How do firms use corporate social responsibiblity to build brand equity

Masteroppgave i økonomi og administrasjon - Universitetet i Agder 2012Corporate Citizenship, Corporate Conscience, Social Performance and Sustainable Responsible Business are the different names of Corporate Social Responsibility. It is a self-regulating mechanism whereby companies take account of social norms and local laws of country. This term came alive around 1960s and 1970s. The core objective of CSR is to increase the responsibility by the firm towards environment, health and safety, labor, consumers, communities etc. The Stakeholder Theory given by the Freeman and UN Global Compact are the founding principles of investing in CSR. To become socially responsible has become an ultimate part of company‟s objectives. The CSR got different approaches that one company can follow. It all depends on their strategy, seriousness as well as their mindset. One of the approach is giving donation to some particular sector, NGO or any public welfare organization. It becomes the part of their value creation strategy. Few companies used different approach like making CSR a part of their core strategy and heavily investing resources like Coca-Cola made Coca-Cola foundation. Shell and Nike are working with many NGOs in different welfare projects. Some companies use benchmarking strategy like the way their competitors are doing, they do the same. Companies are socially accountable and responsible for their internal as well as external acts. They are not allowed to do any act which is against the local norms, laws, regulations or against environment. CSR is a name of consistent and true commitment to behave ethically and take part in the development of economic growth and improving quality of life. There is a strong connection between brand equity and CSR. Being a socially responsible by using any approach makes a bridge in between CSR and brand equity. The question is how it creates a bridge and at what extent brand equity based on CSR? How CSR can enhance brand equity and how it creates a positive image in the minds of all the stakeholders? There is a strong connection in between CSR and brand equity. Brand equity is an association that develops among people and brands. It spreads on different levels and companies strive hard to consistently building brand equity. The majority conventional feature of brand equity is brand relationship. Associations symbolize the basis for brand devotion and for purchase choice. Brand equity is considered to be the customer loyalty, brand‟s potential price premium, alleged brand leadership, high comparative quality, differ from other brands, consumers‟ perceived trust, admiration and reliability of the brand, brand awareness, the alleged worth of the brand, its market share, its character as well as its functional advantages. Different literatures reviewed to know and understand the basics of these two concepts and what are the areas under CSR that companies explored so far. Corporate Citizenship defines the companies‟ sense of accountability towards the society and the surroundings and environment in which it functions, and illustrates possessions and takes sustenance from. Stakeholders or the citizens who influence or are exaggerated by communal strategies and performances are the focal points, and the director is leaning toward these focal points. Corporate Social Responsibility, in order to explain the condition by categorizing the main hypothesis as well as the approaches into four groups that are economical, political, communal incorporation as well as morals or principles. The Freeman‟s Stakeholder theory is also reviewed in detail in order to analyze its impact over the CSR and ultimately brand equity. Managing and integrating the relationships among stakeholders like employees, suppliers, communities and shareholders is the main objective of the Stakeholders‟ Theory that imposes a positive impact on the long-term growth of a firm. The word “stockholder” is clearly influenced by the stakeholder approach. International Standard Organization and UN Global Compact have given standards that one company may follow to achieve goodwill among all the stakeholders. In fact, it helped companies to see the loopholes and aftereffects of CSR initiatives. The ten principles of UN Global Compact under the heads of environment, labor, human resource, anti-corruption, local communities are evidently helping companies to achieve their objectives. We have focused on three main variables in this study which are; environment, labor and local communities. These three variables are clearly defined in both the mentioned documents. It has clearly written that companies must follow the local as well as international environment laws. They must develop health and safe working environment for their employees. Production hazards and inefficiencies must be minimized. Employees must have full liberty in terms of freedom of association, freedom of speech and exiting. There should be no biasness during the recruitment and companies must eliminate discrimination of employees. The role of companies and state become extremely important to avoid the circumstances of slavery, child labor, physical abduction, bonded labor, threats to labor, non-payment of wages, deprivation of food and shelter, discrimination of employees etc. Age standards in regards to the type of work must be justifiable. Companies like Nike who may have sub-Page | 6 contractors need to ensure the elimination of child labor. The role of local communities and trade unions come in front to make them realize and responsible. Environmentally sound technologies can eliminate day-to-day polluting emissions, operational inefficiencies, waste, workers‟ interaction with hazardous materials etc. It will lead to enhancing productivity standards, less use of raw materials, increase overall competitiveness and provide long-term growth. Shell and Apple in the past few years have changed the face of usage of technology in their production processes. Apple has become the giant in technology world but we need to assure that these companies set clear performance objectives regarding the production and consumption processes and are these sustainable in the long-run and what are the compliance standards? Investing in research and developing environmentally friendly products can surely have significant progressions of progress in the long-run. Different case studies of four companies reviewed and analyzed. It is observed that Coca-Cola and Apple are facing severe allegations related to the violation of environmental and labor laws. The production partners of Nike also found to be involved in child labor. These companies are quite active now in the area of CSR through different initiatives. They observed quite influencing effects of investing resources in CSR initiatives in terms of enhanced brand equity and company‟s image. There are different CSR activities Moreover, it has been experienced by these companies that stakeholders including internal as well external environment, labor, communities, shareholders, suppliers, consumers perceive a better image and give more value to the names of these companies. This study explored number of CSR initiatives taken by these companies and taken out ratings on the basis of these activities. The results shown that almost all the four companies (Shell, Coca-Cola, Apple, Nike) are becoming more socially responsible. Nike has made a strong code of conduct for their suppliers around the world. They are making efforts to implement this code of conduct to eliminate child labor and minimum age limit. Coca-Cola foundation is a part of growth strategy. Coca-Cola made number of initiatives especially in India after receiving huge amount of allegations related to polluting the environment. Apple made efforts to use environment friendly material in their products after the incident of few labors in China production unit. Shell is the leading company in oil and gas sector. Shell must put on more responsibility towards safer and clean environment. They spend huge amount of money on research and development every year in order to avoid any harmful acts. So, we may conclude that companies are getting aware about the importance of CSR. A safer working environment for the labor ensures enhance productivity and commitment towards organization. Consumers develop a good image of that company who is doing for improving the quality of life and investing in social projects in front of them. Brand equity is somewhat directly proportional to corporate citizenship. The business environment has become quite competitive and companies are gradually accepting the importance of CSR. The objective of focusing only generating more revenue streams is no more valid. This study is being done under the observation of three important variables. There is still room available for exploring the impact of other variables over the brand equity and many uncovered industries may become the next focus