Liverpool John Moores University

Corporate Social Responsibility

Stakeholder Analysis:

Walmart

Module Code: LBSMA2001Module Title: MANAGEMENT for FINANCIAL MANAGERSTutor: John ReedFull Name: Rachel MurphyPerson ID: 323016Course Title: BA (Hons) Marketing

1. You are required to produce a 1,500 word report that covers the following aspects. Briefly review the CSR models which managers could consider when determining their position on CSR.

Identify the range of stakeholders to whom your selected corporation could be considered responsible. Give a brief explanation of why the corporation’s CSR stance is important to each of the stakeholders.

Summarise and evaluate your corporation’s position in relation to the 3C-SR model developed by Meehan et al as below. Note that you need to explicitly consider how your corporation behaves under the 3Cs of Commitments, Connections and Consistency as detailed in the Meehan et al paper.

2. Corporate Social Responsibility Issues and Models

The term ‘Social Responsibility’ has been an important term in business during the past century. However, an element of confusion and uncertainty still surrounds the definition and the understanding of Corporate Social Responsibility today.

Carroll suggests that; “One of the factors contributing to the ambiguity that frequently shrouded discussions about social responsibility was the lack of a consensus on what the concept really meant” (Carroll, 1979, p.497). This statement is further reinforced by other interpretations of CSR, considering it “Devoid of an internal structure and content, it has come to mean all things to all people” (Sethi, 1975, p.58). It is therefore apparent that although a CSR strategy is deemed as a worthwhile and beneficial commodity, the framework of objectives are not clear enough for a business to make any real successful attempt.

Corporate Social Responsibility (CSR) has grown in importance over the last number of years and is likely to continue to move up the corporate agenda. There are many definitions and interpretations of the term Corporate Social Responsibility. According to Frankental (2001) corporate social responsibility, however one chooses to define the term, implies that a company is responsible for its wider impact on society. Yet these wider responsibilities are not reflected in the accountabilities of companies with regard to UK Company Law.

Existing literature from authors like Crowther (2003) and Idowu and Towler (2004) have argued that there are enormous benefits, which corporations of the twenty-first century can derive when they are perceived by their stakeholders as being socially responsible. The field of corporate social responsibility according to Jackson (2003) appears to have thrived following recent incidents in the corporate world and the world in general; for example the collapse of Enron, WorldCom, Parmalat, the pressing ecological issues such as climate change, a few well-publicised environmental accidents, the globalisation of the economy and information transfer. It is therefore, unfortunate that so many interpretations of the topic have shrouded the principles of CSR.

Early models of CSR emerged in the 1960’s and focused upon the “social” aspect of CSR as referring directly to those responsibilities above and beyond economic and legal obligations.

From a management perspective, elements of corporate social responsibility have been criticised by economists Milton Friedman and Henry Manne as an attempt to regulate the free market through social and ethical obligations (Friedman, 1970, Manne and Wallich, 1972). Also, an organisation’s corporate performance is difficult to evaluate as it is determined by the culture of which the organisation operates. These issues place doubt on the legitimacy and effectiveness of the concept and its role in a globalised free market economy thus putting pressure on the need for a standalone model to support its practice modern society (Carroll, 1979, Sethi, 1975, Meehan et al 2006, Sethi, 1975).

It is only logical that the management of a strong social performance would improve the perception of any business. However, understanding what needs to be achieved and physically working towards achieving are difficult to approach. Meehan et al (2006) propose a method of tackling this issue via “competitive advantage through “social resources”” or the 3C-SR model. This model attempts to build on the idea that corporate responsibility is a strategic method of achieving profits rather than a philanthropic gesture on behalf of the organisation or a means of regulation (Carroll, 1991). If any organisation lacks in ethical and social commitments, connections with partners in the value network or consistency of behaviour over time it is considered to have a competitive disadvantage. It is the correct

management of these elements which in turn builds on an effective corporate social performance. The correct management however may be difficult to achieve as individuals will perceive the levels of which they operate differently and there are no measurable levels for success. The 3C-SR model offers a positive approach to standardising the complications of Corporate Social Responsibility but as a guideline for success it is questionable.

3. Walmart Stakeholder Engagement.

Walmart has rapidly grown to a position of unprecedented power over the years and has experienced equally rapid growth in social and legal criticism across a wide spectrum of issues.According to their mission statement, Walmarts goals have been consistent and constant since the companys inception. “Saving people money to help them live better” was the goal that Sam Walton envisioned when he opened the doors to the first Walmart in 1962. Walmart aims to continually find ways to reduce costs throughout their supply chain while bringing quality products to their shelves.

Walmart is a neighbour and citizen in thousands of communities across the U.S. and around the world. Walmart's CSR activities stretch across its people, the community and the environment. The company recognises its responsibility to help sustain the communities in which it operates. Wal-Mart focuses on environmental sustainability as it is a key to improve the quality of life for people around the world; other areas include its employees as well as community projects.

Engaging with stakeholders is a vital part of managing corporate social responsibility. By engaging with stakeholders you are able to increase your understanding of stakeholders’ views and expectations, helping businesses to improve their strategy, processes and products. Walmart use a Sustainability 360 approach which is very important to how they run the entire company.They work with their customers, associates, suppliers and communities, in order to grasp the full potential of their company and its size and reach.

Every business has stakeholders, and in the case of Walmart there are several important stakeholders, both integral within the business and outside of the business, they are as follows:

The Shareholders The Wal-Mart Executives The Employees The Community (where Wal-Mart is located) Consumers Non-profit Organizations Other Retailers Online Retailers Gasoline Retailers International Retail Stores Politicians

Further analysis of the stakeholders can be found in Appendix 1.

Using the 3C-SR model, the corporate social performance of Walmart can be summarised through specific criteria.

4. Evaluation of Walmart’s Corporate Social Performance.

Ethical and social commitments

Ethical and social commitments represent the values element of social resources. They comprise the ethical standards and social objectives the organisation subscribes to and are manifested in its mission, strategic objectives, strategy programmes, organisational policies and corporate culture, (Meehan et al 2006)When Sam Walton founded Walmart, he instilled many principles and values within the company, three of which became our 3 Basic Beliefs to which we remain firmly committed.

Respect for the Individual

Service to the Customer Striving for Excellence

An example of Walmarts ethical and social commitments is the production of their statement of ethics. This Statement of Ethics aims to introduce all stakeholders to the types of attitudes and conduct that create an honest, fair and legal workplace. As one the worlds largest companies, Walmart conducts business in many countries around the world, a result, their actions and operations are subject to many different laws, customs, and cultures. The business activity is therefore very complex, and constantly changing due to new legislation or attitudes in society. When necessary the Statement of Ethics is modified to conform to changes in laws and customs. Walmart expects that all those associated with Walmart must uphold the law at all times. However, Walmart have experienced a lot of heavy criticism in regards to their basic legal and ethical practices. In the United States the social, legal, and political issues facing walart are vast and seem to grow from one month to the next. Walmart has faced a flood of lawsuits and issues with regards to its workforce. These issues involve low wages, poor working conditions, inadequate health care, as well as issues involving the company's strong anti-union policies. Walmart is currently the defendant in the largest class action gender discrimination case in the history of the United States. And the company has settled countless cases for wage and hour law violations. In 2008, after years of being embarrassed by lawsuits over its wage practices, the company agreed to settle 63 cases pending in federal and state courts in 42 states of America(ny times 2008). According to the Wal-Mart Watch web site, "In June 2004, U.S. District Court Judge Martin Jenkins granted class-action status to $1.6 million current and former female Walmart employees who charge the company with paying women less and offering them fewer opportunities for promotion.

Connections with partners in the value network

Creating shared value, benefits all parties. Shared value can be created through policies such as fair trade initiatives, which not only creates long lasting fair relationships with suppliers, but ensures fair labour and help for local communities. In October 2007, Sam’s Club became the first mass-market retailer in the U.S. to offer Fair Trade Certified™ bananas. As of December 31, 2009, their sales of these bananas had generated more than $900,000 to fund community development projects in Colombia while eliminating the need to use more than 875,000 gallons of herbicides. At Walmart, they believe in a philosophy of operating globally and giving back locally. They are able to make the greatest impact on their communities by supporting causes that are important to their customers right in their own neighborhoods. However, communities often don’t get a say with where Walmart open their stores. According to their 2010 Global Sustainability report, Walmart states that they use an approach called Sustainability 360 to take a more comprehensive view of their business in order to engage more than 100,000 suppliers, more than 2 million associates and millions of customers around the world in their sustainability efforts. However, reports of the true actions of Walmart are completely contradictory. As a large buyer to most of its suppliers, Walmart has the power to bring lower prices to attract its customers. The company pressures its suppliers to sell at lower prices, often making little profit themselves. If suppliers do not keep prices competitive with other suppliers, they risk losing business from Walmart altogether, in favour of a lower-priced competitor. As Bavaria (2005) has observed: “For years, Wal-Marts business model has seemed to be about reducing costs at all costs, whatever the social and environmental consequences”.

When talking about important environmental issues in the world today, it is necessary to factor in the human element in every step of the equation. As part of their sustainability report, Walmart state that they only work with suppliers who share their commitment to being socially and environmentally responsible. However, earlier this year according to WalmartWatch (2010) it has been found that their “Love, Earth” brand has been working in breach of their own policies. The jewellery brand which works together with large-scale retailers and their suppliers, to deliver affordable, quality jewellery made from gold and silver that is traceable and comes from mines that meet Walmart’s environmental and social criteria. Instead it has been reported that there has been digging of enormous pits, so large they could swallow cities, and piling the extracted ore into heaps that would cover many football fields several hundred feet high; spraying a cyanide solution over the heaps, recovering the used cyanide, then respraying the cyanide solution over the heap. This is clearly not what consumers expect when they hear “sustainable” or environmentally friendly.

It is important to state on the other hand that Walmart do have philanthropic schemes in place to benefit the communities that they are based in. Walmart’s current focus is on Hunger Relief: Walmart and the Walmart Foundation made a $2 billion commitment through 2015 to hunger relief efforts in the U.S. in order to support the record 1 in 6 Americans who do not know where their next meal is coming from. As hunger relief is now an integral part of the Foundation’s work, the Foundation seeks to fund initiatives that integrate hunger relief into

the main focus areas listed above. This act can be criticised, as such a big multinational coproration, they waste millions of dollars on waste/out of date food everyday, food that could help the hungry.

Consistency of behaviour

Consistency refers to the behavioural element of social resources over time and across all facets of an organisations operation. Adherence to stated values and careful selection (and development) of business partners, who have matched social commitments, is the litmus test of an organisation’s own credibility. Failure to “walk the talk” is a common source of criticism of many companies claiming to be socially responsible.

Walmart started out with a single discount store in Northwest Arkansas and in less than 50 years grew to become the world’s largest retailer, with thousands of stores and clubs and millions of associates. It’s culture of ethics and integrity has been a constant throughout that transformation. From the beginning, it has defined who it is as a company, and how they as associates treat each other, their suppliers, and their customers.Walmart is consistant when it comes to offering low prices, which is a positive for the consumer. However, it also demonstrates consistantly bad ethical practices.Walmart often fail to adhere to the promises they make, such as protecting the environment, and looking after their employees. Most lawsuits against Walmart are often based on the same issues such as sexism in the work place.

Walmart have the capacity to be humane and incredibly philanthropic. When Hurricane Katrina hit the gulf region, Walmart contributed $17 million to the relief effort, in addition to more than $3 million in merchandise. A company capable of operating in such a coordinated, humane way should do so not just in a disaster but every day. There is no reason Walmart could not operate in an equally streamlined, well-organized manner to make sure that labor laws (on overtime, child labor, discrimination) are followed. There is no reason its impressive resources could not be marshaled to remedy the daily, ongoing disaster that so many of its workers face: low wages and inadequate healthcare.

5. Conclusion

Upon evaluation of the application of the 3C-SR model it is clear to see that Walmart in spite of its economic success, can be considered as a very unethical, company. This is due to the company’s operating policies and practices, the cultural, legal, social, and political environments in which it operates, and its size and power. Walmart is the world’s largest retailer, it sets industry standards for wages, benefits and corporate responsibilities that impact millions of retail workers, their families and communities. Walmart’s policies have not changed dramatically over the years since it was established, and continues to make every penny go as far as possible, often at the expense of its stakeholders. Wlamart has become the poster child for low wages and benefits in spite of the fact that Wal-Mart can point to many other firms in various aspects of retailing whose wages and benefits are no worse. As Walmart’s influence continues to grow at home and abroad, policymakers, media and others are asking questions about the impact of Walmart in their community. Unfortunately this impact all too often includes the lowering of standards that hurt communities and families.

6. References.

Bavaria, J. (2005), “Wal Mart: twenty-first century leadership?”, The Independent, 25 October.

CARROLL, A. B. (1979) A Three-Dimensional Conceptual Model of Corporate Performance, Academy of Management Review 4, Vol. 4,

CROWTHER, D. (2003), ‘‘Corporate social reporting: genuine action or window dressing?’’, in Crowther, D. and Rayman-Bacchus, L. (Eds), Perspectives on Corporate Social Responsibility, Ashgate, Aldershot, pp. 140-60.

FRANKENTAL, P. (2001), “Corporate social responsibility – a PR invention?”, Corporate Communication: An International Journal, Vol. 6 No. 1, pp. 18-23.

FRIEDMAN, M. (1962) Capitalism and Freedom, University of Chicago Press

IDOWU, S.O. and TOWLER, B.A. (2004), ‘‘A comparative study of the contents of corporate socialresponsibility reports of UK companies’’, Management of Environmental Quality: An InternationalJournal, Vol. 15 No. 4, pp. 420-37.

MANNE, H; WALLICH, H. C. (1972) The Modern Corporation and Social Responsibility, American Enterprise Institute for Public Policy Research, Washington D.C.

MEEHAN, J; MEEHAN, K; RICHARDS, A. (2006) Corporate Social Responsibility: The 3C-SR model, International Management Review 17, Vol. 3

NY Times (2008) Wal-Mart Settles 63 Lawsuits Over Wages [Online]Available at: http://www.nytimes.com/2008/12/24/business/24walmart.html[Accessed 18th February 2011]

SETHI, S. P. (1975) Dimensions of Corporate Social Performance: An Analytical Framework, California Management review 17, Vol. 3

Walmart Watch (2010) Love, Earth Brand Called Environmentally Responsible Despite Evidence Otherwise.Available at: http://walmartwatch.org/blog/archives/love-earth-brand-called-environmentally-responsible-despite-evidence-otherwise/[Accessed 18th February 2011]

7. Bibliography

Walmart (2010) Sustainability Progress Report [Online]Available at: http://cdn.walmartstores.com/sites/sustainabilityreport/2010/WMT2010GlobalSustainabilityReport.pdf [Accessed 18th February 2011]

Walmart (2008) Statement of Ethics. [Online]Available at: http://walmartstores.com/media/cdnpull/statementofethics/pdf/U.K_SOE.pdf[Accessed 18th February 2011]