VIETNAM NATIONAL UNIVERSITY

UNIVERSITY OF ECONOMICS AND BUSINESS

ASSIGNMENT

Course: Corporate Social Responsibility

Semester 1 (2021-2022)

SUPERVISOR: Dr. Nguyen Phuong Mai

STUDENT: Dinh Huyen My

STUDENT CODE: 18050771

CLASS: QH-2018-E QTKD CLC 1

Hanoi, 12/2021
Question 1 (5 marks):

Why do some firms, industries, and cultures have different CSR thresholds than

others? Illustrate your answer with real examples for all three categories.

(Write a short essay from1500 to 4000 words to answer the question)

Answer:

The decision of when to implement a CSR policy is compounded by why, where,

and how it should be implemented, not to mention who should oversee the process. The

industry context complicates things further because of the varied stages of acceptance

of CSR by different competitors. Another level of complexity, differences among

countries and cultures, ensures different firms will approach CSR in vastly different

ways. Although the value of an effective CSR policy within spe- cific industries and

firms is becoming increasingly accepted, the point at which such a policy becomes ripe

for implementation (or unavoidable to those unconvinced of the benefits) varies. Thus,

when depends on many factors, which include the CEO’s attitude toward CSR, the

firm’s industry and actions of competitors, and the cultural environment in which the

firm is operating.

CSR Threshold determines the timing as to when and where the CSR should be

undertaken in the organization. The threshold determines whether the organization is

ready to pursue the policy or not and thus its implementation. The threshold enables the

business entity to relate its core business and expectations of the society. Different

organizations have varied CSR threshold due to the culture of the organization,

competition levels in the industry and nature of the services and products offered.

Implementation of the CSR policy varies from the organization to organization, for

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instance the current environment and the attitude of top management towards the CSR

affects the threshold. In most manufacturing firms CSR threshold does not change due

to environmental factors like the service industry where the attitude of the top

management determines extent of participation in social activities.

An organization’s CSR Threshold is the point at which they turn their attention

towards CSR strategies. This tipping point occurs due to many factors, such as

acceptance by competitors, management’s attitudes, and the surrounding cultural

environment. Since these aspects are different within various industries, the CSR

threshold will be different from business to business. In particular firms, the CEO may

have personal intrinsic inclinations to conduct business with a sense of corporate

opportunity toward social responsibility. This business would, most likely, create CSR

policies offensively out of management’s high ethical and social awareness. On the

other hand, companies that may not be led by such management, would defensively

react to the demands of consumers in relation to CSR initiatives for reasons, such as

avoiding negative media attention or increasing sales.

In terms of industries, the consumer’s impression of that industry will dictate the

businesses within that category’s CSR threshold. Companies that sell products are more

apt to have lower tipping points than a service industry. This may be in part to the fact

that services are generally more difficult to quantify harm in than in malfunction or loss

in products. Additionally, the expectations of certain cultures can affect the CSR

threshold of an organization. In developed countries a company’s point can be defined

by created laws and regulatory bodies. However, in many other parts of the world, CSR

can be seen as something that only big business needs to take into consideration. While

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these views are evolving, the resource variation between these two types of cultures still

maintain vast differences in when the CSR threshold is met.

CSR thresholds are highly dependent on multiple different factors. For firms

their business level strategy has a major impact on when they choose to implement CSR

policies. The firm’s size and capacity, as well as positioning in the industry dictate their

timing for CSR. At an industry scale its quite dependent on the nature of said industry.

Apparel for example opposed to the banking industry has a much lower threshold. The

culturalthreshold is relative to a culture’s perception of the importance of CSR as well

as the development and ability to make changes.

Walmart's business-level strategy probably raises its CSR Threshold; that is, the

firm has more CSR leeway and can “get away with" more because its value proposition

is based on a strategy of low cost. A Walmart shopper, for example, is unlikely to be

surprised to discover that the firm favors products manufactured overseas by low-paid

contract employees. For a firm like The Body Shop, however, which has built its

reputation and customer base largely on the social justice issues it advocates (such as

no animal testing and fair trade), the CSR Threshold at which customers, the media,

and society react may be much lower. Thus, The Body Shop's stakeholders are likely to

have a lower tolerance for perceived ethics violations.

In other words, a Body Shop customer would expect the firm to live by the values

that attracted him or her to the store in the first place, which translates into a lower CSR

Threshold for the firm. One CSR error by The Body Shop, for example, may well be

equal, in terms of stakeholder backlash, to multiple CSR oversights by Walmart.

Products targeted at market segments or niches, such as lifestyle brands, are especially

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valuable to a firm because they often rest on subjective perceptions tied to shifting social

trends, rather than objective price and quality comparisons. Customers will pay a greater

premium for such products. Yet, paradoxically, those able to pay this premium are

precisely those with the widest range of alternatives, backed by the resources to make

different choices. The subjective base on which lifestyle brand allegiance lies, therefore,

also presents a danger to the firm.

Question 2 (5 marks):

What is meant by the term “CSR as brand insurance”? Can you give an example of a

real firm that has benefited from CSR in this way? Regarding CSR implementation,

what additional actions do you suggest the chosen firm do to strengthen its brand?

(Write a short essay from 1500 to 4000 words to answer the question)

Answer:

CSR as ‘brand insurance’ is needed because even the most prestigious brands

have substitutes. Do NIKE's shoes do the job any better than Adidas'? Is Starbucks'

coffee any better quality than the coffee served at Tully's? Would car engines run any

less efficiently if, instead of BP's gasoline, they had to run on Shell's? A CSR mindset

throughout the organization heightens the brand-user bond, reducing the brand's

vulnerability to internal management lapses.

CSR is needed as a brand insurance because of most of the brands, even high-

status brands, have alternatives. The brand-user bond will be strengthened through a

CSR mindset and be able to reduce the brand’s vulnerability to internal management

lapses. It has the ability to give a company credibility if they get in trouble with a legal

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problem because they can show a good track record when proving themselves as

socially responsible.

Savvy nongovernmental organizations (NGOs) and consumer activists that know

how to engage the ‘always-on’ media are able to multiply the impact of CSR lapses.

Their actions can severely threaten the implicit contract between the brand and its users.

These groups can carry the threat of conveying detailed and often emotive ‘evidence’

of CSR lapses further and faster than ever before. John Passacantando, Executive

Director of Greenpeace USA, expresses the new sense among activists of their growing

relevance in the global debate: “You have to skip the middleman and find a way to put

on pressure that becomes unbearable for these companies. Don't just write to your

congressman. Take it straight to the brand. (Gilding, 2001)”

The linkage between stakeholders and brands is the purpose of branding. As the

value of this relationship grows, so does the strategic importance of CSR. This simple

relationship can be summarized in what we label The Branding Law of Corporate

Social Responsibility: “The importance of CSR to any organization is directly related,

and rises in proportion, to the value of the firm's global brand.”

Executives find it difficult to apply cost–benefit analysis to avoid future

problems of uncertain likelihood. But these are the ideal conditions for insurance, not

an insurance that pays off after a crisis but more like traditional boiler insurance that

focuses on preventative protection. The reason why firms need CSR is not because they

necessarily have a pressing problem at the moment but so that they can avoid (or at least

lessen) problems that undermine their brand going forward. Simply put, CSR represents

conflict prevention and can be thought of as modern day boiler insurance.

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 Here we describe how CSR activities can play an important role in the risk-

management dimension of a firm’s strategy. Consider the situation of Mattel in 2007.4

Mattel ‘s CEO, Robert A. Eckert, had just learned that it faced the largest toy recall in

history, covering some of its most popular product lines. These toys were found to

contain extremely high levels of lead paint. Disclosing the problem and recalling the

affected toys would surely be costly to Mattel; however the long-run impact on the

profitability of the firm would ultimately depend on the cause that the public and

investors ascribed to the problem. If they saw the problem as one mainly stemming

from Mattel’s negligence in overseeing its Chinese suppliers, there would be serious,

long-term consequences. If, however, it were seen as merely an “honest mistake”—

something that could happen to even a diligent firm—the damage would be much less.

We shall argue that Mattel’s “reputation,” driven in part by its perception as a

“responsible” corporate citizen, will do much to drive beliefs about the proximate cause

of an adverse event.

Although adverse events have direct costs in the form of regulation penalties and

lawsuits, there are also indirect costs to consider. For example, Mattel may have to

monitor its input suppliers more carefully and engage in a substantial public relation

campaigns to communicate such improvements. Being a publicly held company, these

expected costs will be (almost) immediately reflected in its stock price. Investors will

also price in the future expected cost of such adverse event for the firm---their beliefs

about the possibility of such events happening again. Obviously, investors’ judgment

about this risk will be colored by the firm’s reputation before the event. Is this an

anomaly or is it consistent with a view that Mattel has been rather cavalier in monitoring

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its suppliers? In short, the degree of price change following the event will be based on

the weight investors place on its cause.

Similarly, regulators have limited resources to investigate adverse events. In

local law enforcement, the decision to prosecute some crimes and not others is known

as “prosecutorial discretion.” In a regulatory setting, a similar principle applies: All

things equal, those firms that are thought less likely to have committed negligence as

opposed to have experienced bad luck will be pursued less fiercely or not at all. One

can think of a scale describing the possible causes of an incident. The left side of the

scale is labeled “bad luck”—the incident was caused by factors largely out of the firm’s

control. The right side of the scale is labeled “bad management”—the incident was

caused by negligence, foolhardy cost-cutting, or some other factor under the control of

the firm. Where investors and regulators place an event on this scale depends on the

firm’s reputation, based on its past actions as a “responsible corporate citizen,” leading

up to the event.

Viewed in this light, expenditures on corporate social responsibility (CSR) can

be thought of as an insurance premium. In normal times, this simply reflects a pure cost;

however, when an incident arises, the firm is insured to the extent that its past CSR

activities tip the scale toward bad luck rather than bad management, saving the firm

money, avoiding regulatory scrutiny, and preserving the value of its brand. That is, CSR

provides a contingent benefit.

Corporate Social Responsibility means that, “a corporation should act in a way

that enhances society and its inhabitants and be held accountable for any of its actions

that affect people, their communities, and their environment; it implies that harm to

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people and society should be acknowledged and corrected if at all possible” (Lawrence,

A. T. & Weber, J., p50 para 2). Mattel is a socially responsible corporation according

to their 2009 Global Citizen report, Mattel's Corporate Responsibility mission is to “act

with integrity in all we do to bring the world safe toys that grown-ups trust and children

love. We are committed to positively impact our people, our products and our planet by

playing responsibly. This commitment resonates in our actions and through our

company values each and every day, as we: Play Fair by continually encouraging the

Mattel organization to align decision-making with the company's values. Play

Together by working with employees, partners, vendors and regulators to bring the

world safe toys that grown-ups trust and children love. Play to Grow by committing

to a sustainable future through efforts to work smarter and reduce our impact on the

environment. Play with Passion by volunteering in our communities and helping

underserved children experience the joy of play” (Mattel, Inc., 2014).

Furthermore, Mattel has always listened to its stakeholders and encouraged open

and mutually transparent dialogue. “Stakeholders are all those who affect, or are

affected by, the actions of the firm” (Lawrence, A. T. & Weber, J. p21). Mattel’s

communication with its stakeholders and its management of the public relations crisis

not only greatly impacted the recall outcomes but showed socially responsible and

ethical corporate behavior.

In order to ensure the safety of children’s toy’s I believe that toy companies, the

CPSC, and the government should work together to develop a plan. Us Senator, Dick

Dubin is calling for stricter government regulations for recalls on defective toys. In an

interview Durbin says, “When defective toys are found we don’t have the laws to

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enforce it. The law requires the commission and the company responsible to negotiate

and have conversations about next steps before a press release is issued to the public.

This problem is that these negotiations can take months” (Reuters, 2007). Not having

these regulations in place could lead to injury or possibly death. The Us Consumer

Product Safety Commission (CPSC) is also calling for new testing standards to test toys

before they are imported from other countries.

Mattel’s Global Product Integrity team is engaged to ensure that products meet

or exceed our standards and specifications. They have also added new requirements to

our processes and dedicated more resources to improve product quality and safety.

Mattel takes pride in its integrity, safety and quality of their toys. Mattel also designs

its toys to meet or exceed applicable safety standards wherever they are sold. Which

includes; the evaluation and careful selection of materials and components to create

engaging toys that are durable and safe; all while working to comply with each

country’s unique regulations. (Mattel Inc., GCR, 2009, p15).

In my experience the collaborative accountability model has always been an

effective way to ensure not only are standards adhered to but that the rules will be

enforced. Currently, stricter government regulation and enforcement of prompt

communication between the responsible parties are being considered. Toy companies

believe they are making toys safe by testing the toys and keeping products out of the

supply chain that may compromise their safety. They have a mandatory program that

includes testing, standard procedures for verifying products conformed to the US safety

standards. In addition to developing testing methods, and working with the government

to implement legislation.

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 Consumer advocates should continue to build trusting relationships with the

consumer since the consumer isn’t able to trust the toy industry or the government to

keep children safe. In addition to mandating federal regulations and inspections to keep

children’s toys safe. Other stakeholders like children’s product retailers who also want

stronger safety measures should continue to advocate for enforcement of federal

regulations; a stronger consumer product safety commission; a better production code

stamping of products and packaging to easily trace safety issues when they occur and

finally an improved recall systems.

The best way to protect children from harmful toys in the future is to do exactly

what Mattel has outlined in their third Global Citizenship Report in 2009. The report

covered everything from the evolution of the company between 2007-2008, including

the formation of a Corporate Responsibility organization that reports directly to the

CEO, who says, “We believe that making Corporate Responsibility an independent

function will ensure greater accountability and oversight of our product quality, social

compliance and environmental commitments.” (Mattel Inc., GCR, 2009, p8). The

organization was formed to ensure accountability and oversight of product quality,

social compliance and environmental commitments. Mattel also announced a three-

point plan. This plan aims to tighten Mattel’s control of production, discover and

prevent the unauthorized use of subcontractors, and test the products itself rather than

depending on contractors.

As a result of the release of the 2009 report, Mattel has received several honors

including being listed at the top 10 of the “100 Best Corporate Citizens”; ranked one of

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the “World’s Most Ethical Companies”; and has been named for the second consecutive

year to Fortune Magazine’s list of the “100 Best Companies to Work For”.

In my opinion, Mattel’s reputation was quickly repaired due to how the company

responded to its market and non market stockholders. Their handling of the crisis and

subsequent issues following the 2009 recall and the establishment of a new corporate

responsibility organization will continue to keep them on top as a global leader. Mattel

is hard at work restoring goodwill and faith in its brands, even as it continues to be

plagued with residual distrust over the lead paint nightmare. Reputations are hard won

and easily lost, but Mattel appears to be steadfast in its commitment to restoring its

reputation.

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 REFERENCES

1. Associated Press. (2007). Mattel CEO admits it could have done better job.

NBCNews.com. Retrieved from:

http://www.nbcnews.com/id/20738314/ns/business-consumer_news/t/mattel-

ceo-admits-it-could-have-done-better-job/#.UyiTt6hdU1M

2. Dill, K. (2014). The Top Companies For Culture And Values. Retrieved from

Forbes:

http://www.forbes.com/sites/kathryndill/2014/08/22/the-top-companies-for-

culture-and- values/#6cf87a593797.

3. Mattel, Inc. (2009). Global Citizenship Report (GCR). 3rd Ed. Retrieved from

http://corporate.mattel.com/about-us/2009GCReport.pdf

4. Mattel, Inc. (2014). Playing Responsibly. Retrieved from

https://corporate.mattel.com/about-us/corporate-responsibility.aspx

5. Reuters. (2007, Aug 14). Mattel recalls more Chinese-made toys. Retrieved from

http://youtu.be/hrb3CMFVeDM

6. Thottam, J. (2007, Sept). Why Mattel Apologized to China. Time .Retrieved from

http://content.time.com/time/business/article/0,8599,1664428,00.html

7. Thorne, D., Fraedrich, J., Ferrell, O.C., and Jackson, J. (2011). Mattel Responds to

Ethical Challenges. Daniels Fund Ethics Initiative, University of New Mexico.

Retrieved from http://danielsethics.mgt.unm.edu

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