C1 CSR/social audits
CSR audits are investigations into the actual CSR practices and performance of a business which are measured against their goals. Firms may do this internally or use an external organisation to conduct this.
Internal stakeholders
Employees’ key objectives relate to pay and working conditions. When considering applying for a job, it is typical for a person to check salary packages and added benefits. Many employers give interview candidates a tour of the premises as part of the interview. This is one opportunity where these candidates can get a good idea of working conditions. If there has been any bad press about the treatment of workers by an organisation, it is likely to negatively affect recruitment numbers. Employees who feel valued either through pay, working conditions or treatment, will be more motivated which results in higher overall productivity for the firm.
Would you apply for a job at Amazon after reading this article?
In addition, to pay and working conditions, it is becoming increasingly apparent that employees are more motivated when working for a socially responsible organisation. Therefore the communication of CSR activity is important for recruitment, motivation and retention of staff.
Managers key objectives are similar to employees. They want good pay and working conditions. In addition, they may be seeking to meet departmental targets that can result in bonus payments and career progression. The existence of a reward system can create a conflict for managers. Decisions that lead to bonuses (such as high profits) may not always be in line with those that meet CSR goals (to use ethically sourced materials). In attracting socially-conscious managers and encouraging a strong ethical focus, manager targets should be in line with CSR strategies.
Owners’ key objectives relate to profits. High revenue and low costs lead to high profits. Any profits that are not reinvested back into the business are distributed amongst shareholders. Therefore, the higher the profits, the happier the owners are. However, investors are becoming more socially aware when deciding which businesses to invest in. There are also strong links between socially responsible activity and profits. This is largely due to the impact on brand image and customer loyalty. Organisations that effectively communicate their socially responsible activity can attract larger investment.
Read about Lego’s sustainability strategies through the eyes of a potential investor. Would you buy shares in this company?
External stakeholders
Customers’ key objectives are to have high-quality products at good prices. Quality can be defined in many ways. On the one hand, we may view quality as the durability of a product but the basic definition is a product that meets the needs of the customer. Increasingly, businesses are becoming aware that a key need of a consumer is that the products they buy do no harm. This includes harm to the environment, the workers involved in the production and even other businesses such as those in the supply chain or smaller competing firms.
Read Tesco’s statement about Fairtrade suppliers
Suppliers’ key objectives are to receive regular orders and to receive payments on time. Conflicts exist where businesses put pressure on their suppliers to keep their prices low. Depending on whether the power lies with the supplier or customer, suppliers may be pushed into unethical practices to meet the needs of their customers. When there are many suppliers for a business to choose from, individual suppliers have less power because it is so easy for their customers to switch. Not meeting price demands can lead to losing business customers. To keep prices low, suppliers may use cheaper, less environmentally friendly materials, invest less in the working environment and reduce payments or increase expectations of their staff. They may also outsource to cheaper producers who have questionable working practices.
Read about Patagonia’s relationships with suppliers.
Government key objectives include for businesses to be successful and provide jobs that reduce dependence on the welfare state. Governments also want businesses to be profitable as they pay tax on their profits. This money can be used for fiscal spending such as health, education and infrastructure to improve living standards for all.
However, many companies take measures to avoid paying taxes in the countries in which they operate. This means that these governments are dealing with the negative externalities of these organisations such as pollution without the benefits of increased income from tax. Some governments in less developed countries are pressured into allowing organisations with poor social responsibility to locate in their country, e.g. poor treatment of staff and damage to the environment. This is due to the need to provide jobs for their population.
Read about “race to the bottom’.
Local Community key objectives include the provision of jobs, investment into the community reduced environmental impact. Organisations may appease the local community by undertaking community projects and liaising with key people in the community to compromise on meeting objectives.
Lenders’ key objectives are to receive loan repayments on time with interest. They want organisations to take out large loans as this increases the interest they receive. Lenders will be reluctant to lend to firms that have a reputation for being unreliable and missing payments with lenders in the past.
