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Executive Summery
This report focuses on the benefits of Corporate Governance (CG) and Corporate Social
Responsibility (CSR) engagement as well as the company’s strategies involving CSR by using The
Body Shop as the main focus of the report.
The Body Shop was regarded as one among the first companies in the cosmetic industry to publish a
report on its social responsibility commitment. The Body Shop has been using Corporate Social
Responsibility (CSR) successfully established itself as leader in the arena of social responsibility,
and increasing awareness of its name and product ranges. One of the company strategies is providing
extensive programs aimed at educating its consumers about corporate actions and using Anita’s
philosophy related to the Environment, Human and Animal rights and Fair Trading program for the
selling point.
The Body Shop went through the tough time later with the criticisms from the activist groups
campaigning for consumer to ban The Body Shop. As these activist group accused the company of
misleading the information and abusing the CSR for the benefits of the company.
1. The Body Shop History
The Body Shop was founded in 1976 by Anita Roddick, selling natural soap and lotion products, in
Brighton, UK (Van, Nijhof and Jeurissen, 2009), She was inspired to set up the shop after seeing a
store called ‘The Body Shop’ in Berkeley, California, USA, that sold cosmetic like shampoos,
lotions and body creams (Purkayastha, 2006). Also, having worked as a United Nations researcher in
the 1960s, Anita was aware that men and women in Africa, Asia and Australia used locally grown
plant extracts to care for their bodies (Van, Nijhof and Jeurissen, 2009).
The First Body shop had to be financed from extremely limited resources (Roddick, 1991, cited in
Van, Nijhof and Jeurissen, 2009). Anita made a virtue out of a necessity by bashing her soaps and
lotions on natural ingredients, such as bees wax, grains of rice, cocoa butter, almonds and bananas
(Van, Nijhof and Jeurissen, 2009). The product packaging was simple with handwritten label, which
people could also reuse. Urine sample bottles, the cheapest packaging available at the time, were
used as containers (Purkayastha, 2006).
At first, The Body Shop was unable to afford any advertising. Anita managed to compensate amply
for this cleverly playing the role of the underdog (Van, Nijhof and Jeurissen, 2009). When two
funeral directors threatened to sue her if she used the name ‘Body Shop’ as they considered
inappropriate name (Purkayastha, 2006). She managed to bring the problems to attention of a local
newspaper, ‘The Argus’ (Van, Nijhof and Jeurissen, 2009). The newspaper published the story as a
centrespread, which generated free publicity for her shop.
In the 1980s, Anita acquired the US right to the ‘Body Shop’ from the two entrepreneurs of
Berkeley, USA (Purkayastha, 2006).
On March 17, 2006, Body Shop announced that it had agreed to be taken over by L’Oreal in a ₤ 652
million deal (BBC news, 17 March 2006).
2. The major potential benefits of Corporate Governance (CG) and
Corporate Social Responsibility (CSR) engagement
As Zenisek (1979) cited in Maharaj (2008) stated that in order to be accepted as a good corporate
citizen organizations must be cognizant about societal expectations. The lack of attention to CSR and
social performance by organizations is gaining prominence in the strategy field as there is growing
acknowledgment that skilful stakeholder management contributes to firm’s value creation process,
by enhancing a firm’s intangible assets, such as reputation and subsequently its competitive
advantage (Clarkson, 1995; Hillman and Hitt, 1999 cited in Maharaj, 2008). Also, there are a
growing number of investors who are solely investing in companies that are recognizing their role as
corporate citizens and being socially responsible (Maharaj, 2008). Such proven benefits good CG
and CSR can bring the achievement of competitive advantage, better reaching market segment like
ethical consumers and socially responsible investors as mentioned from above. Furthermore, CG
and CSR engagement can enhance opportunities for strategic alliances or other partnerships as major
business opportunities for corporations with external constituencies, and, from an internal point of
view, enhancement of labour relations and employee commitment (Keinert, 2008).
2.1 Achievement of competitive advantage
CSR has long been discovered as a major source of competitive advantage for many reasons. Firstly,
CSR helps crating intangible assets. Seifert et al. (2003, p196) cited in Keinert, (2008) stated that ‘do
good in order to do well.’ Doing good certainly is the favourable influence exercised on key
stakeholder attitudes and public opinion toward corporations outstanding in their engagement for
society and the environment (Campbell et al, 1996 cited in Keinert, 2008). CSR engagement will
enhance the market position, the indirect and direct impact upon sales through the creation of
positive publicist and enhanced reputation (Keinert, 2008). The Body Shop had adopted this very
well from the start, it was associated with the social responsibility which also strongly associated
with the social activism of Anita. She was very critical of what she called the environmental
insensitivity of industry and called for a change in standard corporate practices (Purkayastha, 2006).
Anita wanted to establish a business with ethics. The Body Shop focused on being to become a good
corporate citizen organisation and socially responsible. For instance, Body Shop was one of the first
companies to publish “Values Report’ in 1996 (Purkayastha, 2006). ‘The Body Shop’s mission
statement (Purkayastha, 2006). Anita (BBC news, 17 July 2003) ones said ‘I don’t give a damn if we
were made successful by Mrs Rosie Brown who love her vitamin E cream. Behind us there was a
tacit acceptance of what we were doing.’
The Body Shop distinguished itself clearly from the competition. The Body Shop asked its suppliers
to sign declarations that they had performed no animal testing in the past five years, and had no plan
to perform tests of this kind in the future (Van, Nijhof and Jeurissen, 2009). The company has
differentiated itself by developing a niche product line and unique buying experience (Menon et al,
1999). For example, Body Shop provided product information, a number of leaflets and poster on
recycle paper provided information about social causes that the company believed in and encouraged
its customers to get involved. Therefore, all of these had given The Body Shop the competitive
advantage, like taking opportunities within the market and appeal to consumers and investor as well
as building partnerships and alliances.
2.2 Value-added to products and services
Another advantage potentially implied in CSR engagement is the creation of new business
opportunities through value-added to products and services, and raising consumers’ and investors’
interest in the corporation and its respective offers (Keinert, 2008). The Body Shop was creating to
the needs of the ethical consumer and socially responsible investor by creating identity called ‘
profits with a principles’ philosophy and the brand was closely associated with the social justice
agenda (Purkayastha, 2006). Furthermore, The Body Shop staff would receive half a day wage for
services to the community (Van, Nijhof and Jeurissen, 2009). This form of voluntary work is now a
popular expression of one aspect of CSR. Therefore, The Body Shop developed a loyal customer
base. As research suggests that consumers prefer to buy products and services, and investors prefer
shares from socially responsible firms (Keinert, 2008). Moreover, The Body Shop has extensive
programs aimed at educating their customers about corporate actions and philosophies related to the
environment. Establisng credibility, personalising purchases, and adding perceived value to the
product and service are some of the factor creating customer and brand loyalty (Menon et al, 1999)
As a result, the company has been able to expend very substantially its market share in both a
consistent and sustainable manner to the degree that it has even entered the mainstream market after
gaining strength and visibility in a market niche. Also, this group of consumers once they dispose of
sufficient knowledge about The Body Shop engaged with CSR, they tend to be loyal and made a
repeated purchase or willingness to pay a premium (Keinert, 2008). Moreover, the company seemed
to attract the ‘Socially oriented investors’ who tend to be loyal, truly engage with the company, and
not interested in portfolio ‘fashion and fads’ (McLachlan and Gardner, 2004 p13 cited in Keinert,
2008), CSR has been found to be also part of overall product and service evaluation and thus
exercises at least an indirect influence on consumer and investor loyalty (Keinert, 2008).
2.3 Achievement of organisational commitment
CSR engagement and an excellent corporate reputation for high values and ethical standards in the
treatment to their stakeholders can be, increasing the company attractiveness, increasing loyalty and
identification with the corporation, and thereby rendering employees more committed to the interest
of the organisation (Del Mar Garcia de los Salmones et al, 2005, p 370 cited in Keinert, 2008). An
organisation which builds employee commitment through CSR engagement will also be more likely
to attract and consecutively retain employees with equally high standards (Keinert, 2008), which
crucial for continuous growth. For example, employees are selected very much on the basis of
personal values (Sodeman, 2003 cited in Van, Nijhof and Jeurissen, 2009).
2.4 Equal opportunity compliance, diversity and their inherent benefits
Compliance with equal Opportunity legislation has become a MUST within the developed world
(Keinert, 2008). Companies that mirror the general population on all levels are apt to better
understanding the needs and wants of customers, and to develop products and services that meet their
needs more accurately (Eyring, 1998 p 245 cited in Keinert, 2008). The benefit of equal opportunity
for the firms lies in the benefit arising from diversity and its underlying potential for innovation.
Evidence suggest diversity leads to overall improved decision making, as a diverse group takes
advantage of increased awareness of global opportunities, and might find a more cogent approch to
identification and solution of upcoming problems (Keinert, 2008).
2.5 Opportunity for partnership and alliances
CSR engagement and sincerely upheld values and principles clearly build confidence in a company
(Kaptein,2005 P 14 cited in Keinert, 2008 ), therefore a CSR champion is likely to be more
trustworthy partner for strategic alliances that a firm not know for its social orientation (Keinert,
2008). The Body Shop has sticked to their core values from the beginning. The Body Shop has
being socially and ecologically as part of their core values, when engaging with stakeholders and
community to gain considerable competitive advantage through the enhancement of their image. As
Keinert (2008) stated that partnerships with governments or communities may serve to reduce
criticism and distrust towards corporations, grant them access to community knowledge and thus
provide them with valuable new insights.
3. The Body Shop’s CSR initiatives for growth
The Body Shop has been engaging the Stakeholder Business Model from the early years as part of
their expansion, using themselves at the centre of an array of mutual relationships with persons,
groups and entities called ‘Stakeholder’ (Steiner and Steiner, 2009). Furthermore, they have been
including CSR in their marketing strategies to represent their commitment by behaving ethically and
contribute to economic development, while improving the quality of life of the employees and their
families, as well as of the local community and society at large (Watts and Holme, 1999). Last but
not least, the company produces and promotes its product lines with environmental and social
sensitivity as a major theme. Anita once said ‘I’d rather promote human rights, environmental
concerns, indigenous rights, than promote a bubble bath’ (Entine, 1995 cited in Dennis, P. Neck and
Goldsby, 1998).
First of all, The Body Shop was discovering their core values from the very early days, the
company created the mission statement (Exhibition 1) that reflected on Anita’s
environmental, social, and political values. Furthermore, The Body Shop published its first
‘Value Report’ in 1996 and its second ‘Values Report’ in 1998 (Purkayastha, 2006). These
reports were audit statement of its social, environmental and animal protection practices. The
reports were given a top rating in a worldwide ranking by Sustanaiability for the United
Nations on environmental and social reporting (Purkayastha, 2006).
Secondly, The Body Shop has been engaging their stakeholders, including the animals, for which
steps are taken to prevent their use in cosmetic testing, alongside native population groups seeking an
income, and the environment, which is not burdened with mountains of packaging waste (Van,
Nijhof and Jeurissen, 2009).
3.1 No animal testing
The Body Shop asked its suppliers to sign declarations that they had performed no animal testing in
the past five year, and had no plan to perform tests of this kind in the future (Van, Nijhof and
Jeurissen, 2009). According to Paulette Cleghorn, a spokesperson for the company, “Our products
offer the consumer an alternative – a high quality, naturally based, inspired product from a company
that cares about the environment, the developing world and does not test on animals” (Wheeler,
1994). As a result in 2005, the company was awarded the first place in the cosmetic category for
‘Achieving Higher Standards of animal Welfare’ by the royal Society for the Protection of Animals,
in recognition of its efforts on this issue (Purkayastha, 2006).
3.2 Support community trade
The company developed the Trade not Aid program to support developing countries by trading with
them. The Body Shop guaranteed a living wage for its community trade suppliers and their workers
through a predictable and long term business relationship (Purkayastha, 2006).
In fact, the company pays the Kayapo’ well above the market price for Brazil Nut Oil” (Bavaria et
al., 1994 cited in Dennis, P. Neck and Goldsby, 1998). In Anita’s words ‘Our trade with the
communities is not just about creating another product or market for The Body Shop. It is about
exchange and value, trade and respect, friendship and trust’(www.thebodyshop.com/
bodyshop/values/support_community_trade.jsp, accessed on 17 July 2010). To ensure that the
company Trade not Aid program would be successful in fulfilling a community’s goal, The Body
Shop developed a set of Fair Trade Guidelines and Ethical Trade Standards (Exhibition 2 and 3).
3.3 Protect the planet
The Body Shop has a history of taking action to address environmental concerns. For example, the
company has been a proponent of “green” packaging. The company also supported materials and
technologies that caused minimal harm to the environment and promote the use of renewable
resources and sustainable ingredients (Purkayastha, 2006). For instance, it has dealt with the problem
of waste water affluent. By installing a Living Water waste treatment system, they became the “first
international skin- and hair-care company to tackle the industry’s chief environmental challenges:
successfully treating raw factory waste on site with an experimental, ecologically sustainable
system” (Roderick, 1993 cited in Dennis, P. Neck and Goldsby, 1998). These environmental
efforts have paid off for The Body Shop. For the year 1997, the company had the highest ranking in
an environment report published by the UK (Boulton, 1997). The Body Shop also published its first
social report in 1995, after consulting more than five thousand stakeholders. This makes the
company a front runner in the development of sustainability reporting (Wheeler and Sillanpaa, 1997
cited in Van, Nijhof and Jeurissen, 2009).
4. Criticisms
4.1 Against animal testing
The Body Shop initially claimed that its products contain ingredients that are tested on animals, there
is evidence this claim is not completely true. The Body Shop used ingredients in its products that
have been tested on animals by other companies (Entine, 1995 cited in Van, Nijhof and Jeurissen,
2009). The company’s purchasing manager, in an internal memo dated May1992 ‘ noted that 46.5
percent of its ingredients have been tested on animals, up from 34 percent the year before’ (Entine,
1995 cited in Dennis, P. Neck and Goldsby, 1998). As a result The Body Shop ended up junking its
deceptive label, replacing it with the equally disingenuous ‘ against animal testing’ (Entine, 1997
cited in Dennis, P. Neck and Goldsby, 1998).
4.2 Trade not Aid program
The Body Shop was accused of paying exploitative wages and having an anti trade union stance. The
program was also viewed as patronizing and was said to have created tensions and divisions within
indigenous communities and undermined self sufficiency and self dependence (Purkayastha, 2006).
According to Bavaria, Becker and Billenness (1994) stated in their research that;
‘In its promotional materials The Body Shop stated that the harvest of Brazil Nuts is ‘a viable and
sustainable alter native (Kayapo) to cutting down their forest’ However, the Kayapo make the bulk
of their income from selling logging and mining concessions on their lands, precisely the activities
that The Body Shop claims it is preventing. The money Kayapo make from Brazil Nut oil and
wristbands is just supplemental income that could never match the level of income achieved by
selling logging and mining rights’.
Moreover, in fact only a small proportion of the ingredients were purchased through fair trade
programmes, while the majority was brought on the world market (Entine, 1995) To conclude this,
the production volume that could be generated from the trade not Aid program is too small for
worldwide sales, so a proportion of the production is purchased through the mainstream market.
4.3 Environment
There have been environmental problems associated with The Body Shop. At the company’s former
New Jersey warehouse, there were three leaks of product into the environment (Dennis, P. Neck and
Goldsby, 1998). According to the records of the company and local Hanover Sewerage Authority, at
least 62 gallons of shampoo and shower gel were released. It also appears that the spills were first
identified by the officials of the Hanover Sewerage Authority and traced back to The Body Shop.
The pattern of spills suggests that management at The Body Shop’s facility was lax in its safeguards
and tardy in its reporting (Bavaria, Becker and Billenness, 1994).
5. Analysis
The Body Shop is a special company in many respects. Firstly, the leadership of the company, who is
Anita Roddick, committed to the CSR from the beginning. She created brand identity that closely
associated with the CSR and pass on her philosophy to her employees and her value customers.
According to Kohli and Jaworski, 1990 cited in Bavaria, Becker and Billenness, 1994 stated that, the
leadership of an organisation is believed to play a critical role in shaping its values and orientation.
Secondly, it is clear that the company focused in the stakeholders in the early years and tries to
continue to do so. The company tried to differentiate itself from its mainstream industry by using
CSR with its marketing strategies involving their stakeholders and focusing on environmental
awareness. As a result, the company created the ‘Green customers’ base, the loyalty customers,
attracting the employees with the same value with the company and The Body Shop was imaged as
the social and environmental sustainability company. Also, the Body Shop shows how to set up and
expand a profitable company based on unconventional assumptions. For example, the company
invented ‘against animal testing’ policy in the cosmetic product development. The Body Shop has
also shown how a company has the option of purchasing goods based on a fair price.
6. Conclusion
I conclude that The Body Shop is a good example of the company that applying CSR successfully.
The company has still preserved with various CSR projects in the face of criticism. From this report,
I can classify that The Body Shop’s strategy is involving its stakeholders and using Anita’s
philosophy as part of the company values and point of selling.
The Body Shop was actually a pioneer in the dialogue with its stakeholders and the development of
Values Reporting. This makes The Body Shop a front runner in the development of sustainability
reporting.
The company has succeeded in appealing to a very specific customer group and investors, being
socially and environmentally aware buyers of its products who identify with the founder, Anita
Roddick’s philosophy and ideals.
Appendix
Exhibit 1The Body Shop’s Mission Statement
Dedicate our business to the pursuit of social and environmental change.
Creatively balance the financial and human needs of our stakeholders: employees, customers,
franchisees, suppliers and shareholders.
Courageously ensure that our business is ecologically sustainable, meeting the needs of the
present without compromising the future.
Meaningfully contribute to local, national and international communities in which we trade
by adopting a code of conduct which ensures care, honesty, fairness and respect.
Passionately campaign for the protection of the environment, to defend human rights, and
against animal testing within the cosmetics industry.
Tirelessly work to narrow the gap between principle and practice, whilst making fun, passion
and care part of our daily lives.
Source: www.thebodyshop.com
Exhibit 2
The Body Shop’s Fair Trade Guidelines
1. Community
We are looking to work with established community organizations which represent the
interests of their people.
2. Community in Need
We target those groups who are disadvantaged in some way, those whose opportunities are
limited.
3. Benefits
We want the primary producers and their wider community to benefit from the trade socially
as well as economically.
4. Commercial Viability
It has to make good commercial sense meaning that price, quality, capacity and availability
are carefully considered.
5. Environmental Sustainability
The Trade has to meet The Body Shop standards for environmental and animal protection.
Source: www.thebodyshop.com
Exhibition 3
The Body Shop’s Ethical Trade Standards
Employment is freely chosen
Freedom of association and the right to collective bargaining are respected
Working conditions are safe and hygienic
Child labours is not used
Living wages are paid
Working hours are not excessive
No discrimination is practiced
Regular employment is provided
No harsh or inhumane treatment is allowed
Source: www.thebodyshop.com
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