csr issues in organized retail

Corporate Social Responsibility CSR Issues in Organized Retail

Subject Corporate Social Responsibility

Topic CSR Issues in Organized Retail

Submitted toDr. Bindi Mehta, Faculty in charge (Corporate Social Responsibility)Division D

Submitted by Aditya Ahuja (302)Ritabrata Ghosh (316)Manas Jain (324)Anurag Kalita (331)Abhishek Pandey (344) Dishant Sidana (357)

Submitted on: 28.08.08

Project Assignment - 1 - 1st Trimester 2008 -2010


Table of Contents

Corporate Social Responsibility............................................................................................................3Defining the phenomenon..................................................................................................................3Common grey areas...........................................................................................................................3Forms of involvement........................................................................................................................4

Organized Retail Industry......................................................................................................................5What is Retail?...................................................................................................................................5Stages of retailing..............................................................................................................................5Popular formats of retailing...............................................................................................................6The retailing challenge......................................................................................................................7Concerns among retailers..................................................................................................................8Indian Retail Industry........................................................................................................................9

Insight into CSR Initiatives.................................................................................................................10Environmental Dimension...............................................................................................................10Social Dimension.............................................................................................................................11Economic Dimension.......................................................................................................................13

Challenges in implementing CSR........................................................................................................14Influencing CSR initiatives of the suppliers....................................................................................14Low profits.......................................................................................................................................14Infringement on the shareholders rights..........................................................................................15Raising Customer Involvement.......................................................................................................15Competitor Inequality......................................................................................................................15Increasing pressures on manufacturers............................................................................................15Involvement & Connect...................................................................................................................16CSR beyond the PR.........................................................................................................................16

CSR at Musgrave Group (A case study)..............................................................................................17About Musgrave Group...................................................................................................................17Business Objective...........................................................................................................................17Society benefit.................................................................................................................................18How does it work?...........................................................................................................................18Impact..............................................................................................................................................19Critical evaluation............................................................................................................................19

Evaluation of the industry....................................................................................................................21Future of CSR......................................................................................................................................22Bibliography........................................................................................................................................23

Print Publications.............................................................................................................................23Online Resources.............................................................................................................................23



Corporate Social Responsibility

Defining the phenomenon

Inarguably the most famous management guru of our times Philip Kotler along with Nancy Lee, a distinguished professor on Social Marketing in numerous American universities, have defined Corporate Social Responsibility in their book by the same name as :

"Corporate social responsibility is a commitment to improve community well-being through discretionary business practices and contributions of corporate resources"

The key flavour of this definition is that it considers corporate social responsibility beyond the benchmarks of judicial or social parlance. It expects organisations to go beyond adhering to the legal tenets of the land or meeting the moral or ethical expectations of the society.

This good done by corporate can be in any sector and any form. The trend worldwide is to identify this good and work towards it. Almost each of the fortune 500 companies are working towards it and define it by some name including the names as: corporate social responsibility, corporate citizenship, corporate philanthropy, corporate giving, corporate community involvement, community relations, community affairs, community development, corporate responsibility, global citizenship, and corporate social marketing.

Some of the additional definitions on Corporate Social Responsibility that are worth mentioning are:

1. The organization World Business Council for Sustainable Definition identifies corporate social responsibility as "business' commitment to contribute to sustainable economic development, working with employees, their families, the local community, and society at large to improve the quality of life".

2. The organization Business for Social Responsibility takes note of corporate social responsibility as "operating a business in a manner that meets or exceeds the ethical, legal, commercial, and public expectations that society has of business."

Common grey areas

The most common areas in which organizations contribute as a part of their corporate social initiatives are like:

1. Community Health related areas like AIDS awareness, Malaria prevention, Immunization, women health and maternity risks.



2. Education related areas like primary education, literacy, computer education and countering the challenges of education.

3. Employment related areas like job training, hiring practices and work conditions for people.

4. Environment related areas like recycling, elimination of usage of harmful chemicals, reduction in packaging and decrease of non biodegradable products.

5. Basic human needs and social equality related areas like hunger, homelessness, animal rights and antidiscrimination efforts.

As the good cannot be constrained by a limit of definition or name, in the same earnest the areas of work for corporate social responsibility cannot be confined and are best described as limitless. More and more corporate are joining this revolution of bringing in the good by leveraging their individual resources and areas of expertise.

Forms of involvement

Among the more popular forms of support forwarded by corporate are:

1. Cash contributions and grants.

2. Paid advertising and publicity.

3. Promotional sponsorships.

4. Technical expertise.

5. In-kind contributions (donation of products or services).

6. Employee volunteering.

7. Access to distribution channels.



Organized Retail Industry

What is Retail?

The everyday definition of retail can be described as the act of selling of goods and merchandise from a fixed location. In other words retailing is a distribution channel function where the retailing organization will buy products from certain manufacturers and then sell it directly to consumers. A retailer is a reseller from which a consumer purchases products.

The origin of the word retail is considered to be from the French word retaillier which means to "cutting off, clip and divide" in terms of tailoring. To use the concept, retailing directly converts into the meaning that it is breaking of products in larger consignments into smaller packages for general consumption.

Perhaps the concept of retail exists from the times of established currencies if not from the times when the barter system was prevalent. However, the irony of the Indian retailing industry is that even tough it is one of the basic financial activities carried out in an economy, it is considered to be the newest when taken in the form of an organised sector in itself.

The retail industry in United States is considered to be most evolved. This fact is proved by the fact that the biggest retail corporations of the world that appear in the top 50 ranks of the Fortune 500 list are all headquartered in United States. The famed list is headed by Walmart Stores Inc. and there are other very reputed like Home Depot, Kroger, Costco and Target. The significance of this fact is that the organised retail sector is driven by the practices of the United States Retail industry and the concepts are based around the same.

Stages of retailing

Retailing does not only comprise of selling the products to customer but it also taking care of the entire product movement cycle. This path from manufacturer to the consumer has a very important stage known as the Retail Supply Chain. The retailing cycle involves the following key components:

1. Suppliers and/or Manufacturers



2. Logistics Partners

3. Warehouse

4. Distribution Centres

5. Stores

6. Customers

Popular formats of retailing

Since the retail industry covers a wide range of corporations, it can be classified in various formats. However the most popular format of classification is by the type of business channel the retailer implements to do business. Some of the popular categories are:

Mom-and-Pop Stores: This is represented by the small, individually owned and operated retail outlet. It is often seen that these are family-run businesses which cater to the local community and are capable to provide high level of service. However they often have a limited product selection. Mass Discounters: These are the type of retailers who sell either general or specialty merchandise. But their forte is in offering discount pricing to their customers. Compared to department stores, mass discounters offer fewer services and lower quality products.

Warehouse Stores: This is a form of mass discounter retailer. The prices offered by these types of retailers is even less than traditional mass discounters. However, the constraint on buyers is that they need to make purchases in quantities that are greater the quantities that can be purchased at mass discount stores. The level service is often low and product selection can also be limited. Also notable is that these stores are of warehouse style where customers might be found selecting products off the ground from a shipping package. Another form of warehouse stores is warehouse clubs where customers need to be members to be able to make purchases.

Category Killers: Major retailers also focus on a concept of specialty stores wherein they service by providing multitude of options within than product category. In Indian parlance, the concept of “category killers” is often found in the product categories as electronics (The E-Zone), office supplies (Office Linc) and Books (Crosswords).

Department Stores: These retailers offer mid-to-high quality products and strong level of service. However in most cases these retailers do not fall into the full-service category. Even tough the Department stores are classified as general merchandisers; some retailers may opt to carry a more selective product line. For instance, while Big Bazaar carries a wide range of products from grocery to electronics, Shoppers Stop focuses primarily their products on apparel and lifestyle products.

Boutique: These are usually small stores catering very specialized or niche products which is often high-end merchandise. Also in all cases the level of service is very high for this format. They often follow a full-pricing strategy and have prices which are more than the prices of merchandise available in any of the other formats.

Catalog Retailers: The concept of this form of retailing is that the customers will place orders after



seeing products from a published catalog. Tata Sons retail venture Croma utilizes this business channel. Orders can either be delivered by in house logistics or a third-party shipper. The format utilized by McDonalds and Pizza Hut outlets for their delivery model can be identified as this format.

e-tailers: In this format the retailer principally sells via the Internet. There are thousands of online-only retail sellers of which Ebay is the most famous in India. The benefit of this format for customers is that it is open 24X7 and for the retailer is that it does not need to stock the merchandise.

Franchise: This form of retailing comprises of a contractual channel where one part the franchisor controls the business activities of the other party franchisee. The franchisee has access to the franchisor’s business methods and other important business aspects, such as the franchise name. In return the franchisee shares a part of the revenue with the franchisor. The common examples are McDonalds and Pizza Hut.

Convenience Store: As the name implies these general merchandise retailers cater to offering customers an easy purchase experience. Convenience is offered in many ways including through easily accessible store locations, small store size that allows for quick shopping, and fast checkout. The product selection offered by these retailers is very limited and pricing can be high.

Vending: This form of retailing involves utilizing automated methods for customers to quickly purchase the desired product. This can be interactive kiosks and vending machines. The presence of vending machines for purchase of smaller items, such as beverages and snack food, is already common in case of products like beverages and magazines. However newer devices are entering the market which will be able to vend more expensive and bulkier products. By access of either Internet or telecommunications link, these systems will enable customers to use credit cards.

The retailing challenge

The challenge of retailing is to strike the balance between cost optimization and maintaining the



level of service. The trade off between these factors is a dynamic one and retailers have to endeavour to strike a balance towards it all times.

Concerns among retailers

In the global context, for retailers to be successful need is to address various issues which are inherently related to their business. The key issues include:

Customer satisfaction: Customer satisfaction is one of the most important factors which determine the success of business. Only way to keep customers loyal is by making them satisfied. Needless to say the retailers need to have strategies in place that build relationships with customers and hence customers keep returning to make more purchases.

Ability to Acquire the Right Products: The ability to provide the right product will make the customer satisfied. As most retailers do not manufacture the products they sell, they need to collaborate with their suppliers in order to provide the product demanded by customers. Hence, the retailers who constantly identify the products the customer will demand and negotiate with suppliers to obtain these products.

Product Presentation: Often the suppliers provide the basic product and retailers need to generate interest about the product while presenting to customers. The merchandising of the product from packaging stage to putting on the shelf is very crucial. Hence the retailers need to employ creative people who understand and can relate to the market.

Traffic Building: Retailers need to focus on marketing aspects as well. The main focus is to create customer interest using promotional methods. The best way to measure the customer interest is by the number of people visiting a retail location or website which more commonly known as footfalls and the measure is known as footfalls per square feet. Traffic Building is actually a judicious mix of promotional techniques such as advertising, including local newspapers or Internet, and customer loyalty programs and specialized promotional activities, such as coupons.

Layout: Layout of the store covers attributes which are much more than the physical dimensions of the store and product arrangement. For most retailers, the layout should be of great visual appeal to customers as well it should cover the basics of ergonomics. Many retailers often keep renovating according changing trends and create makeovers to create the right shopping atmosphere (Motifs, objects, light, sound) can add to the appeal of a store. In the online context also the layout of a website is very important as factors like easy site navigation and usability are crucial deciding factors for success.

Location: The decision of setting up a store is incomplete without incorporating the significance of location. Stores located in easy access and which have high visibility, might command higher land usage fees but may hold significantly more value than lower cost sites that yield less traffic. It is important to evaluate the trade-off between costs and benefits of locations before arriving at a retail decision.

Technology: Technology has become the basic fabric of the retailing industry today. Perhaps the most important fact is that retailers who do not understand the ways to use technology for competitive advantage will be left out in the competition. The use of technology is present in each and every of retailing including customer knowledge (Customer relationship



management software), product movement (Use of RFID tags for tracking), point-of-purchase (Scanners, kiosks, self-serve checkout), web technologies (Online shopping carts, purchase recommendations) and many more. Retailers will not only need to implement technology in their operations but also challenge their ways of doing it to succeed.

Indian Retail Industry

The organised retail industry has started in the late 1990s and after a decade it has surpassed all expectations. It is undoubtedly one of the most fast growing sectors of the Indian economy and big players from other industries are focussing on retailing like never before. Some of the key attributes of the Indian retail industry as of today are:

1. It is the 5th largest retail destination globally. This phenomenon ahs been fuelled both by the increase of both domestic retailers as well international retailers setting up their operations in India.

2. The Indian retail industry has shown tremendous growth. In exact numerical terms the retail industry had done business worth US $ 25.44 billion in the financial year 2007-08 whereas the level business done in financial year 2006-07 was US $ 16.99 billion. This is an overall industry growth rate of 49.73%.

3. The Indian retail industry boasts of the largest number of retail outlets in the world. There are total 12 million retail outlets out of which 5 million sell food and related products.

4. The industry has been the delight of all consulting organization. The recent report from AT Kearney has declared the industry tops the Global Retail Development Index (GRDI) for the 3rd consecutive year.

The above points are more than a fair indication where the Indian retail industry is heading. It is gaining strength to strength and will become soon have a very significant say in the society's needs.

It will be very apt to mention the famous words by Keith Davis which is commonly known as the Iron law of responsibility: "Those who don't exercise power responsibly will tend to lose it."

Thus the need of the hour for the retail industry is to seek ways to respect the stakeholders and collaborate for betterment of the society.



Insight into CSR Initiatives

The primary role played by CSR in Retail industry is to ensure sustainable development. Companies investing in CSR are able to maintain a balance between the following three areas of development:

These three forces are entwined with one another and do not operate in isolation.

A good economical development can not take place if the environment suffers and the social system is disturbed.

Environmental problems can only be solved if the economy growths, production takes place where it is eco efficient and when the global poverty can be reduced.

Social fairness and therefore the balance between different economically developed countries can not be reached if the economy is lame and the living standard is in danger.

CSR integrates these three factors into a seamless unit.

In India, the involvement of the corporate sector CSR has picked up after 1991 as 63% of the organizations started CSR during 1991-2005. For most companies, CSR was a way to improve the public perception of the company. Though the initial thrust for CSR was for increased brand equity, as the practices became more mature, companies started to realize that there were a whole lot of other areas where CSR would give a competitive advantage in their long term growth strategy. The following section provides some of the advantages of practicing CSR in the Retail Industry.

Environmental Dimension

One of the major challenges for companies is to use production factors in a way to achieve ecoefficiency and profit maximization. Ecoefficiency combines ecological and economical interests and is the basis for sustainability. Ecological efficiency cannot be achieved in a short period of time



and therefore requires long term commitment. The following section illustrates some of the major CSR initiatives in this space.

Promoting Green Consumerism: Informing the customer of the carbon footprint of products covering their entire life cycle from manufacture through to use. This helps the customer to compare substitutive products based not only on price but also on carbon footprint. Tesco has introduced the concept of Green Clubcard where consumers are offered incentives in going for greener choices. They are encouraged for recycle and reuse. This not only decreases carbon emission, but also increases the brand equity of the company.

Increasing Transportation Fuel Efficiency and use of Biofuels: By making investments to increase the fuel efficiency in transportation, retail companies can make huge savings. It is estimated that if Walmart improves fuel mileage of its trucking fleet by one mile per gallon, it could save more than $40 million in one year. This in turn leads to lower prices for the customer and lesser environmental impact. Also switching from hydrocarbons to biofuels reduces pollution substantially.

Investment in Sustainable Technology: Retail companies have started investing in low carbon technologies to reduce greenhouse gas emissions in their business. These technologies are not economically viable currently but the focus is on the future. These include investments in renewable energies like wind turbines and gasification to turn waste food to power. These technologies will help in reducing the operating cost of companies. Companies have also started working with the suppliers to examine ways in which the supply process can be made more efficient.

Energy Efficient Green Stores: Today top retail companies like Walmart are integrating cutting edge technology in their outlets that are reshaping the way we heat, cool and light buildings. These buildings use 30% less power than ordinary buildings.

Zero Waste: Companies are trying to reduce the amount of solid waste that comes out from the stores. More and more waste is recycled. This not only saves dumping cost, but also adds to the bottom line as an additional source of income. The ultimate goal is to reach Zero Waste.

Reduction in Food Mile: Major Retail companies are reengineering their Supply Chain distribution system for food and other agricultural products to reduce food miles. Food products are now sourced from locations which are nearest to the market. This reduces transportation cost in turn decreasing CO2 emissions.

Social Dimension

Society is a key stakeholder in the businesses of corporations. The relationship between society and business is symbiotic where each benefits from the other. As such corporations need to collaborate with civil society for societal development. Retail companies have been very proactive in making social investments. These investments has not only helped the community but also has strategically enhanced their business opportunities. The following section describes some examples of CSR investments in the Social space.



Ethical Trading Practices: Many US companies like Tesco follows a strict evaluation of its business partners against ethical trading practices. If any supplier violates any of the following codes, then its relationship with the company is terminated immediately:

o Employment is freely chosen o Freedom of association and the right to collective bargaining are respected o Working conditions are safe and hygienic o Child labour shall not be used o Living wages are paid o Working hours are not excessive o No discrimination is practised o Regular employment is provided o No harsh or inhumane treatment is allowed

Strategic CSR: Many Indian retail companies have started aligning their strategic objectives with CSR practices. Pantaloon Retail is offering a co-branded credit card with ICICI Bank only to its women customers at Big Bazaar stores. The card has no fees and has a limit of Rs. 5,000, with a 50 days free credit period. These initiatives end up in a winning situation for both where women are getting empowered to exercise their consumer choice and the company has the opportunity to penetrate in a hitherto untapped consumer segment.

Community Investment: Community investment focuses on how companies manage their activities in the community and create a positive impact for both the community and the business. Strategic community investment should set out how a company will maximize its positive impacts prioritizing those that are most relevant to its core business products, services, employees and customers both in the short and long term. Engaging with consumers offers companies the opportunity to demonstrate publicly their brand values, and use products, sales and marketing to support charities, key social issues and mobilize consumers behind good causes. Engaging employees in community programmes, develops a wide range of skills and competences including communication, project management, leadership and team working. Reliance Retail aims to recruit people from the underprivileged community in the society and give them proper training.

Corporate Governance: With the advent of globalization, retail companies have started

adopting corporate good governance norms. This has also led to more frequent and stringent monitoring and reporting norms. This has made their operations more transparent and increased shareholder and consumer satisfaction. Better governed companies take into consideration the interests of all the stakeholders while making business decisions. Internationally various code of conducts have been formulated. The following shows some of them:

o Worldwide Responsible Apparel Production (WRAP)o SA 8000 (Social Accountability 8000o Fair Labor Association

Information Sharing and Collaboration: Many retailers are leveraging IT in providing market information to farmers. An example in this regard is the e-Choupal initiative by ITC. It was conceived as a more efficient supply chain aimed at delivering value to its customers around the world on a sustainable basis. Today it reaches out to over 4 million farmers growing a range of crops - soyabean, coffee, wheat, rice, pulses, shrimp - in over 40,000 villages through nearly 6500 kiosks across ten states



Economic Dimension

Companies investing in CSR also reap economic benefits in the long term. CSR then becomes a competitive advantage to the company. The following section highlights some of the long term economic benefits of CSR.

CSR encourages companies to look at a wider range of stakeholder interests, which can widen understanding of the potential risks and opportunities for the business while offering wider social or environmental gains.

Closer links with consumers may lead to greater awareness of their needs, which could result in the firm becoming more competitive in terms of product quality.

In some cases, CSR could also lead to greater efficiency (e.g. cost savings from adoption of best-practice waste minimisation techniques), and this could lead to the firm becoming more competitive in terms of prices.



Challenges in implementing CSR

The organized retail sector has always been a high revenue-low margin sector and occupies a unique position in the business scenario by virtue of being the point of contact for both the consumer and the vendor. Thus, it often has to strike a balance between the consumer demand and the procurement from the suppliers and also between the high costs of keeping inventory of goods and the low profit margins. Each of these factors throw up challenges in practically all the functionalities of the retailer but especially in the socially responsible initiatives, since, due to their long term benefits and short term investments, they do not get the high priority status during crunch times. Some of the challenges in CSR implementation are as follows:

Influencing CSR initiatives of the suppliers

The large organized retailers leverage the influence of their deep pockets, bulk purchases and long term contracts that they offer to the manufacturing company, and get it to adhere to the code of conduct that the retailer prescribes.

GAP: Leveraging its position

The company’s move to withdraw the clothing from 3,000 stores followed an undercover investigation by a British newspaper that reportedly found that children as young as 10 were employed in miserable conditions by a Gap sub-contractor in the Shahpur Jat area. The children were hand-sewing smocked blouses for the Gap Kids label. The UK £ 20 tops were headed for the company’s US and European stores for sale during the upcoming Christmas season.

The story reported that many children had complained of working long hours, remaining unpaid, and being subjected to threats and beatings. A 10-year-old boy who was filmed working said he had been sold by his family to the factory owner. The boy claimed he had worked for the factory owner for four months without pay and would have to continue there until the amount his parents were paid for him was recovered. Many children said the factory owners had told them they were not being paid because they were being trained.

However, the small retailers who do not have such influence over their vendors have to often turn a blind eye to the unethical practices which are followed by the supplier. These practices include unethical/distasteful advertising of products (such as the Fair& Lovely ad which promoted discrimination on the basis of colour of the skin), deployment of child labour (such as in the manufacturing of garments in third world countries like Bangladesh), providing inhumane conditions for the workers (rampant in Chinese industries) and neglecting the impact on the environment (tanneries in the Kanpur-Lucknow belt in India).

Low profits

The retail industry typically has low profit margins and high sales with the exception of apparels in which the profit margins are usually double to that of FMCG and grocery products.



The operating costs are typically higher in the Indian context where there is a chronic shortage of electricity supply which makes it imperative for the retailer to have a power generation unit installed in the premises. Also, in India, the property rates are on the higher side with metro cities crunched for space and tier II and tier III cities experiencing high growth rates. The low profits translate into lower budgets for the CSR initiatives which do not figure high on the priority list of the management.

Infringement on the shareholders rights

Typically, large organized retail chains are public limited companies having shareholders money invested with them. The shareholders get a dividend on every share based on the profits. If the retailer chooses to invest in socially responsible activities, then the money is essentially coming from the profits of the company and hence indirectly from the dividends that would have been paid to the shareholders. Thus, one can conclude that the shareholders money is being diverted towards those initiatives which he/she may not conform to as they might not add any value to the bottom line of the company.

Raising Customer Involvement

The consumer is the undisputed king of the marketplace. In order to successfully implement CSR activities, the organized retailer has to make the customer more engaged in the process.

If a key consumer starts buying more from the retailer who has corporate social responsibility management systems in place than one who has not, then it gives an additional incentive for implementing such systems. Similarly, if a key retailer stops buying products produced by a vendor who adopts malpractices with regards to social and environmental aspects, then it sends down a strong message to the vendor to be more socially responsible.

For example, in 2006 Gap had revoked approval for 23 factories that failed to comply with the standards of an ethical code it imposed three years ago.

Competitor Inequality

There are some retailers that are more socially responsible than the others. This leads to inequality in the competition especially in the short run, as the expenses associated with CSR implementation could have been employed for better financial results or showing on the stock market index.

While there has been advent of certain concepts such as the Triple Bottom Line (3BL) which aim at addressing this inequality concept by having separate bottom lines for financial, social and environmental criteria, a standard procedure has yet not been developed which would be able to measure the intangible benefits of CSR initiatives.

Increasing pressures on manufacturers

The retailers nowadays are demanding more risk sharing, lower prices and fast fashion. This puts immense pressure on the manufacturer as he has to deliver round the clock or else he will lose the business. Fast turnaround orders today account for almost half of all orders and inventories have been reduced to a minimum.



Such a scenario leads to manufacturers having to resort to unethical practices such as longer working hours for the employees and disregard to environmental and workplace ethics. The tighter the squeeze on the suppliers by the retailers for lower prices, the more the chance of the supplier evading the social responsibilities. For instance, Wal-Mart is known for selling goods at the lowest prices the world over, but it has also been reported that when they started sourcing their goods from a particular plant in China, the average wages in that plant were reduced from 31 cents an hour to 13 cents an hour.

Involvement & Connect

CSR implementation requires involvement of all the employees in the organization across all levels. For an organized retailer which is efficient in terms of human resource utilization, such activities may become a huge constraint on the company resources. Also, many employees might not want to be involved in such kind of work due to some other priorities.

It also requires connecting with the community and hence there is a need to develop social skills of the employees.

CSR beyond the PR

There are retailers who indulge in CSR activities for the sole purpose of building a brand image for their organization. This gives them the competitive advantage but at the same time, it defeats the purpose of corporate social responsibility in spirit.

One of the basic principles was that since a corporate entity has limited liability and potential immortality, therefore, it has some obligations & responsibilities towards the various stakeholders who are not directly linked with the bottom line of the company such as the families of the workers, the residents of the area in which the company is operating, and the society in general whom it can benefit.



CSR at Musgrave Group (A case study) 1

About Musgrave Group

Since it was founded by the Musgrave brothers, Thomas and Stuart in 1876, Musgrave Group has become Ireland's largest grocery distributor. Today, the Group has operations in the Republic of Ireland, Northern Ireland, Britain and Spain. More than a century and a quarter since it commenced in Cork, a family-owned business has developed from small beginnings into a major Irish and international firm with annual sales of over €3.3 billion.

While the scale of the business has grown, its values have not changed. Over the years, a Musgrave way of doing things has been built that has served the Group well. The Group's guiding principles have grown out of traditional values -values which apply equally in the international marketplace as well as at home. These include long-term stable relationships based on integrity and mutual benefit. The Group's mission is to create exceptional added-value from food businesses that are different and better, and to share the value created with shareholders, employees, customers and the community at large.

Musgrave's core strategy is a simple one - to support independent retail operators in the grocery sector. This strategy is brought to life by the ability to deliver a superior level of professional expertise and support services that ensure the success and profitability of the Group's customers businesses.

The overall business is currently made up of five divisions: Musgrave Retail Partners NI; Musgrave Retail Partners Ireland; Musgrave Wholesale Partners Ireland; Musgrave Retail Partners GB in Britain and Musgrave Retail Partners Espana which operates from a base in Alicante in south-east of Spain.

Musgrave Retail Partners CSR programme:“A CSR strategy integrated into the fabric of what we do as a business means we can make a positive impact on the health of our community. It also gives us an opportunity to influence our retail competitors to do the same and to make Northern Ireland a better place to live.”

Musgrave Retail Partners NI was named Company of the Year 2007, in recognition of the company’s excellence in incorporating responsible business into commercial activities, with positive impacts across the environment, community and the workplace. The company, previously known as Musgrave Super Valu-Centra, is the symbol group under which 121 Super Valu and Centra independent retailers currently operate at the heart of their communities across Northern Ireland.

Business Objective

Musgrave NI’s approach was instigated in 2001 and is based on the integration of its CSR strategy with overall business strategy. A key aim of the strategy is to further integrate the business into the local economy and communities and to achieve this Super Valu and Centra retail partners are encouraged to get involved in local community activity.



Society benefit

Super Valu’s partnership with Action Cancer’s mobile detection service was set up in 2001 to promote and fund the early detection of cancer. The firm fully funded the charity’s old mobile unit until 2006 and then committed to fund £612,000 of the £1.5 million needed for a new hi-tech version – the Big Bus – which was launched a year ago. The new unit has onboard digital breast screening, cancer prevention and health promotion services. Centra’s partnership with Action Cancer in support of its Health Action programme for young people helps reduce cancer risk in later life through the provision of healthy lifestyle sessions. Centra’s support of the DoE Cycling proficiency scheme began in 2004, with the aim of educating 9-11 year olds in road safety. Musgrave Retail Partners has more than 200 local suppliers, producers and growers from across Northern Ireland which in turn provides the highest quality goods to their Super Valu and Centra retail partners. The firm’s environmental projects, including the introduction of double decker lorries, the promotion of recycling at store level and the Super Valu Best Kept Awards all help to reinforce Musgrave Retail Partners’ green credentials. To underline its commitment to the local environment Musgrave Retail Partners brand Super Valu supports the Northern Ireland Amenity Council’s Best Kept Awards, encompassing town, village, school and healthcare facility categories. The Awards were established to reward Northern Ireland’s cleanest and greenest places, to improve and preserve our important built and natural heritage.

How does it work?

Workforce: Musgrave NI’s workforce commitment is led by the HR department in line with a 5 year plan. There is a commitment to spend 3% of payroll on training, while attendance awards and profit sharing schemes reward loyalty/quality.

A host of communication methods/volunteering/fundraising events involve staff in CSR. The firm demonstrates a commitment to continuous development, ensuring HR objectives are being met by conducting bi-annual staff surveys.

Environment: An Environmental Action Team sets annual targets for waste reduction, CO2 emissions, fuel consumption and recycling. A One Stop Shop Waste Management solution is available to retailers, providing environmental advice e.g. reduction of cardboard, plastic & oil waste.

The annual SuperValu Best Kept Awards reward the province’s cleanest and greenest Towns, Villages, Housing Areas, Healthcare facilities and Schools for biodiversity, litter reduction and wildlife projects.

Community: The community partnerships are managed by the Communications team. Targets are set with partners for programme delivery and fundraising; regular meetings and annual research with retailers, customers and community partners evaluate the impact of the programmes and allow for continuous improvement.

Supervalu stores host Big Bus visits and help with local promotion. Centra retailers fund raise for Health Action programme and promote the scheme to local schools. Centra also provides financial and practical support for the DOE Cycling Proficiency Scheme, as well as retailer involvement.



Impact

Super Valu has donated well over £1/2 million to Action Cancer mobile services and approximately 14,000 have used the service in almost six years.

71,000 young people have been educated in healthy eating and fitness since 2003, when Centra started supporting the Action Cancer Health Action programme, and £300,000 as been donated through sponsorship and store fundraising.

9,000 children take part in DOE safe cycling training each year.

500 entries a year to the Super Valu Best Kept Awards.

Musgrave NI achieved 91% score in Arena Network Environmental Management Survey (average 57%) in 2006.

87% of Super Valu and Centra customers say they feel good about shopping at the stores because of the CSR programmes.

Retailers comment that the associated positive publicity, estimated as being worth over £400,000 in 2006, helps reinforce their position in the community, improving customer loyalty, brand differentiation and staff morale.

72% of employees said they would recommend Musgrave NI as a good place to work!

In 2006 bespoke training courses were undertaken by 31 employees

Case Analysis

Musgrave Group, which was founded in 1876 is Ireland's largest food and grocery distributor. Musgrave operates a distribution and support network for independent retail franchisees throughout Ireland. Its network services 24 percent of the grocery market in the Republic and 12 percent in Northern Ireland. It works through its SuperValu and Centra chains, in addition to its cash and carry wholesaling business. Musgrave Group is a private, family-controlled Irish company. Over 18,000 people work in the business.

As a company, Musgrave is clearly more inclined to environmental sustainability. As a result of its various policies and processes (mostly well described in the case study and including a programme on greening the supply chain, which takes them some way further than many of their peers),it has been able to achieve outcomes such as reducing electricity use in distribution centres in the face of increasing volumes handled, and reducing truck road journeys through more efficient planning

The degree of maturity the environmental processes enjoy in comparison to the broader picture definitely indicates a sort of bias the Musgrave group shows towards them.

The case study establishes three strong themes from the start, with people, places and products - but it doesn't manage to weave a strong narrative thread around these themes throughout the case study. It could certainly go a lot further.



There is interesting circumstantial evidence that the company's current practices contain useful practices. For instance, 34% of their customers rate themselves as extremely loyal to the company, as compared to figures of around half that level for its main competitors. In the absence of any detailed stakeholder perception information or other marketplace focused measures it is impossible to get to the bottom of why this difference exists.

The key performance indicators that the company has identified need work or frankly just replacing. Reporting on the number of internal presentations carried out on environmental issues, or the number of people attending internal meetings, may be of interest for managers seeking to make their programmes work. They are frankly of limited interest to external stakeholders who by and large are looking forward towards outcomes.

Information on health and safety is included (86 serious and 148 minor health and safety incidents) as is male to female ratio in management - (over 80% male). But figures overall for employee well being and perceptions are not present - nor are key measures of the company's relationship with local communities except for some brief details on philanthropic giving. Their philanthropic activities seem to be unidirectional and don’t cover a large section of the society.

Even where the company has strong data, it is cautious about setting strong targets. For instance, it found that 89% of staff travel to work by car - a contribution of 462 tonnes of CO2 per year to the atmosphere from their Cork site alone. The target set - to advise staff on sustainable transport and to generally reduce the contribution to global warming seems rather timid in the face of this.

The company does take stronger positions in some areas. For instance, as a company that supports customer choice in the area of genetically modified food, it promises that all home brand products will have labelling that gives all GM ingredients where they exist - even secondary and tertiary ingredients that are not currently required to be labelled by legislation. Whether this goes as far as its customers will want is another matter - after the entire driver for this issue in large parts of Europe has been customer pressure and concern. But the company's position on labelling is a principled one that makes a distinction between being sensitive to stakeholder concerns to being led wholly by them. There is still a position for leadership on issues - although it is a riskier strategy to take.

Overall, Musgrave has come up as a company whose core strategy is to support its independent retail operators. Further Super Valu’s partnership with Action Cancer’s mobile detection service is a landmark step towards preventing cancer at an early stage. The company has excellent environmental standards and is one of the leading supporters of the concept of living in a greener world.



Evaluation of the industry

In the wake of stiff competition, the upcoming retail industry which has come up with various schemes, benefits and low priced goods, do a lot of unethical things which are usually kept under cover.

Most of the employees of various retail giants live below poverty line (www.pbs.org). These retailers also sell companies fake products and also mix products of different quality levels. Some companies even ban the rise or set up of labour unions (Wal-Mart). Most of these also don’t have any policy against employee abuse and also discriminate among employees on various bases. Also it is seen that even if there are equal number of man to women ratio, there are always more number of men in the top management. The wages of employees (lower level employees) is very low in such retail outlets. US companies say that Walmart is notorious for driving out competition/labour cost. This has gradually led to the development of monopolistic market. The large retailers also do not care about environment. They do not have any environment policy and are always willing to compromise on environment policies for profit. Also sometimes these companies engage in unfair trade and business practices. Most of the retailers that are engaged in food industry do not have hygienic conditions and pack stale food stuffs (Subhiksha Stores). They package old food stuff beautifully in an attempt to disguise the purchaser. To boost their sales these companies engage in unfair practices and hide important relevant information from the customers. This is a common case of dishonest and unethical behaviour by these retailers.

Most of these companies practice CSR in an attempt to screen there shortcomings and other unethical activities done by them. What the Indian and the global retail industry needs at this moment is a regulatory authority which would look into the proper working of various retail business features. Also incentives must be given to the companies practising CSR in their organisations. Strict labour laws regarding the retail sector is also necessary. To counter the impact of unethical practices people also need to come forward. US public has come together to form a organisation called the Association of Community Organisations for Employment Reform (ACORM). Such initiatives must be welcomed with open arms by the society.

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http://www.pbs.org/


Future of CSR

Out of the 100 largest economies of the world, 51 are corporations and only 49 are nation states. Out of the 100 largest companies of the world about 10 are directly or indirectly linked to the retail industry. These companies have a social responsibility to fulfill in return of the various privileges given to them by the society.

Among all of them, Wal-Mart is the largest retailer with total sales of 378.8 billion. David Blackwell, VP, Wal-Mart, says, “Governments don’t make any goods—businesses do. So, it’s going to be companies—not governments—that solve the problems.”

Also many companies are developing their long term strategy looking into their responsibilities

towards the society. Most of the companies have embedded the following as part of their long term

strategy:

To be 100 percent supplied by renewable energy.

To make stores 25 percent more efficient.

To create zero waste.

Since retail industry consists of a whole chain of suppliers and retailers thus it becomes the responsibility of the retailer to convince their suppliers to be socially responsible. This will lead to a phenomenon which will necessitate the competitors of the parent company to become socially responsible due to a common supplier. Thus it becomes the responsibility of the retailer to make the whole supply chain understand the need of being socially responsible. Various companies are doing this by following practices like Vendor Development, 5’s technique to reduce wastes, environmental friendly policies etc.

Companies now are moving towards Strategic CSR than just CSR because this gives them an even stronger motive to follow it. Further along the continuum these companies will fully integrate CSR throughout their business model. After completing the early stage CSR the companies will move towards catering the needs of 3BL. Looking into the trends one can easily see the increasing role of stake holders in the process. The concept of CSR has been shifted from the shareholders view to stakeholders view. In future thus stakeholders will have a much greater say in the dialogues, governance and other management decisions.

The future of CSR in retail comes down to a simple line said by S.S.Kresge, Founder, Kmart , “You have to ask yourself if you are going to be involved by just talking about a solution, or if you are going to be committed by actually working to create change.”



Bibliography

Print Publications

1. Corporate Social Responsibility "Doing the Most Good for Your Company and Your Cause" by Philip Kotler and Nancy Lee

Online Resources

1. Wikipedia, the free encyclopaedia - www.wikipedia.com2. Business for Social Responsibility - www.bsr.org3. GreenBiz.com, "Business. The Environment. The Bottom Line." - www.greenbiz.com4. Indian Brand Equity Foundation - www.ibef.org5. Corporate Social Responsibility – A Government update – www.csr.gov.uk6. Walmart Sustainability Progress to Date 2007-2008


http://www.csr.gov.uk/

http://www.ibef.org/

csr issues in organized retail

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