Upload
kristokuns
View
222
Download
0
Embed Size (px)
Citation preview
7/30/2019 Business Ethics - A Look Into CSR
1/88
PROJECT REPORT ON
BUSINESS ETHICS A LOOK INTO
CSR
TY BMS | 2012-13 1
7/30/2019 Business Ethics - A Look Into CSR
2/88
A PROJECT REPORT ON
BUSINESS ETHICS A LOOK INTO CSR
SUBMITTED BY
MS. _______FOR THE DEGREE OF
THE BACHELOR OF MANAGEMENT STUDIES
UNDER THE GUIDANCE OF
MISS _____________
_______ COLLEGE OF COMMERCE AND ECONOMICS
_________, MUMBAI 4000____
ACADEMIC YEAR 2012 - 2013
TY BMS | 2012-13 2
7/30/2019 Business Ethics - A Look Into CSR
3/88
DECLARATION
I, ________, OF THE _________ COLLEGE OF COMMERCE AND ECONOMICS,
___________( E ) , HEREBY DECLARE THAT I HAVE COMPLETED THE
PROJECT ENTITLED BUSINESS ETHICS A LOOK INTO CSR IN PARTIAL
FULFILLMENT OF THE REQUIREMENT FOR THE THIRD YEAR OF THE
BACHELOR OF MANAGEMENT STUDIES COURSE FOR THE ACADEMIC YEAR
2012-2013
I FURTHER DECLARE THAT INFORMATION SUBMITTED BY ME IS TRUE AND
ORIGINAL TO THE BEST OF MY KNOWLEDGE.
DATED: _________
Name of the student
TY BMS | 2012-13 3
7/30/2019 Business Ethics - A Look Into CSR
4/88
CERTIFICATE
I MISS ______________ HEREBY CERTIFY THAT __________ STUDYING IN
TYBMS AT ________ COLLEGE OF COMMERCE AND ECONOMICS, HAS
COMPLETED A PROJECT ON BUSINESS ETHICS A LOOK INTO CSR IN THE
ACADEMIC YEAR 2012-2013 UNDER MY GUIDANCE.
I FURTHER CERTIFY THAT THE INFORMATION SUBMITTED IS TRUE AND
ORIGINAL TO THE BEST OF MY KNOWLEDGE.
DATED:
Place:
Name of the guide
Examiners Sign &Date PROJECT GUIDE
_____________________
College Seal PRINCIPAL
TY BMS | 2012-13 4
7/30/2019 Business Ethics - A Look Into CSR
5/88
ACKNOWLEDEGEMENT
I EXPRESS MY SINCERE THANKS TO MISS ______________FOR HER
VALUABLE GUIDANCE IN DOING THIS PROJECT.
I WISH TO TAKE THE OPPORTUNITY TO EXPRESS MY DEEP SENCE OF
GRATITUDE TO PRINCIPAL ___________________________ AND PROF. (Mr.)
________________________ FOR THEIR INVALUABLE GUIDANCE AND
SUPPORT IN THIS ENDEAVOUR. THEY HAVE BEEN A CONSTANT SOURCE
OF INSPIRATION.
FINALLY IT IS THE FOREMOST DUTY TO THANK ALL MY RESPONDENTS,
FAMILY & FRIENDS WHO HAVE HELPED ME DIRECTLY OR INDIRECTLY IN
COMPLETING MY FIELD WORK, WITHOUT WHICH THIS PROJECT WOULD
NOT HAVE BEEN SUCCESSFUL.
Name of the student
TY BMS | 2012-13 5
7/30/2019 Business Ethics - A Look Into CSR
6/88
CHAPTER 1
TY BMS | 2012-13 6
7/30/2019 Business Ethics - A Look Into CSR
7/88
1.1 SYNOPSIS
CSR is often understood only from the perspective of business generosity to community
projects and charitable donations. This perspective however fails to capture the valuable
contributions organizations can otherwise make. In a 1987 empirical study by Khan and
Atkinson it was found that a large percentage of the Indian executives studied agreed that
CSR was relevant to business and felt that business had responsibility not only to the
shareholders and employees but also to customers, suppliers, society and to the State.
Both the Indian and UK respondents felt that CSR eventually promotes a better
relationship between industry and people, a good work environment, enhanced customer
relationships and enhanced corporate image of the company.
European Commission defines CSR as a concept whereby companies decide voluntarily
to contribute to a better society and cleaner environment and as a process by which
companies manage their relationship with stakeholders. In a study of German and UK
companies it was found that the largest corporations project CSR as a comprehensive,
sustainable business strategy and recognizes the business-society interdependence.
Governments CSR public policies and the relationships between government, businesses
and civil society stakeholders have also known to impact the CSR initiatives. It is alsoobserved that large firms are more likely to identify relevant stakeholders and meet their
CSR requirements through specific and formal CSR strategies. Firms with a high value
for social responsibility are much more likely to engage in traditional kinds of plans for
social strategy. The use of social strategy depends upon the presence of specific
configurations of industry environment, resources and values.
TY BMS | 2012-13 7
7/30/2019 Business Ethics - A Look Into CSR
8/88
CHAPTER 2
TY BMS | 2012-13 8
7/30/2019 Business Ethics - A Look Into CSR
9/88
2.1 INTRODUCTION
Business as it is said, is a product of environment. The environment in which the business
operates determines the nature of business, location, the product to be manufactured, the
size, volume of operation, etc. Similarly it has an impact on the environment in which it
exists. The business decisions in an organization completely depend upon the
environment and their impact. The environment can be divided into:
Internal Environment
External Environment
Social Responsibility of business refers to what business does over and above the
statutory requirement for the benefit of the society. The word responsibility emphasizesthat the business has some moral obligations towards the society. The term corporate
citizenship is also commonly used to refer to the moral obligations of the business
towards the society. It implies that like individuals, corporations are also the part of the
society and their behavior shall be guided by the social norms.
Davis has defined social Responsibility as follows:
Social responsibilities refer to businessmans decision and actions taken to reason at
least partially beyond the firms direct economic or technical interest.
Andrews have suggested still broader view when he says that:
By social responsibility, we mean the intelligent and objective concern for the welfare
of the society that restrains individual and corporate behavior from ultimately
TY BMS | 2012-13 9
Internal
Environm
ent
Business
Decision
External
Environment
7/30/2019 Business Ethics - A Look Into CSR
10/88
destructive activities, no mater how immediately profitable, and leads in the direction of
positive contributions to human betterment, variously as the latter may be defined.
There has been a growing acceptance of the plea that business should be socially
responsible i.e. it should discharge its duties and responsibilities in enhancing the welfare
of the society of which it is an integral part.
H. S. Singhania classifies CSR into two categories:
The manner in which a business carries out its own business activity.
The welfare activity that it takes upon itself as an additional function.
Corporate social responsibility (CSR, also called corporate responsibility, corporate
citizenship, and responsible business) is a concept whereby organizations consider the
interests of society by taking responsibility for the impact of their activities on customers,
suppliers, employees, shareholders, communities and other stakeholders, as well as the
environment. This obligation is seen to extend beyond the statutory obligation to comply
with legislation and sees organizations voluntarily taking further steps to improve the
quality of life for employees and their families as well as for the local community and
society at large.
The practice of CSR is subject to much debate and criticism. Proponents argue that there
is a strong business case for CSR, in that corporations benefit in multiple ways by
operating with a perspective broader and longer than their own immediate, short-term
profits. Critics argue that CSR distracts from the fundamental economic role of
businesses; others argue that it is nothing more than superficial window-dressing; still
others argue that it is an attempt to pre-empt the role of governments as a watchdog over
powerful multinational corporations.
TY BMS | 2012-13 10
7/30/2019 Business Ethics - A Look Into CSR
11/88
2.2 OVERVIEW
Business ethics reflects the philosophy of business, one of whose aims is to determine the
fundamental purposes of a company. If a company's purpose is to maximize shareholder
returns, then sacrificing profits to other concerns is a violation of its fiduciary
responsibility. Corporate entities are legally considered as persons in USA and in most
nations. The 'corporate persons' are legally entitled to the rights and liabilities due to
citizens as persons.
Economist Milton Friedman writes that corporate executives' "responsibility... generally
will be to make as much money as possible while conforming to their basic rules of the
society, both those embodied in law and those embodied in ethical custom". Friedman
also said, "the only entities who can have responsibilities are individuals ... A business
cannot have responsibilities. So the question is, do corporate executives, provided they
stay within the law, have responsibilities in their business activities other than to make as
much money for their stockholders as possible? And my answer to that is, no, they do
not." A multi-country 2011 survey found support for this view among the "informed
public" ranging from 30 to 80%. Duska views Friedman's argument as consequentiality
rather than pragmatic, implying that unrestrained corporate freedom would benefit themost in long term. Similarly author business consultant Peter Drucker observed, "There is
neither a separate ethics of business nor is one needed", implying that standards of
personal ethics cover all business situations. However, Peter Drucker in another instance
observed that the ultimate responsibility of company directors is not to harmprimum
non nocere. Another view of business is that it must exhibit corporate social
responsibility (CSR): an umbrella term indicating that an ethical business must act as a
responsible citizen of the communities in which it operates even at the cost of profits or
other goals. In the US and most other nations corporate entities are legally treated as
persons in some respects. For example, they can hold title to property, sue and be sued
and are subject to taxation, although their free speech rights are limited. This can be
interpreted to imply that they have independent ethical responsibilities. Duska argues that
stakeholders have the right to expect a business to be ethical; if business has no ethical
TY BMS | 2012-13 11
7/30/2019 Business Ethics - A Look Into CSR
12/88
obligations, other institutions could make the same claim which would be
counterproductive to the corporation.
Ethical issues include the rights and duties between a company and its employees,
suppliers, customers and neighbors, its fiduciary responsibility to its shareholders. Issues
concerning relations between different companies include hostile take-overs and
industrial espionage. Related issues include corporate governance; corporate social
entrepreneurship; political contributions; legal issues such as the ethical debate over
introducing a crime of corporate manslaughter; and the marketing of corporations' ethics
policies.
TY BMS | 2012-13 12
7/30/2019 Business Ethics - A Look Into CSR
13/88
2.3 DEVELOPMENT
Business ethics is a form of the art of applied ethics that examines ethical principles and
moral or ethical problems that can arise in a business environment.
In the increasingly conscience-focused marketplaces of the 21st century, the demand for
more ethical business processes and actions (known as ethicism) is increasing.
Simultaneously, pressure is applied on industry to improve business ethics through new
public initiatives and laws (e.g. higher UK road tax for higher-emission vehicles).
Business ethics can be both a normative and a descriptive discipline. As a corporate
practice and a career specialization, the field is primarily normative. In academia,
descriptive approaches are also taken. The range and quantity of business ethical issues
reflects the degree to which business is perceived to be at odds with non-economic socialvalues. Historically, interest in business ethics accelerated dramatically during the 1980s
and 1990s, both within major corporations and within academia. For example, today most
major corporate websites lay emphasis on commitment to promoting non-economic
social values under a variety of headings (e.g. ethics codes, social responsibility charters).
In some cases, corporations have redefined their core values in the light of business
ethical considerations (e.g. BP's "beyond petroleum" environmental tilt).
The term CSR itself came in to common use in the early 1970s although it was seldom
abbreviated. The term stakeholder, meaning those impacted by an organization's
activities, was used to describe corporate owners beyond shareholders from around 1989.
TY BMS | 2012-13 13
7/30/2019 Business Ethics - A Look Into CSR
14/88
2.4 GROWTH OF CSR
Corporate social responsibility (CSR) till very recently was viewed as a philanthropic
activity indulged into only when the firms were in jeopardy. Though the earlier decades
are referred to as false dawns wherein CSR had a regional, person centered
philanthropic focus, it is now viewed to be inclusive, broad and diverse. It is not only
used for fulfilling legal expectations but also for investing more into human capital, the
environment and the relations with stakeholders. Companies facing the challenges of
globalization are aware that CSR can be of direct economic value. They view these
activities not as a cost but an investment, as a long term strategy minimizing risks linked
to uncertainty. According to Sacconi, (2007) when firms fulfill their fiduciary duties to
their stakeholders, they benefit from reputation and the positioning of the firm withrespect to social issues is clearly a way to differentiate the firm and its products and
services in ways that creates value
Developed countries like USA and UK have long seen CSR as a practice that benefits
both organizations and society. Marketing communications of companies are also
focusing on the communication of their CSR initiatives (e.g. Sunfeast). It has also been
studied that the composition of the board of directors also influences the CSR as outside
directors appear more concerned about CSRs and hence the firm are more likely to
engage in socially responsible activities.
Increased globalization along with increasing the opportunities for business has also
brought the businesses under the scrutiny of different audiences, NGOs and media. It is
predicted that in the times to come companies will be judged more by their social
policies than on their delivery of products and services. Debacles like Enron and
Worldcom did cause a slew of critiques against the CSR initiatives but these critiques
were largely ill founded Many theorists have also argued about the economic impact of
CSR, some relating it positively with the profit and some feeling that no such relationship
exists. Bird et al., 2007 studied that the market is influenced by the independent CSR
activities and also by the totality of these activities and the gains can be in terms of
TY BMS | 2012-13 14
7/30/2019 Business Ethics - A Look Into CSR
15/88
economic performance or social performance. Since CSR and corporate reputation are the
two sides of the same coin the current paper examines how corporate enterprises are
currently using CSR initiatives as a part of their corporate strategy and public relations
pertaining to the same.
TY BMS | 2012-13 15
7/30/2019 Business Ethics - A Look Into CSR
16/88
2.5 APPROACHES TO CSR
Some commentators have identified a difference between the Continental European and
the Anglo-Saxon approaches to CSR. And even within Europe the discussion about CSR
is very heterogenous.
An approach for CSR that is becoming more widely accepted is community-based
development projects, such as the Shell Foundation's involvement in the Flower Valley,
South Africa. Here they have set up an Early Learning Centre to help educate the
community's children, as well as develop new skills for the adults. Marks and Spencer is
also active in this community through the building of a trade network with the
community - guaranteeing regular fair-trade purchases. Often alternative approaches to
this is the establishment of education facilities for adults, as well as HIV/AIDS education
programmes. The majority of these CSR projects are established in Africa. A more
common approach of CSR is through the giving of aid to local organizations and
impoverished communities in developing countries. Some organizations do not like this
approach as it does not help build on the skills of the local people, whereas community-
based development generally leads to more sustainable development.
TY BMS | 2012-13 16
http://www.flowervalley.org.za/http://www.flowervalley.org.za/7/30/2019 Business Ethics - A Look Into CSR
17/88
2.6 INTEREST GROUPS
Social Responsibility requires the identification of various interest groups, which may
affect the functioning of a business organization and may also be affected by its
functioning. Normally various groups associated with a business organization are
shareholders, workers, customers, creditors, suppliers, government and society in general.
The management owes responsibility towards all these groups. Therefore, management
should show a standardized norm of behavior.
Shareholders
The first responsibility of the management is to protect the interest of shareholders. The
interests of majority of shareholders and large minority of shareholders are generally well
protected through either direct participation in the management actions or they have real
power to intervene, if necessary. They should be informed about the functioning of the
TY BMS | 2012-13 17
7/30/2019 Business Ethics - A Look Into CSR
18/88
organization adequately and timely. Therefore, management has a responsibility to
provide proper safeguard to the money invested by shareholders.
Workers
Workers have direct interest in an organization because by working there, they satisfy
their needs. Thus, it is the managements responsibility to protect the interest of workers
in the organization. The management can do this in the following ways:
Management should treat workers as another wheel of the cart
Management should develop administrative process in such a way that promotes
cooperative endeavor between employers and employees.
The management should adopt a progressive labor policy based on recognition ofgenuine trade union rights participation of workers in management, creating a
sense of belongingness, improving their living and working conditions
Management should pay fair and reasonable wages and other financial benefits to
workers.
Customers
Management owes a primary obligation to give a fair deal to the customers. This canbe
done in the following ways:
Customers should be charged a fair and reasonable price
The supply of goods and services should be of uniform standard and of reasonable
quality
Management should not indulge in profiteering, hoarding, or creating artificial
scarcity.
Management should not mislead the customers by false, misleading andexaggerated advertisements.
Creditors, Suppliers and Others
TY BMS | 2012-13 18
7/30/2019 Business Ethics - A Look Into CSR
19/88
They affect the organization in various ways. Therefore, the management is responsible
to fulfill its obligations towards them. This can be done in the following ways:
Management should create healthy and cooperative inter business relationship
between different businesses.
Management should provide accurate and relevant information to creditors and
suppliers.
Payments of price of materials, interest on borrowings, other charges should be
prompt.
Government
It is very closely related with the business system of the country. It provides various
facilities for the development of business. Government, no doubt, exercises control over
business, but these controls are meant for overall development of business. Management
can discharge its obligation to government by:
Management should be a law-abiding citizen
Management should pay taxes and other dues fully, timely & honestly
It should not corrupt government workers and public servants and the democratic
process It should not buy political favors by any means
Society
Organizations exist within a social system and get facilities from the system. Therefore,
they owe obligations to the society as a whole. This can be done by:
Management should maintain fair business policies and practices
It should play a proper role in civic affairs
It should provide and promote general amenities and help in creating better living
conditions in general.
TY BMS | 2012-13 19
7/30/2019 Business Ethics - A Look Into CSR
20/88
2.7 CSR BENEFITS
Social responsibility of a business refers to what the business does, over and above the
statutory requirement, for the benefit of the society. The term corporate citizenship is also
commonly used to refer to the moral obligations of the business to the society. This
implies that just as individuals, corporates are also integral part of the society and their
behaviour shall be guided by certain social norms. The operations of business enterprises
affect a wide spectrum. The resources they make use of are limited to those of the
proprietors and the impact of their operations is felt also by many a people who are in no
way connected with the enterprise.
The scale and nature of the benefits of CSR for an organization can vary depending on
the nature of the enterprise, and are difficult to quantify, though there is a large body of
literature exhorting business to adopt measures beyond financial ones. The definition of
CSR used within an organisation can vary from the strict "stakeholder impacts" definition
used by many CSR advocates and will often include charitable efforts and volunteering.
CSR may be based within the human resources, business development or public relations
departments of an organisation, or may be given a separate unit reporting to the CEO or
in some cases directly to the board. Some companies may implement CSR-type values
without a clearly defined team or programme.
The business case for CSR within a company will likely rest on one or more of these
arguments:
TY BMS | 2012-13 20
7/30/2019 Business Ethics - A Look Into CSR
21/88
Human resources
Risk management
Brand differentiation
License to operate
2.7.1 Benefits for businesses
Being socially responsible is not just good business practice but also makes good
business sense. CSR has positive effects on the economics of the company, its publicrelations, customers, employees and shareholders. If integrated into the business strategy,
CSR is a potent business tool. There are several benefits to companies:
Getting license to operate from key stakeholders not just shareholders:
Certain industries like mining etc that displace people or have environmental impact
require a license to operate from the community whom they impact by their operations.
Failure to do so could not only make the operations difficult, but the hostility can
sometimes make the operations even unviable in extreme cases.
Enhanced reputation and brand value:
The business environment is increasingly sensitive to a companys social, ethical, and
environmental performance due to globalization, the communication revolution, and
mobility of customers and suppliers. Reputation is an important sustainable competitive
asset, because it is difficult and time consuming to develop and cannot be easily
mimicked by competitors. Brand identity is also growing in importance. Interbrand, a
leading international branding consultant predicts that the brand worth of companies will
rise to 45 percent of stock market capitalization by 2010. This is up from five percent in
1960 to 30 percent in 2000.
TY BMS | 2012-13 21
7/30/2019 Business Ethics - A Look Into CSR
22/88
Increased efficiency in operations:
Using the CSR framework in corporate business strategy can result in high efficiency in
operations, for instance, improved efficiency in the use of energy and natural resources;
reduced waste such as reducing emissions of gases; and selling recycling materials.
Better human resources also benefit business. Work-life programs that result in reduced
absenteeism and increased retention of employees often save companies money through
increased productivity and by a reduction in hiring and training costs. For example,
companies that improve working conditions and labor practices among their offshore
suppliers often experience a decrease in defective or unsalable merchandise. A study of
15 large employers conducted by the Medstat Group and the American Productivity and
Quality Center found that health benefit programs can increase productivity and decrease
company costs related to absenteeism, turnover, disability and health-care claims by 30
percent.
Increased sales and customer loyalty:
According to the Millennium Poll on Corporate Social Responsibility, the majority of
25,000 people interviewed in 23 countries want companies to contribute to society
beyond making a profit. While businesses must first satisfy customers key buying
criteria such as price, quality, appearance, taste, availability, safety and convenience
studies also show a growing desire to buy based on other values-based criteria, such as
sweatshop-free and child-labor-free clothing, smaller environmental impact.
Increased ability to attract and retain quality employees:
In interviewing 150 top employees in 24 organizations, the UK consulting firm, Stanton
Marris, learned that employer reputation was a key factor in accepting a job offer.
Seventy-six percent of those polled by the Cone/Roper Corporate Citizenship Study saida company's "commitment to causes" was an important consideration in deciding where
to work. Attracting and retaining a committed and skilled workforce is vital to business
success.
TY BMS | 2012-13 22
7/30/2019 Business Ethics - A Look Into CSR
23/88
Innovation in market and product development through cooperation with local
communities:
Cooperation with local communities helps in tailoring products and services to local
markets. For e.g. IBM's community partnership programs have produced six new
products for market and 15 patent applications in 2000 alone.
2.8 CRITICAL ANALYSIS
CSR is entwined in the strategic planning process of many multinational organizations.
The reasons or drive behind social responsibility towards human and environmental
responsibility whether driven by ulterior motives, enlightened self-interest, or interests
beyond the enterprise, is subject to much debate and criticism.
Some critics argue that corporations are fundamentally entities responsible for generating
a product and/or service to gain profits to satisfy shareholders. Milton Friedman and
others argue that there is no place for social responsibility as a business function. These
critics point to the rule of corporate law that prohibits a corporation's directors from any
activity that would reduce profits.
Other critics argue that the practice cherry-picks the good activities a company is
involved with and ignores the others, thus 'greenwashing' their image as a socially or
environmentally responsible company. Still other critics argue that it inhibits free markets
or seeks to pre-empt the role of governments in controlling the socially or
environmentally damaging effects of corporations' pursuit of self-interest.
Disputed business motives
Some critics believe that CSR programmes are often undertaken in an effort to distract
the public from the ethical questions posed by their core operations. Examples of
companies that have been accused of this motivation include British American Tobacco
TY BMS | 2012-13 23
7/30/2019 Business Ethics - A Look Into CSR
24/88
(BAT), which produces major CSR reports, and the petroleum giant BP, which is well-
known for its high-profile advertising campaigns on environmental aspects of its
operations.
Self-interest
Some CSR critics argue that the only reason corporations put in place social projects is
for the commercial benefit they see in raising their reputation with the public or with
government. They suggest a number of reasons why self-interested corporations, solely
seeking to maximise profits, are unable to advance the interests of society as a whole.
They point to examples where companies have spent a lot of time promoting CSR
policies and commitment to Sustainable Development on the one hand, whilst damaging
revelations about business practices emerge on the other.
Other views from this perspective include:
Corporations really care little for the welfare of workers or the environment, and
given the opportunity will move production to sweatshops in less well-regulated
countries.
Companies do not pay the full costs of their impact. For example, the costs of
cleaning pollution often fall on society in general. As a result profits of
corporations are enhanced at the expense of social or ecological welfare.
Hindrance of free trade
These critics are generally supporters of Milton Friedman, who argued that a
corporation's principal purpose is to maximize returns to its shareholders, while obeying
the laws of the countries within which it works. Friedman argued that only people can
have responsibilities. Because of this, moderate critics suggest that CSR activity is most
effective in achieving social or environmental outcomes when there is a direct link to
profit. This approach to CSR requires that the resources applied to CSR activities must
TY BMS | 2012-13 24
7/30/2019 Business Ethics - A Look Into CSR
25/88
have at least as good a return as these resources could generate if applied anywhere else.
This analysis drastically narrows the possible scope of CSR activities.
2.9 DRIVERS
Corporations may be influenced to adopt CSR practices by several drivers.
Ethical consumerism
The rise in popularity of ethical consumerism over the last two decades can be linked to
the rise of CSR. As global population increases, so does the pressure on limited natural
resources required to meet rising consumer demand. Industrialization in many developing
countries is booming as a result of technology and globalization. Consumers are
becoming more aware of the environmental and social implications of their day-to-day
consumer decisions and are beginning to make purchasing decisions related to their
environmental and ethical concerns. However, this practice is far from consistent or
universal.
Globalization and market forces
As corporations pursue growth through globalization, they have encountered new
challenges that impose limits to their growth and potential profits. Government
regulations, tariffs, environmental restrictions and varying standards of what constitutes
labour exploitation are problems that can cost organizations millions of dollars. Some
view ethical issues as simply a costly hindrance. Some companies use CSR
methodologies as a strategic tactic to gain public support for their presence in global
TY BMS | 2012-13 25
7/30/2019 Business Ethics - A Look Into CSR
26/88
markets, helping them sustain a competitive advantage by using their social contributions
to provide a subconscious level of advertising. Global competition places particular
pressure on multinational corporations to examine not only their own labour practices,
but those of their entire supply chain, from a CSR perspective.
Social awareness and education
The role among corporate stakeholders to work collectively to pressure corporations is
changing. Shareholders and investors themselves, through socially responsible investing
are exerting pressure on corporations to behave responsibly. Non-governmental
organizations are also taking an increasing role, leveraging the power of the media and
the Internet to increase their scrutiny and collective activism around corporate behavior.
Through education and dialogue, the development of community in holding businesses
responsible for their actions is growing.
Ethics training
The rise of ethics training inside corporations, some of it required by government
regulation, is another driver credited with changing the behaviour and culture of
corporations. The aim of such training is to help employees make ethical decisions when
the answers are unclear. Tullberg believes that humans are built with the capacity to cheat
and manipulate, a view taken from, hence the need for learning normative values and
rules in human behaviour. The most direct benefit is reducing the likelihood of dirty
hands, fines and damaged reputations for breaching laws or moral norms. Organizations
also see secondary benefit in increasing employee loyalty and pride in the organization.
Government laws and regulation
Another driver of CSR is the role of independent mediators, particularly the government,
in ensuring that corporations are prevented from harming the broader social good,
including people and the environment. CSR critics such as Robert Reich argue that
governments should set the agenda for social responsibility by the way of laws and
regulation that will allow a business to conduct themselves responsibly.
TY BMS | 2012-13 26
7/30/2019 Business Ethics - A Look Into CSR
27/88
Crises and their consequences
Often it takes a crisis to precipitate attention to CSR. One of the most active stands
against environmental management is the CERES Principles that resulted after the Exxon
Valdez incident in Alaska in 1989. Other examples include the lead poisoning paint used
by toy giant Mattel, which required a recall of millions of toys globally and caused the
company to initiate new risk management and quality control processes. In another
example, Magellan Metals in the West Australian town of Esperance was responsible for
lead contamination killing thousands of birds in the area. The company had to cease
business immediately and work with independent regulatory bodies to execute a cleanup.
TY BMS | 2012-13 27
7/30/2019 Business Ethics - A Look Into CSR
28/88
2.10 DIMESIONS OF CSR & RELEVANCE
The Green Paper by the Commission of the European Communities identifies two main
dimensions of CSR, an internal dimension relating to practices internal to the company
and an external dimension involving the external stakeholders.
2.10.1 Internal Dimension
This relates to practices internal to the company, which need to be modified to
incorporate CSR practices. The various components of the internal dimension of CSR are
shown below:-
Human Resources Management
CSR can be successfully implemented in an organization through precise management of
its own work force. The internal dimension of CSR includes elements like providing an
environment for life long learning for employees, employee empowerment, better
information flow, improving the balance between work, family, and leisure, diversified
work force, profit sharing and share ownership schemes, concern for employability as
well as job security among others. Active follow up and management of employees who
are off work due to disabilities or injuries have also been shown to result in cost savings
for the companies. Molding of recruitment policies to include people from ethnic
minorities, older workers, women and the long-term unemployed would be a significant
step forward to incorporating CSR practices in Human Resources Management.
TY BMS | 2012-13 28
7/30/2019 Business Ethics - A Look Into CSR
29/88
In the context of emerging markets, the availability of cheap labour is an encouraging
factor for companies. Developed markets have clearly moved towards heavily capital-
intensive distribution with the introduction of electronic data interchanges, mechanized
movement and monitoring of goods, and vending machines that replace salespeople. By
contrast labour-intensive distribution remains economical in emerging markets. For
example, in emerging markets, Coca-Cola has not invested in vending machines. These
are too expensive relative to salespeople.
Work Safety and Health Measures
Worker safety and labour health have been documented to be having a direct impact on
productivity of the labour force. Although legal measures exist in most nations on
maintaining standards for ensuring worker safety and providing health benefits, recent
trends have made it imperative for companies to adopt a proactive approach to this issue.
In emerging markets having significant cost advantages in labour, outsourcing of labour
and processes have led to the situation where companies not only need to maintain high
safety levels in their own premises but also ensure that their suppliers and other
connected parties comply with these principles. The increased focus on safety standards
and employee welfare has led to the development of standards across industries.
Mechanisms are being designed especially in emerging markets for measuring,
documenting and communicating these qualities thereby saving time, work and costs in
the purchasing process.
Adaptation to change
A recent trend in the global business scenario has been the wide spread use of mergers
and acquisitions for business expansion. Also downsizing has been used, often
ineffectively, as a cost cutting measure by firms in their relentless push for profits.
Management of Environmental impacts
The importance of this aspect of CSR cannot be overemphasized. Optimization of
resource utilization and reducing environmentally damaging effluents can reduce the
TY BMS | 2012-13 29
7/30/2019 Business Ethics - A Look Into CSR
30/88
environmental impact. This will also enable the firms to affect significant cost savings in
energy bills and pollution costs. Many firms in emerging markets have had to face
serious repercussions from the state and society for over exploitation of natural resources
and disregard for environmental safety measures. Many multinational companies are
realizing to their cost that early compliance with accepted standards will provide strategic
advantages in the long run even though cost inefficient in the near future.
2.10.2 External Dimension
This dimension relates to practices concerning external stakeholders. The significance of
this dimension of CSR has come to the forefront with the advent of globalization leading
to the development of international standards for business practices.
Local Communities
The development of positive relations with the local community and thereby the
accumulation of social capital is particularly relevant for non-local companies. These
relations are being increasingly used by multinational companies to support the
integration of their subsidiaries into various markets in which they are present. Deep
understanding of the local community and social customs is an asset, which can be
utilized by the companies to gain strategic advantage.
In emerging markets, this is more relevant than ever because of the availability of
cheaper labour from the local communities. Companies would find it in their interest to
substitute capital substitution with labour and reap the cost benefits. For example,
Whirlpool discovered that it was unable to sell its high priced, fully automatic machines
in the emerging markets. It was only after it introduced twin-tub machines that were
cheaper and utilized the consumers labour rather than electronics to complete the entire
washing cycle that sales took off. Interestingly, due to the fact that these machines had
long disappeared in the developed markets, Whirlpool had to acquire the obsolete
technology from Korea.
TY BMS | 2012-13 30
7/30/2019 Business Ethics - A Look Into CSR
31/88
Business Partners
Building long-term relationships of sound ethical foundation with suppliers, customers
(and even competitors in rare occasions) will enable companies to meet customer
expectations better while reducing complexity and costs. Companies should realize their
CSR practices would be judged taking into account the practices of their partners and
suppliers throughout the supply chain. The effect of corporate social responsibility
activities will not remain limited to the company itself, but will also touch upon their
economic partners.
Companies in emerging markets actually take on additional CSR responsibilities because
of the existence of outsourcing opportunities in the form of suppliers and outsourcing
agents. Also as part of their social responsibility companies are expected to provide high
quality products and services, which meet customer expectations in a manner reflecting
the companys concern for the environment and the local conditions. Thus in emerging
markets, consumer based business strategies would enable companies to build long
lasting relationships with consumers based on trust.
Human Rights
Companies operating in countries where human rights are regularly violated may
experience a climate of civil instability and corruption that makes for uneasy relations
with government officials, employees, local communities and shareholders. They also
have a responsibility to use their influence to mitigate the violation of human rights by
governments, the forces of law and order or opposition groups in the countries in which
they operate. In the context of emerging markets, operations of companies should not
impinge on the land rights of the local community. In particular, the company needs tomake sure that people are not forcibly removed from their homes and their livelihoods are
not endangered. There is the growing need to develop proper consultative processes with
local groups protesting against projects or operations in which they are involved. Firms
also need to build confidence in the local community that people (including union
members) participating in peaceful protests against company operations are not
TY BMS | 2012-13 31
7/30/2019 Business Ethics - A Look Into CSR
32/88
intimidated, arrested or in any other way threatened. Also, companies can take steps to
ensure forced labour is not used in their own, or their suppliers operations.
2.11 CUSTOMER SEGMENTATION & DISTRIBUTION
There is an urgent need for modifying currently existing customer segmentation
techniques. While segmentation based on finer product features may have been
successful in the industrially advanced nations, such fine distinctions may not strike a
cord with consumers in the emerging markets. This is amply demonstrated in the case of
consumer products like toilet soaps where market segmentation techniques in the
developed nations are based on value provided by products, like fragrance, anti-aging etc.
However the mass market in emerging economies with lesser-sophisticated consumers
may not be compliant to such fine segmentation.
Segmentation
Segmentation techniques will need more careful analysis of consumer behaviour with
significant input from demographic data. Here, consumers dislike products that evolve
too rapidly, making their recent purchases obsolete. Instead, the need is for basic,
functional, long lasting products. The Volkswagen Beetle remained the largest selling car
in Brazil long after other manufacturers with newer models had phased it out of the
affluent markets and despite competitive assaults. The largest selling car in China is still
the Volkswagen Santana, a model that was phased out of developed markets 15 years
ago. Thus clearly, in depth analysis of consumer behaviour is necessary in emerging
markets although the level of customer sophistication may be less. Here CSR has an
important role to play especially in building up trust in the minds of the consumers. In an
emerging market where consumers are looking for functional products which last longer
and accelerated obsolescence is not a problem like in developed markets, the consumer
TY BMS | 2012-13 32
7/30/2019 Business Ethics - A Look Into CSR
33/88
perception about the company brand assumes significance. A company, which builds the
image of producing quality products that last longer though they may not be on the
cutting edge of technology will actually be able to gain strategic advantage in emerging
economies.
Distribution
Emerging markets, especially those in Asia have posed significant distribution challenges
to multinational companies. Often companies have had to abandon distribution systems
tried and tested in developed nations and start developing a customized distribution
mechanism specific to the country of operation. CSR is instrumental in relationship
building with retailers. Building relationships in a fragmented retail environment requires
an understanding of retailers interests. Successful manufacturers creatively develop new
revenue activities for the retailer.
TY BMS | 2012-13 33
7/30/2019 Business Ethics - A Look Into CSR
34/88
CHAPTER 3
TY BMS | 2012-13 34
7/30/2019 Business Ethics - A Look Into CSR
35/88
3.1 ABOUT HUL
The Hindustan Unilever Ltds (HUL) Inc has taken the opportunity to offer us a broader
view of FMCG category. The Hindustan Unilever Ltd (HUL) is Indias no.1 FMCG is
able to share with their market insights based upon unparalleled breath of consumer
goods experience.
Hindustan Unilever Ltd (HUL) has grown from strength to strength with new
technologies being introduced to make the HUL consumer goods business, one of the
most efficient in the world. The companys history dates back to 1931 when Unilever set
up its first Indian subsidiary, Hindustan Vanaspati Manufacturing Company, followed by
Lever Brothers India Limited (1933) and United Traders Limited (1935). These three
companies merged to form Hindustan Lever Limited in November 1956. Effective July
19, 2007 the company has changed the name to Hindustan Unilever Limited.
Hindustan Unilever Limited (HUL), a subsidiary of Unilever, is a fast moving consumer
goods (FMCG) company based in India. The company focuses on efficient delivery to
consumers with an improved supply chain, brand building initiatives and innovation,
which has helped the company to sustain its leadership position in the overall FMCG
category in India.
TY BMS | 2012-13 35
7/30/2019 Business Ethics - A Look Into CSR
36/88
Hindustan Unilever is Unilever's main operating business in India. It is the country's
biggest consumer goods company, and far and away the leading advertiser. HUL inhabits
virtually every sector of the consumer goods market, including several not occupied by
Unilever in other markets such as preserves and bakery products, and is also one of the
countrys top five exporters. In addition to FMCG products it is the country's biggest
exporter of tea. It is generally acknowledged to be one of India's best-run businesses,
although performance slowed dramatically between 2000 and 2004, prior to restructuring.
Unilever, which sells soap to more than 500 million Indians, may see global revenue
growth slow in 2010 as Procter & Gamble Co. and ITC Ltd. step up marketing in Asia's
third-biggest economy.
The world's second-largest consumer products maker has relied on accelerating
shipments of Surf Excel detergent in India to make up for sluggish sales in Europe.Now
Cincinnati- based Procter & Gamble is stocking Indian stores with Olay skin- care
products after nearly halving the local prices of Ariel and Tide detergents in 2004.
Asia and Africa, which make up about a third of Unilever's worldwide sales, will see
their share of the company's growth fall to 2 percent in 2010 from 3.3 percent in 2007,
according to Brussels-based brokerage Petercam SA. Revenue from the two continentsrose 11.4 percent in the first nine months of last year, helping offset 1.9 percent growth in
Europe and 4.2 percent in North and South America.
Unilever's overall sales growth will slow to 4.9 percent in 2010 from an estimated 5.3
percent in 2007, according to the median of five analysts in a Bloomberg survey.
Hindustan Unilever A 75 Year Commitment
15,000 employees
1,200 managers
2,000 suppliers & associates
75 Manufacturing Locations
45 C&FAs, 4,000 Stockists
TY BMS | 2012-13 36
7/30/2019 Business Ethics - A Look Into CSR
37/88
Total Coverage 6.3 Mln Outlets
Direct Coverage 1 Mln outlets
Population of INDIA: 1027 Mln
5,545 Towns
2.5 Mln outlets
6,38,000 Villages
5.0 Mln outlets
TY BMS | 2012-13 37
7/30/2019 Business Ethics - A Look Into CSR
38/88
3.2 HUL HISTORY
It was in the summer of 1888 that Unilever of England first marketed Sunlight soap in
India. This was followed by brands like Pears and Vim. Vanaspati was launched in 1918
and Dalda came to the market in 1937.
In 1931, Unilever set up its first Indian subsidiary, Hindustan Vanaspati
Manufacturing Company, followed by Lever Brothers India Limited (1933) and
United Traders Limited (1935). These three companies merged to form HUL in
November 1956.
A number of prominent companies came into the HUL fold as result of Unilevers
international acquisitions. These included Brooke Bond (1984), Lipton (1972) and
Ponds (1986).
In 1993, Tata Oil Mills Company (TOMCO) merged with HUL. Two years later,
HUL and yet another Tata company, Lakme Limited, formed a 50:50 joint venture,
Lakme Lever Limited.
Subsequently in 1998, Lakme Limited sold its brands to HUL and divested its 50 per
cent stake in the joint venture to the FMCG giant.
TY BMS | 2012-13 38
7/30/2019 Business Ethics - A Look Into CSR
39/88
HUL formed a 50:50 joint venture with the US-based Kimberly Clark Corporation in
1994, Kimberly-Clark Lever Ltd, which markets Huggies diapers and Kotex sanitary
pads.
HUL has also set up a subsidiary in Nepal, Nepal Lever Limited (NLL), and its
factory represents the largest manufacturing investment in the Himalayan kingdom.
In a historic step, HUL picked up 74 per cent of the equity of Modern Foods from the
Indian government.
In 2002, HUL acquired the government s remaining stake in Modern Foods.
FMCG major Hindustan Unilever Limited (HUL), formerly known as Hindustan
Lever Limited, employs 36,000 people, including over 1,350 managers. It is one of
the earliest MNCs to have entered India
3.3 ORGANIZATIONAL STRUCTURE
TY BMS | 2012-13 39
ManagingDirector
GeneralManager
Vice President
7/30/2019 Business Ethics - A Look Into CSR
40/88
3.4 PRESENT STATUS
Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods
company, touching the lives of two out of three Indians with over 20 distinct categories in
Home & Personal Care Products and Foods & Beverages. They endow the company with
a scale of combined volumes of about 4 million tonnes and sales of Rs.10,000 crore.
HUL is also one of the country's largest exporters; it has been recognised as a Golden
Super Star Trading House by the Government of India. The mission that inspires HUL's
over 15,000 employees, including over 1,300 managers, is to "add vitality to life."
HUL meets everyday needs for nutrition, hygiene, and personal care with brands that
help people feel good, look good and get more out of life. It is a mission HUL shares
with its parent company, Unilever, which holds 51.55% of the equity. The rest of the
shareholding is distributed among 380,000 individual shareholders and financial
institutions.
HUL's brands - like Lifebuoy, Lux, Surf Excel, Rin, Wheel, Fair & Lovely, Pond's,
Sunsilk, Clinic, Pepsodent, Close-up, Lakme, Brooke Bond, Kissan, Knorr-Annapurna,
TY BMS | 2012-13 40
Marketing Manufacturing
Sales Finance Distribution
7/30/2019 Business Ethics - A Look Into CSR
41/88
Kwality Wall's are household names across the country and span many categories -
soaps, detergents, personal products, tea, coffee, branded staples, ice cream and culinary
products. They are manufactured over 40 factories across India. The operations involve
over 2,000 suppliers and associates. HUL's distribution network, comprising about 4,000
redistribution stockiest, covering 6.3 million retail outlets reaching the entire urban
population and about 250 million rural consumer.
HUL has traditionally been a company, which incorporates latest technology in all its
operations. The Hindustan Unilever Research Centre (HLRC) was set up in 1958, and
now has facilities in Mumbai and Bangalore. HLRC and the Global Technology Centres
in India have over 200 highly qualified scientists and technologists, many with post-
doctoral experience acquired in the US and Europe.
3.5 PRODUCT PROFILE
HULs business activities are divided into four broad areas:
Home and personal care
Personal wash, fabric wash, home care, oral care, skin care, hair care, deodorants
and talcs, colour cosmetic
Foods
tea, coffee, branded staples, culinary products, ice creams, Modern Foods ranges
New Ventures
Hindustan Lever Network, Ayush ayurvedic products and services, Sangam,
Pureit water purifiers.
Exports
TY BMS | 2012-13 41
7/30/2019 Business Ethics - A Look Into CSR
42/88
HPC, beverages, marine products, rice
3.6 BRANDS
HUL s brands are household names across the country. They include:
TY BMS | 2012-13 42
7/30/2019 Business Ethics - A Look Into CSR
43/88
Lifebuoy, Lux, Surf Excel, Rin, Wheel, Fair & Lovely, Pond s, Sunsilk, Clinic,
Pepsodent, Close-up, Lakme, Brooke Bond, Kissan, Knorr-Annapurna and Kwality
Walls.
3.7 HUL NEW GROWTH STRATEGY
After having fought a bitter price battle for market share
with its rivals, Hindustan Unilever Ltd (HUL), Indian
subsidiary of the Anglo-Dutch consumer goods company
Unilever Plc, is now working on a new growth strategy for
its laundry business. Price cut or hike is not a long-term
growth strategy. Pricing, in fact, is now pass. Their strategy
for growth, now is focused on product innovation, new
consumer and retail trends and aggressive marketing and
promotions. This comes even as Unilever is scouting for a potential buyer for its laundry
business in the US.
HUL says it is quite upbeat about the segment and says the laundry segment is one of its
key growth areas. They have done key innovations across the product portfolio and it is
working for them. They have successfully migrated from Rin Supreme to Surf Excel and
Wheel Smart Srimatiwhich was rolled out in 2006is also on the right track. HULs
TY BMS | 2012-13 43
7/30/2019 Business Ethics - A Look Into CSR
44/88
market share in the laundry segment grew to around 37.8% in the quarter ended June
from 35.5% in the same period last year, according the market research firm ACNielsen.
However, this time, the increase was not at the expense of price war with its
multinational rival Procter & Gamble Co. P&G also gained 0.5 percentage points, up to a
7.6% share. Nirma Ltd, the Ahmedabad-based manufacturer, however, saw its market
share dip by 1.7% percentage points to 13.5%.
Wheel, a value brand that, according to Vats contributes around 50% of HULs laundry
segment revenues, increased its market share by 2 percentage points in the same period,
with a total share of about 18%.
According to ACNielsen, the
laundry industry in India was worth
Rs7,908 crore in 2006 and rose 8.4% over
2005. HUL doesnt report its laundry
revenues separately but puts them under
the soaps and detergent category.
In 2006, HULs soaps and detergents segment contributed around Rs5,596 crore to the
companys total sales of Rs12,103 crore.
Laundry has been an attractive segment in the past and is likely to keep growing in the
near future. The recent price war between companies led to erosion in their profitability
but now, the industry is stabilizing, says Unmesh Sharma, an analyst at Macquarie
Securities here. According to Vats, the laundry business is witnessing a surge in demand
from cities and HUL is focusing on Tier I and II cities to tap that demand.
TY BMS | 2012-13 44
7/30/2019 Business Ethics - A Look Into CSR
45/88
Consumers today are buying more clothes. Trends suggest that the usage of detergents
has gone up as a result. Also, with premium quality of clothes, people want to use better
and branded products. Still, some of HULs recent moves, such as promotional
campaigns and advertising, seem right. Still, it is too early to say what result their new
strategies will yield.
3.8 SWOT ANALYSIS
Strength
1. Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods
company, touching the lives of two out of three Indians with over 20 distinct
categories in Home & Personal Care Products and Foods & Beverages..
2. Due to its long presence in India has deep penetration 20 consumer product
category, over 15,000 employees, including over 1,300 managers, is to "add vitality
to life."
3. The company derives 44.3% of its revenues from soaps and detergents, 26.6% from
personal care products, 10.5% from beverages, and the rest from foods, ice creams,
exports, and other products.
4. Low cost of production due to economic of scale. That means higher profits and / or
more competitioners. Better market penetration.
TY BMS | 2012-13 45
7/30/2019 Business Ethics - A Look Into CSR
46/88
5. HUL is also one of the country's largest exporters; it has been recognized as a Golden
Super Star Trading House by the Government of India.
Weakness
1. Continuous threat from other competitors.
Opportunities
1. Increasing per capita national income resulting in higher disposable income.
2. Growing middle class and growing urban population.
3. Increasing gifts cultures.
4. Increasing departmental stores concept impulse @ at cash counters.
5. Globalization.
Threats
HUL's tea business has declined marginally, reason is that, cost pressure is likely due
to rising crude and freight costs.
3.9 PEST ANALYSIS
Political
Since the budget range is decontrolled, no political effects are envisaged.
Economical
1. Increasing per capita income resulting in higher
2. Disposable income
3. Growing middle class/urban population increase in demand
4. Low cost of production better penetration
Social
TY BMS | 2012-13 46
7/30/2019 Business Ethics - A Look Into CSR
47/88
1. Per capita consumption expected to increase fashion
2. Increasing gifts culture increase in demand
Threats
Will have to reinforce technology to international levels. Once India is a fully free
economy.
3.10 MARKETING MIX
Product
Satisfaction suffices. But delight dazzles the average company will compete for customer
by conforming to her expectation consistently. But the winner will surpass them by
constantly exceeding her expectation, delivering to her door step additional benefits
which she would never have imagined possible. Hindustan Unilever Ltd(HUL) offer such
product. The wide variety products offered by the company include:
Bathing soaps: Lux, Lifebuoy, Liril, Hamam, Breeze, Dove, Pears and Rexona
Laundry items: Surf Excel, Rin and Wheel
Skin care: Fair & Lovely, Ponds and Vaseline
Hair care: Sunsilk and Clinic
Oral care: Pepsodent and Close up
TY BMS | 2012-13 47
7/30/2019 Business Ethics - A Look Into CSR
48/88
Deodorants: Axe and Rexona
Colour cosmetics: Lakme
Ayurvedic: Ayush
Tea: Brooke Bond and Lipton
Coffee: Bru
Foods: Kissan, Annapurna and Knorr
Ice cream: Kwality Walls .
Pricing
Make no mistake. Second P of marketing is not another name for blindly lowering prices
and relying on this strategy alone to increase sales dramatically. The strategy used by
Hindustan Unilever Ltd(HUL) is for matching the value that customer pays to buy the
product with the expectation they have about what the production is worth to them.
Hindustan Unilever Ltd(HUL) has launched various products which cater to all customer
segments. So every customer segment has different price expectation from the product.
Therefore maximizing the returns involves identifying right price level for each segment,
and then progressively moving through them.
Physical Distribution Place
BRAND ISNT THE ONLY ANY MORE. Marketers and finance manager need a new
term to evaluate their business:
TY BMS | 2012-13 48
7/30/2019 Business Ethics - A Look Into CSR
49/88
Distribution Equity. It takes much more time and effort to build, but once built,
distribution equity is much together to erode.
The fundamental axiom of Indian consumer market is this:
You can set up a state-of the-art manufacturing facility, hire the hottest strategies on the
block, swamp prime television with best Ads, but the end of it all, you would be know of
selling your products. The cardinal task before the Indian market is managing is to shoe-
horn its product on retail shelves. Buyers are paying for distribution equity not brand
equity and market shares.
Why does the company need distribution equity more anything in India? With technology
and competitive pressure slash in it is becoming increasing difficult for marketers to
retain a unique product differentiation for ling period. In a product and price parity
situation, the brand that sells more is the one that reaches the highest number of
customers.
India The operations involve over 2,000 suppliers and associates. HUL's distribution
network, comprising about 4,000 redistribution stockists, covering 6.3 million retail
outlets reaching the entire urban population, and about 250 million rural
consumers.television has already primed and population for consumption, and the
marketer who can get to the to the consumer ahead of competition will give a hard to overtake lead. But getting their means managing wildly different terrains-climate,
language, value system, life style, transport and communication network. And your brand
equity isnt going to help when it comes to tackling these issues.
Own distribution network consist of clearing and forwarding (C&F) agents & distribution
stockiest. This network of distribution can either contact wholesalers and which in turn
retailers or the distributors can contact to the retailers directly.
Once the stock product reaches retailers, the prospective customers can have access to the
product.
Hindustan Unilever Ltd(HUL) distributes the product in the manner stated above.
Hindustan Unilever Ltd(HUL) distribution network has expanded. Beside use of
improved logistics, Hindustan Unilever Ltd(HUL) is also attempting to improve the
TY BMS | 2012-13 49
7/30/2019 Business Ethics - A Look Into CSR
50/88
distribution quality. To address the issue of product stability, it has installed visi colors at
several outlets. This helps in maintaining consumption in summer when sales usually
drops due to the fact that the heal effects product quality and thereby off takes.
Looking at the low penetration of few products, a distribution expansion would itselfbeing incremental volume. The other reason is arch rival Procter & Gamble Co. reaches
more than a million retailers.
This increase in distribution is going to be accompanied by reduction in channel costs.
Hindustan Unilever Ltd(HUL) marketing costs, at 18% of total costs, is much higher than
Procter & Gamble Co. The company is looking to reduce this parity level. At Hindustan
Unilever Ltd(HUL), they believe that selling FMCG is it like selling soft drinks.
Promotion
If an advertisement is to communicate effectively, the receiver must at least half want it
to, and be prepared too take step toward the sender. Effective advertising is rarely
hectoring or loudly explicit. It often both attracts and generates arm feelings. More
often than not, a successful campaign has a stronger element of the unexpected a quality
that good advertising shares with much worthwhile literature.
To penetrate into the inner recesses of her memory, communication must first ensure
exposure, grab her attention evoke her comprehension, grab her acceptance and then
extract retention competing with thousands of other units of communication trying to do
the same.
Finding showed that the adults felt too conscious to be seen consuming a product actually
meant for children. The strategic response address the emotional appeal of the band to the
TY BMS | 2012-13 50
7/30/2019 Business Ethics - A Look Into CSR
51/88
child within the adult. Naturally, that produced just the value vacuum that Hindustan
Unilever Ltd(HUL) was looking to fill. Thereafter it was the job of the advertising to
communicate customer the wonderful feeling that he could experience by re-discoursing
the careful, unself conscious, pleasure seeking child within himself a graft these
feeling onto the Ad campaign like hasso to khul k hasso for close up, cream
bathing bar for dove soap and daag ache hai for surf excel have been sure shot
winner with the audience.
It has also launched Pureit, a home water purifier which supplies drinking water without
boiling/need of electricity , As well as outdoor and radio ads, ad agency contract has
created communication for cinemas and even ATM machines for the brand.
All ICICI s ATM a message flashes on the screen as soon as customer insert his ATM
card. Something familiar is planned for phone-book as well. In cinemas, Hindustan
Unilever(Ltd)has a message on-screen just before the lights are dimmed to give them a
chance to get their product There will also be after dinner sampling in restaurants to
begin with, 30 catteries in Mumbai have been selected.
Ad spend in 2000 was about 14% of sales and the management said that plans to maintain
as spend at this level in the current year also.
Ad since any discussion today would be incomplete without mention e word, themanagement plans to tap this new channel of marketing. Beside the company website
(i.e. www.unilever.com), that the company has launched, it had also entered into various
marketing relationship with other portals, specially targeted during festivals and events
such as Valentines day, etc.
Its a combination of spiffing up its key brand, researching and improving the newer
products that havent taken off, supported with high ad spends that Hindustan
Unilever(Ltd) hopes will see it emerges stronger after the current slowdown, as well asexpand the market.
TY BMS | 2012-13 51
7/30/2019 Business Ethics - A Look Into CSR
52/88
Positioning
In the 1970s consumers were ready to pay more for more, and luxury goods flourished.
In the 1980s, consumers began to demand more for same, and the discounting era grew
strong. Todays consumer demanding more for less, and the winner will be that super
value marketers. Some of todays most successful companies recognize those
customers are more educated and able to recognize true customer value
Positioning is simply concentrating on an idea or even a word defines that company
in the mind of the consumer. It is more efficient to market one successful concept to one
large group of people than 50 product or service ideas to 50 separate group
repositioning is a must when customer attitude have changed and product have strayed
away from the consumers long standing perception of them
TY BMS | 2012-13 52
7/30/2019 Business Ethics - A Look Into CSR
53/88
Hindustan Unilever (Ltd) is an anchor in sea of consumer products. As a variety of
competitive claims assails her senses, today customer uses complicated decision making
process to assess the alternative before making a purchase. Since Hindustan
Unilever(Ltd) is more clearly associated with a particular set of attributes in terms of
benefits and prices, the quicker becomes her search process.
Positioning of individual product:
1) Lifebuoy is one of Unilevers oldest brands with more than a hundred-year
history, as www.unilever.com informs. Lifebuoy has become more than just a
red bar of soap today the brand provides hygiene and health solutions for
families
2) Fair & Lovely, a hot-selling fairness cream, which promises a lighter skin tone
for many of Indias complexion-conscious consumers
.
3.11 MARKET SEGMENTATION
Market place for any product is comprised of many different segments of consumers,
each with different needs and wants. Markets segmentation can be defined in a number of
ways such as:
Demographic variables (e.g. Consumers are groups, gender, material states incomeetc)
The lifestyle of consumers (i.e. their interests and activities) the benefits whichconsumers look for in a product or on the occasions when the product might be
consumed.
Hindustan Unilever (Ltd) takes into account all these factors when producing a rangeof products. It targets different segments within the market, such as the:
TY BMS | 2012-13 53
7/30/2019 Business Ethics - A Look Into CSR
54/88
Break segment products which are normally consume as a snatched break and oftenwith tea and coffee.
Impulse segment these products are often purchase on impulse, used these and then.They include product such as close up.
Take home segment this describes product that are normally purchased insupermarkets, taken home consumed at a later stage.
TY BMS | 2012-13 54
7/30/2019 Business Ethics - A Look Into CSR
55/88
CHAPTER 4
4.1 HUL SERVICE TO SOCIETY
HUL believes that an organisation's worth is also in the service it renders to the
community. HUL is focusing on health & hygiene education, women empowerment, and
water management. It is also involved in education and rehabilitation of special or
underprivileged children, care for the destitute and HIV-positive, and rural development.
HUL has also responded in case of national calamities / adversities and contributes
through various welfare measures, most recent being the village built by HUL in
earthquake affected Gujarat, and relief & rehabilitation after the Tsunami caused
devastation in South India.
In 2001, the company embarked on an ambitious programme, Shakti. Through Shakti,
HUL is creating micro-enterprise opportunities for rural women, thereby improving their
TY BMS | 2012-13 55
7/30/2019 Business Ethics - A Look Into CSR
56/88
livelihood and the standard of living in rural communities. Shakti also includes health and
hygiene education through the Shakti Vani Programme, and creating access to relevant
information through the iShakti community portal. The program now covers 15 states in
India and has over 31,000 women entrepreneurs in its fold, reaching out to 100,000
villages and directly reaching to 150 million rural consumers. By the end of 2010, Shakti
aims to have 100,000 Shakti entrepreneurs covering 500,000 villages, touching the lives
ofover600 million people.
HUL is also running a rural health programme Lifebuoy Swasthya Chetana. The
programme endeavors to induce adoption of hygienic practices among rural Indians and
aims to bring down the incidence of diarrhoea. It has already touched 70 million people
in approximately 15000 villages of 8 states. The vision is to make a billion Indians feel
safe and secure.
If Hindustan Unilever straddles the Indian corporate world, it is because of being single-
minded in identifying itself with Indian aspirations and needs in every walk of life.
4.2 HUL CSR CONTRIBUTIONS
4.2.1 CSR philosophy
Their approach to Corporate Social Responsibility (CSR) is rooted in the belief that to succeed
requires the highest standards of corporate behaviour towards our employees, consumers and the
societies and world in which we live. Their growth and profitability are sustained by adherence
to corporate purpose and to code of business principles.
TY BMS | 2012-13 56
7/30/2019 Business Ethics - A Look Into CSR
57/88
Their CSR philosophy is embedded in their commitment to all stakeholders - our consumers,
employees, the environment and the society that they operate in. It is this commitment they
believe, that will deliver sustainable profitable growth.
4.2.2 The CSR policy of HUL is to
Be a socially responsible corporate entity with thrust on three pillars of sustainable
development-Social, Environmental & Economic.
4.2.3 CSR communication-The United Nations Global Compact - Reaffirmation of
Commitment
HUL s chairman MR.RS BANGA had written on May 15, 2001 to the UN Secretary
General, Mr. Kofi Annan, confirming Hindustan unilever Limited (HUL) s support of theUN Global Compact, while welcoming its recognition of the positive contribution that
business has to make to a more prosperous and sustainable world. He wished to confirm
that as the Unilever Company in India, HUL reaffirms its commitment to the principles
of the UN Global compact.
4.3 CSR PRIME INITIATIVES
IT-powered system has been implemented to supply stocks to redistribution stockists on a
continuous replenishment basis. The objective is to catalyse HULs growth by ensuring
that the right product is available at the right place in right quantities, in the most cost-
effective manner. For this, stockists have been connected with the company through an
Internet-based network, called RSNet, for online interaction on orders, despatches,
information sharing and monitoring. RS Net covers about 80% of the company's
turnover. Today, the sales system gets to know every day what HUL stockists have sold
to almost a million outlets across the country. RS Net is part of Project Leap, HULs end-
to-end supply chain, which also includes a back-end system connecting suppliers, all
company sites and stretching right upto stockists.
TY BMS | 2012-13 57
7/30/2019 Business Ethics - A Look Into CSR
58/88
4.3.1 Project Shakti
HULs partnership with Self Help Groups of rural women, is becoming an extended arm
of the company's operation in rural hinterlands. Started in 2001, Project Shakti has
already been extended to about 50,000 villages in 12 states - Andhra Pradesh, Karnataka,
Gujarat, Madhya Pradesh, Tamil Nadu, Chattisgarh, Uttar Pradesh, Orissa, Punjab,
Rajasthan, Maharashtra and West Bengal. The respective state governments and several
NGOs are actively involved in the initiative. The SHGs have chosen to partner with HUL
as a business venture, armed with training from HUL and support from government
agencies concerned and NGOs.
4.3.2 Empowerment of Women
Creating income generating opportunities for women
They seek to empower underprivileged rural women by providing them the opportunity
to generate income. But as importantly, what it provides them is newfound dignity and
self-respect.
Supported by micro-credit, these women from Self Help Groups (SHGs) are HULs
rural direct-to-home distributors. This in turn helps us increase our reach, penetration and
communication with rural consumers. This initiative has so far benefited women in 4750
villages in Andhra Pradesh, Karnataka & Gujarat touching about 7.5 million rural people.
It has been widely supported by various developmental bodies and the government.
TY BMS | 2012-13 58
7/30/2019 Business Ethics - A Look Into CSR
59/88
Their vision is to change the lives of women in one lakh villages by making them Shakti
dealers. This provides economic opportunities for the underprivileged while creating a
distribution and communication channel for our brands to access untapped rural markets
with a consumer base of over 100 million rural Indians.
4.3.3 Rehabilitation
Helping the underprivileged and specially challenged children lead a normal life
ASHA DAAN in Mumbai is a home for the poorest of the poor. Managed by the
Missionaries of Charity, it is actively supported by and operates from premises given by
us. It has been home to over 20,000 people since 1976. It provides care and compassion
as well as food, shelter and medication to the homeless, sick, infants and HIV +ve
patients.
Their projects - ANKUR in Doom Dooma Plantations - Assam, KAPPAGAM and
ANBAGGAM in our Tamil Nadu plantations are aimed at physically and mentally
challenged children. The projects provide educational, therapeutic, vocational and
recreational inputs which help the children to be self-reliant and engage in some fruitful
occupation.
Their projects have been widely appreciated and ANKUR has also received the Lawrie
Group Worldaware Award for Social Progress from HRH Princess Royal in London.
4.3.4 Greening barrens
HUL's Water Conservation and Harvesting project is committed to extending its efforts
on water management to the larger community, and has engaged in community projects
in water adjacent to manufacturing sites. HUL's vision is to continuously innovate
technologies to further reduce water consumption and further increase conservation in its
TY BMS | 2012-13 59
7/30/2019 Business Ethics - A Look Into CSR
60/88
operations. Simultaneously, HUL sites will progressively help communities, wherever
required, to develop watersheds.
4.3.5 Relief and Reconstruction
Rebuilding lives reconstructing an entire village
The earthquake in Gujarat in 2001 was devastating, affecting many people and also our
factory at Kandla. The immense magnitude of the tragedy provoked them to extend help
beyond their own operations in Kandla and they chose Nani Chirai, a completely wrecked
village in Kutch district, for reconstruction.
They built YASHODADHAM with the help of NGOs and the villagers, with their
financial assistance and their managers implementing the project on site. Spread over 26
acres, this new village is fully equipped with piped water, sanitation, underground
drainage and electricity. It also has a school, a playground and a community centre. In
Yashodadham, they have gone beyond financial help into active involvement in the
design and construction of the new village. Yashodadham is today a vibrant rural
community with happy people secure in the comfort of their new homes.
Responding when a community is in adversity, they believe, is the duty of a good
corporate citizen.
4.3.6 Integrated Rural Development
Improving the quality of life in backward areas
Providing development opportunities in backward areas is an important part of their
philosophy. 28 of their plants are located in the most underdeveloped regions of India
spread across 11 political states. Apart from providing local employment they have also
made efforts in the development of surrounding villages through their INTEGRATED
RURAL DEVELOPMENT (IRD) program.
TY BMS | 2012-13 60
7/30/2019 Business Ethics - A Look Into CSR
61/88
Communities in over 500 backward villages adjacent to their plants in locations like
ETAH and ORAI in Uttar Pradesh, have benefited through IRD. Their initiatives span
adult literacy, animal husbandry, modern farming, infrastructure development, education
and medical care. IRD is also an integral part of their Business Leadership Training
Program, enabling every trainee to get an in-depth understanding of rural lifestyles,
conditions, opportunities and challenges. Their involvement through this has made all
managers more sensitive to the needs and aspirations of rural India.
4.3.7 Lifebuoy swasthya chetna
Lifebuoy Swasthya Chetana is the single largest rural health and hygiene educational
programme ever undertaken in India. Its objective is to educate people about basic
hygienic habits.
Started in 2002, the programme has as of now covered about 15000 villages. It has
already touched about 70 million people, imparting hygiene education to over 25 million
children. The vision of this on-going project is to make a billion Indians feel safe and
secure by focusing on their health and hygiene needs.
4.3.8 Happy homes
TY BMS | 2012-13 61
7/30/2019 Business Ethics - A Look Into CSR
62/88
Under the Happy Homes initiative, HUL supports special education and rehabilitation of
children with challenges. Over 20,000 individuals have benefited from the Happy Homes
initiatives since inception. HUL is wholeheartedly involved with all four centers and will
continue to be involved in the future. The four happy homes centers are-ASHA DAAN,
ANKUR, KAPPAGAM & ABAGAM. Ankur received the Lawrie Group World Aware
Award for Social Progress in 1999 from HRH Princess Royal in London. These centres
have taught the children the self-help skills, useful vocational activities Infact, some of
the children have become relatively self-reliant by earning through crafts learnt at the
center.
4.3.9 Fair & lovely foundation - economic empowerment of women
The Fair & Lovely Foundation is HUL's initiative which aims at economic empowerment
of women across India. It aims to achieve this through providing information, resources,
inputs and support in the areas of education, career and enterprise. It specifically targets
women from low-income groups in rural as well as urban India. Fair & Lovely, as a
brand, stands on the economic empowerment platform and the Foundation is an extension
TY BMS | 2012-13 62
7/30/2019 Business Ethics - A Look Into CSR
63/88
of this promise. The Foundation has renowned Indian women, from various walks of life,
as its advisors.
The support provided by Fair & Lovely Foundation will help girl children avail
opportunities of higher education and acquire skills in appropriate professions. The series
of projects that have been drawn up to achieve the vision include EDUCATION,
CAREER and ENTERPRISE.
4.3.10 Yashodadham
HUL has reconstructed a village in the Bhachau Taluka of Gujarat's Kachch district. The
village, which has been named Yashodadham, was dedicated to its 1100 residents in
December 2002. The residents belong to Nani Chirai village, which was completely
wrecked by the devastating earthquake of January 2001.HUL, which had launched
immediate relief after the quake in areas adjacent to its Kandla Exports factory,subsequently decided to reconstruct a village, which was completely wrecked. The
objective was to help a completely wrecked village, because such settlements had the
greatest need for help.
4.3.11 Energy Management
Conserving energy through innovative thinking and efficient process
Their efforts focused on energy conservation as well as use of renewable energy have
resulted in a reduction of their energy consumption by 61% since 1996. It has also led to
a 58% reduction of emission of Green House gases.
TY BMS | 2012-13 63
7/30/2019 Business Ethics - A Look Into CSR
64/88
They have taken several initiatives including process redesign, fuel substitution,
rationalizing equipment and productivity improvement. They have deployed new
technologies to optimize electrical energy inputs and heat recovery while plugging
atmospheric energy losses. This has reduced the global warming potential as well as
saved energy.
Their En