Ethics and Corporate Social Responsibility Case Study Essay Example

Ethics and Corporate Social Responsibility

Ethics and Corporate Social Responsibility

Executive Summary

This report is about the corporate social responsibility of Starbucks, the coffee shops giant chain store whose headquarter is located in Seattle, United States. The report establishes that Starbucks has been concerned about social responsibility because of the impact society has on businesses as a source of market and labor. In addition, social responsibility is one of the company’s strategy to solicit consumer loyalty, which comes in handy especially during period such as global recessions. The report establishes that Starbucks has a unique way of providing high levels of benefits to its employees as a way of motivating them and increasing the level of commitment towards the company.

Social responsibility activities have seen Starbucks experiencing exponential growth for the time it has been in operation. The company encourages the support of local courses as a social responsibility program. The support of education to children reflects the company’s commitment to helping the society in alleviating poverty. The report highlights environmental sustainability, business expansion and global recession as the ethical issues facing businesses in the 21st century. In addition, the report provides recommendations for businesses to improve or create a more ethical culture. These recommendations include the use of eco-friendly materials in packaging and strengthening of the business’s brand among other recommendations.

1.0 Introduction

Starbucks is a shop that has been in operation for the last forty years in the United States with branches in all the corners of the country. The company is under the leadership of Howard Schultz, the C.E.O who has seen it through its ups and downs. For a better part of his tenure as the company C.E.O, Schultz has displayed great competency in management and leadership having steered the company through tough economic times such as economic recessions, stiff competition, unfair government policies among other challenges that an operational company is bound to come across. Howard draws his inspiration as an excellent leader in management back from his childhood. He was raised by a father who worked for a company that neglected the welfare of its employees. He witnessed the hardships his father went through and how they affected his performance at the workplace.

As the company C.E.O, Howard was determined to make Starbucks a better place for his employees and true to this endeavor, Starbucks has been ranked several times as the best company to work for (Simon, 2008, p.193-195). Starbucks owes this success to the concerted efforts it has put for the last forty years to engage in ethical and socially responsible activities. This report offers answers the question why Starbucks is so concerned about social responsibility and how this concern has enabled the company to grow so rapidly. Further, the report will look into the key ethical challenges facing businesses in the 21st century and give recommendations for creating a more ethical culture.

Why Starbucks Has Been So Concerned About Social Responsibility

When a business is concerned about the environment around which it operates, it is said to be socially responsible. In the context of social responsibility, environment is not limited to the natural features in the surrounding. It comprises the community surrounding the business. The community is an important aspect of a business because, not only does it provide the market for its products and services but also provides for the labor requirements of the business. In this regard, it is important for the business to make it a matter of priority to take care of the surrounding community in which it operates. Starbucks has been in operation for more than forty years with an avalanche of success to show for it (Plog, 2005, p.284-287).

Unlike other companies in the community, Starbucks operates under the guiding principles of people before profits and not the other way round. The importance that the members of staff at Starbucks attach to the surrounding community speaks volumes about the company’s commitment to serving the community by putting the interests of the community before anything else. Social responsibility goes beyond the services offered to the members of the community who come to the Starbucks coffee shops (Katrinli, Gunay & Biresselioglu, 2011, p.164-167). In fact, social responsibility is more of the voluntary non-profit activities the company engages in for the good of the community as a whole. The company understands the value of education to the individual and to the community as a whole. It also embraces the idea of a clean and sustainable environment.

Starbucks is on the forefront of providing education opportunities and bettering the conditions of learning institutions in the surrounding communities where its coffee shops are located (Marques, 2008, p.248-250). In addition, the company is rigorous in efforts to provide members of the community with better healthcare facilities. These efforts are seen through the company’s expansion programs which are geared towards penetrating unexploited markets such as China. Social responsibility programs allow the company an opportunity to draw the attention of the community after which appropriate action regarding the welfare of the community is taken. The attention of the community toward the company is the beginning of the buildup of a large customer base, which is necessary for the realization of high revenues for the company.

Social responsibility is one of the means through which the company has managed to remain relevant for as long as it has served its consumers. This is because of the fact that the more the company is perceived as sensitive to the needs of the community, that alone sets it apart as the preferred company whose operations are genuinely to serve the community and not to make profits alone. Consequently, high revenues are realized from the large customer base. Starbucks is always concerned about social responsibility because it is through social responsibility that a company will show its responsiveness to the needs of the community (Sotorrío, Sánchez & Fernández, 2008, p.380-382). The company is also in a position to make decisions that are congruent with the direct needs of the community.

The Uniqueness of Starbucks in Providing High Level Benefits

Starbucks operates under the guiding principle of «people before profits.» It also observes respect and dignity as the code of conduct that the members of staff are expected to live by. In this regard, the company is willing to compromise its profit goals at the expense of safeguarding the welfare of its employees (Alharbi, 2012, p.18). As if that is not enough, the company invests huge amounts of money in projects that are geared towards improving the quality of life for its employees across the various branches. For instance, the global social responsibility is aimed at improving the lives of the company’s employees across the world as well as the communities around which it operates. These efforts not only foster the commitment to work from the employees but also create a working environment in which everyone wants to be part of.

It is for this reason that the company has been ranked the best to work for in several occasions (Nord & Fuller, 2009, p.279-282). Apart from that, the company’s policies are conducive enough to the extent that they allow benefits to casual workers. For instance, the company’s health benefits plan accommodates casual workers that meet specified terms such as having worked for a certain period of time. The inclusion of casual workers in the health benefits plan is a move that sets Starbucks apart as a unique company. Consequently, the company enjoys a competitive advantage over its rivals in the coffee shops industry as a result of a collaborative and committed workforce. Schultz understands the implications of employee motivation on the overall output of the company.

One would expect a company that engages in such heavy-budgeted benefits plans to make losses or at least to have a strangled budget as a result of huge withdrawals from the business’s treasury. On the contrary, this is not always the case. In fact, more often than not, it turns out to be profitable in the long run (Ricardo, 2010, p.11-17). This knowledge is what gives Schultz an edge over the rest of his rivals in the coffee shops industry. His inspiration, as we saw earlier, comes from way back when he was still under the care of his father who was frustrated by his employer. Further still, Schultz is aware of the struggles that ordinary people go through to make ends meet, especially after having gotten a glimpse of the financial implications of coping with illnesses in the family.

Starbucks comes in to the rescue of its employees financial struggles in the form of providing healthcare benefits to the members of staff. The guiding principle of people before profits gives the company an upper hand in retaining its employees, most of whom are highly specialized after having worked for quite some time in the company (Caruana & Chatzidakis, 2014, p.577-579). The chances of employees getting sick are always on the low, in which case the health benefits program ends up costing the company less than the projected amounts in terms of health insurances. At the end of the day, Starbucks makes its profits at the same time taking care of the welfare of its members of staff.

Why Starbucks Has Grown So Rapidly

Having been in the market for more than forty years, Starbucks has quite a huge bunch of success to show for it in terms of growth and development. With a workforce of more than one hundred and sixty thousand employees and an estimated total of seventeen thousand stores worldwide, the company is indeed the best of its kind in the coffee shops industry. The astounding fact is that the company has experienced exponential growth at a rather rapid rate that has left many people’s eyebrows raised (Fridell, 2009, p.81-84). However, it is worth noting that the reason for the company’s rapid growth is an open secret. The company owes it huge success in geographical and demographic expansion to its concerted efforts in embracing the business ethics culture and socially responsible activities.

Starbucks is always concerned about the society around which it operates. It does this by engaging in a number of social responsibility programs aimed at improving the living standards of the locals. For instance, the partnership between Starbucks and Jumpstart, an organization that aims at improving the lives of children by providing literacy support. The Starbucks foundation also serves to provide people with the power to alleviate poverty through education. Schultz understands the power of education as a tool for alleviating poverty and improving the quality of life. Local managers of Starbucks are encouraged to donate to community activities as a social responsibility program. For instance, the store in Seattle once donated a whopping $500,000 for the development of Zion Preparatory Academy, an education centre for the city youth (Kleinrichert, 2008, p.475-477).

Not only is Starbucks committed to supporting local courses in the educational sector, but also other backbone sectors of the economy such as the health sector and global campaigns against diseases that are declared menaces and national disasters. For instance, the campaign on the health education about HIV/AID was a local course in which Starbucks was involved through the provision of funds (Wirgau, Farley & Jensen, 2010, p.611-615). These efforts coupled with the company’s policies and guiding principles, which place people before profits are just but a few of the reasons why the company is experiencing exponential growth. This because of the fact that the company’s engagement in local causes increases the loyalty of the customers to the Starbucks brand.

Apart from the company’s practice engagement in ethical and socially responsible activities, the other reason why it has had a fair share of rapid growth is because it provides products and an environment that is in correspondence with the wants, needs and preferences of the customers. For instance, during the recession period in the United States, most of the customers were opting out of buying coffee from the coffee shops and preferred making it for themselves from the comfort of their homes. Starbucks responded to this shift in the demands of the market by providing low budget coffee that went for as low as $ 1 (Hill & Boyd, 2013, p.89). This kind of responsiveness to the needs of the customers does more than just giving the company a competitive advantage. It goes a long way in expanding the company’s demographic coverage as it incorporates that segment of the market with less purchasing power.

Key Ethical Challenges Facing Businesses In The 21st Century

The 21st century has seen the level competition in the business arena going to the next level. As such, some businesses might veer off the accepted code of conduct as expected of them in an effort to remain operational in the wake of stiff competition. The efforts by businesses to remain relevant in the provision of goods and services is what brings about the ethical challenges that are faced by businesses in the 21st century (Argandona, 2003, p.5-8). This is because, it is a challenge in itself for businesses to remain compliant with restraining regulations that, in one way or another, disadvantage the day to day operations of the business. However, it is of paramount importance to take note of the fact that the compliance of a business to regulations that pertain to its operation is a determining factor of its success.

One of the key ethical challenges facing businesses in the 21st century is environmental sustainability (York, 2009, p.97-99). Every business activity takes place in the environment and makes use of the components of the same environment. There are those occasions where businesses over-exploit the environment in the course of their activities. It is upon the management of the business to ensure that its activities do not upset the natural set up of the environment. Over-exploitation of the environment takes place a when the business advances its profit instincts without the consideration of the environment and the inhabitants of its surroundings

The other ethical challenge facing businesses is related to the growth and development of the business (Gill & Biger, 2012, p.668-669). The 21st century businesses that exploit their opportunities for expansion are faced by the challenge of unfair competition accusations filed by smaller businesses. The limitations prevalent in the small businesses prevent them from expanding beyond certain points and this in return limits the expansion of the large ones. This is because of the fact that the expansion of large businesses results in the small ones being forced out of business. The small businesses are forced out of business since they are unable to compete favorably with their rivals. The circumstances force them out in a manner that is considered to be unfair.

The 21st century is characterized by global recessions that spell doom for businesses (Carrigan, 2010, p.99-101). When they occur, recessions are capable of forcing customers out of their preferred brands in an effort to manage tight budgets. Apart from the reduction in the number of customers for businesses, recessions give rise to unethical business practices as businesses strive to sustain continuity and relevance both in the short run and the long run. Businesses are also bound to face criticisms during such periods as regulatory bodies stringent in their inspections. For instance, Starbucks faced criticisms on issues concerning the lack of fair trade coffee and other related criticisms.

Recommendations To Improve And Create A More Ethical Culture

In order for a business to succeed in the dynamic nature of the business atmosphere in the 21st century, there is a need for it to have an ethical culture. Its activities and operations should be in a constant inclination toward the expectations of the consumers and the society as a whole. For instance in the case of environmental sustainability, it is recommended that a business should embrace the use of biodegradable materials especially when it comes to the packaging of take-away items in the fast-food stores and coffee stores. Alternatively, the business could opt for recyclable materials. The business could come up with a program that encourages its consumers to recycle the packaging materials/containers or return them to the company for a bonus or reimbursement. Use of eco-friendly materials is one way a business can create or improve a more ethical culture.

For those businesses that face ethical issues related to their expansions programs, it is recommended that such businesses incorporate the services of consultancy firms. This is in order to establish the appropriate means by which favorable competition can be practiced in a business environment where small and big businesses coexist in the same environment. This way, it would be possible for the big businesses to exploit their expansion opportunities without having to violate the ethics of business. Further still, it will be possible for a small business to maintain its small share of the market without the fear of loss of its customers to the competitive rivals.

Global recessions are a common phenomenon in the 21st century. As such, their occurrence ought not to overwhelm business operations while forcing some out of the market. In order to be prepared for such economic crises, it is paramount that businesses come up with a contingency plan that will serve to restore them back to operations in case of a global recession. In addition, it is recommended that businesses refocus their attention on strengthening their brand, satisfying their customers and building consumer loyalty. This goes a long way in ensuring that recessions do not erode away the customers as they cut down on their expenditure. It is also upon the business to come up with products that accommodate the tight budget scenario that is prevalent during global recessions.

Most importantly, businesses should be committed to working under the considerations of ethical and socially responsible practices. This, it will be less complicated for the business to solicit the loyalty of the consumers as they will be influenced by the knowledge that the business is not only concerned about making profits and expanding its operations, but also it has the interests of the community around at heart.

Conclusion

In conclusion, corporate social responsibility is an indispensable feature of business strategy as it is the facet of the business that speaks volumes about the primary goals of a business and the extent to which the business is committed to achieving its goals. Through social responsibility, Starbucks was able to experience unprecedented growth rates. The company’s growth and development are associated with the activities it has been involved in as part of social responsibility. In addition, the company’s unique approach to employee welfare is another strategy through which Starbucks has been able to maintain a positive team that is committed to the company’s goals and objectives. Environmental sustainability is one of the ethical issues that stand out as a challenge facing businesses in the 21st century. However, this can be solved through the use of recyclable and eco-friendly materials.

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