low emission trading project. For this objective the airline have good capita