Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach [1 ed.] 9783836646154, 9783836696159

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Kolja Paetzold

Copyright © 2010. Diplomica Verlag. All rights reserved.

Corporate Social Responsibility (CSR): an International Marketing Approach

Diplomica Verlag

Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

Kolja Paetzold Corporate Social Responsibility (CSR): an International Marketing Approach ISBN: 978-3-8366-4615-4 Herstellung: Diplomica® Verlag GmbH, Hamburg, 2010

Copyright © 2010. Diplomica Verlag. All rights reserved.

Dieses Werk ist urheberrechtlich geschützt. Die dadurch begründeten Rechte, insbesondere die der Übersetzung, des Nachdrucks, des Vortrags, der Entnahme von Abbildungen und Tabellen, der Funksendung, der Mikroverfilmung oder der Vervielfältigung auf anderen Wegen und der Speicherung in Datenverarbeitungsanlagen, bleiben, auch bei nur auszugsweiser Verwertung, vorbehalten. Eine Vervielfältigung dieses Werkes oder von Teilen dieses Werkes ist auch im Einzelfall nur in den Grenzen der gesetzlichen Bestimmungen des Urheberrechtsgesetzes der Bundesrepublik Deutschland in der jeweils geltenden Fassung zulässig. Sie ist grundsätzlich vergütungspflichtig. Zuwiderhandlungen unterliegen den Strafbestimmungen des Urheberrechtes. Die Wiedergabe von Gebrauchsnamen, Handelsnamen, Warenbezeichnungen usw. in diesem Werk berechtigt auch ohne besondere Kennzeichnung nicht zu der Annahme, dass solche Namen im Sinne der Warenzeichen- und Markenschutz-Gesetzgebung als frei zu betrachten wären und daher von jedermann benutzt werden dürften. Die Informationen in diesem Werk wurden mit Sorgfalt erarbeitet. Dennoch können Fehler nicht vollständig ausgeschlossen werden und der Verlag, die Autoren oder Übersetzer übernehmen keine juristische Verantwortung oder irgendeine Haftung für evtl. verbliebene fehlerhafte Angaben und deren Folgen. © Diplomica Verlag GmbH http://www.diplomica-verlag.de, Hamburg 2010

Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

Corporate Social Responsibility (CSR) as an International Marketing Approach

List of Figures………………………………………………………………………. III List of Abbreviations……………………………………………………………… IV 1. Introduction………………………………………………………………………. 1 2. The CSR Approach……………………………………………………………… 3 2.1 History and Definition of CSR………………………………………………….. 3 2.2 Company`s Motivation for CSR ……………………………………………….. 8 2.3 Examples of CSR carried out…………………………………………………. 10 2.3.1 Investing in NGOs………………………………………………………... 10 2.3.2 McDonalds CSR activities……………………………………………….. 11 3. Benchmarking CSR…………………………………………………………….. 18 3.1 Advantages of Benchmarking………………………………………………… 21 3.1.1 Advantages for the Company…………………………………………… 21 3.1.2 Advantages for the Stakeholders……………………………………….. 23 4. Role and Potential of CSR shown on 4 Aspects………………………….. 25 4.1 Human Resources……………………………………………………………… 25 4.2 Brand Differentiation…………………………………………………………… 30 4.3 Corporate Reputation………………………………………………………….. 33 4.4 Corporate Social Marketing…………………………………………………… 34 4.5 Similarities between Aspects………………………………………………….. 37

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5. Critical Review on “Greenwashing”………………………………………… 44 5.1 Green Marketing as a Countermeasure……………………………………... 47 5.2 Possible Effects of Greenwashing……………………………………………. 50 6. CSR as a Marketing Approach……………………………………………….. 52 6.1 The Role of Marketing in CSR………………………………………………… 52 6.2 CSR Marketing Commitments – The Company’s Approach………………. 54 6.2.1 Corporate Cause Promotion………………………………………… 54 6.2.2 Cause-Related Marketing…………………………………………… 56 6.2.3 Corporate Philanthropy……………………………………………… 60 6.2.4 Green Marketing……………………………………………………… 62 6.3 NGOs as Most Prominent Partners for Companies……………………….... 63 7. International Valuation of CSR with focus on Marketing……………….. 65 7.1 Transferring CSR to an International Marketing Level…………………….. 70 7.2 Examination of International Marketing Potential of CSR Activities……… 72 8. Conclusion………………………………………………………………………. 77 9. Bibliography…………………………………………………………………….. 80

Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

List of Figures

Fig.1 Fig.2 Fig.3 Fig.4 Fig.5 Fig.6 Fig.7 Fig.8 Fig.9 Fig.10 Fig.11 Fig.12 Fig.13 Fig.14 Fig.15 Fig.16 Fig.17 Fig.18 Fig.19 Fig.20 Fig.21 Fig.22 Fig.23 Fig.24 Fig.25 Fig.26 Fig.27

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Fig.28

Kellogg’s Square Dealer Categories of Consultants Selling CSR Services Visual Accounts of CSR and Coexisting Labels McDonald’s “Corporate Responsibility: Oversight and Coordination Acknowledgment of terms to be signed by potential suppliers McDonald’s Sustainable Supply Chain Vision Nutrition-Facts on Product Packaging Ronald McDonald House in Philadelphia Ronald McDonald Family Room Ronald McDonald Care Mobile Aspects of Corporate Social Responsibility per Stakeholder Ethical Brand Monitor Subway’s cosponsored message provides strong support for a desired brand positioning Own illustration: “The Relationship between CSR Aspects” Own illustration: “The Relationship between CSR Aspects” annotation of “I” Own illustration: “The Relationship between CSR Aspects” annotation of “II” Examples of Eco labels “Breakdown of the Seven Sins” in the American Market Percentage of consumers who have punished companies for being socially irresponsible, by region “The Dave Matthews Band” promoting global warming through Ben & Jerry’s Ice Cream 2009 “Keep America Beautiful – Great American Clean Up” Sponsors Promotional material for American Express’s campaign to help reopen Lady Liberty The Expanded Benefits of Cause Marketing Elucidation of Benefits of CRM Kenneth Cole ad with a philanthropic intention Five-stage process model of internationalization Market pioneer, early follower and late follower within the products lifecycle Fair Trade Logo

III

Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

Copyright © 2010. Diplomica Verlag. All rights reserved.

List of Abbreviations

AFNCC

Arthritis Foundation, Northern California Chapter

BP

British/Beyond Petroleum

C

Corporate

CC

Corporate Citizenship

CDC

Center of Disease Control

CEO

Chief Executive Officer

CoC

Code of Conduct

CR

Corporate Reputation

CRM

Cause Related Marketing

CS

Corporate Social

CSM

Corporate Social Marketing

CSP

Corporate Social Performance

CSR

Corporate Social Responsibility

EBS

Educational Building Society

e.g.

exempli gratia (“for example”)

etc.

et cetera (“and so forth”)

HNWI

High-Net-Worth Investors

HR

Human Resources

HRM

Human Resource Management

i.e.

id est (“that is”)

ISO

International Organization for Standardization

KLD

Kinder, Lydenberg and Domini

LBG

London Benchmarking Group

LOHAS

Lifestyle of Health and Sustainability

MNC

Multinational Corporation

NGO

Non-Governmental Organization

PGA

Professional Golfers Association

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Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

Public Relations

RMFR

Ronald McDonald Family Room

RMH

Ronald McDonald House

RMHC

Ronald McDonald House Charities

SER

Sociaal Economische Raad

SR

Social Responsibility

SUV

Sports Utility Vehicle

US

United States

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PR

V

Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

1. Introduction The purpose of this paper “Corporate Social Responsibility (CSR) as an International Marketing Approach” is to identify an approach to merchandize corporate social responsibility on an international level. Solely promoting a company’s CSR initiatives and its philosophy globally has not yet been attempted. My intention is to illustrate the possibilities of promoting CSR internationally, due to the fact of the rising interest in the subject and the resulting pressure from the outside world. To pursue this goal, general information about “corporate social responsibility” will have to be illustrated, along with two basic examples at the beginning, so the reader can understand the main framework of CSR. It is shown how companies can evaluate the potential that lie behind the implementation, demonstrating benefits for the company itself and other parties that can profit from CSR initiatives. Is CSR a product, a service or non of it? Is it possible to promote it as a whole? If not, how can something that is not a product or service be merchandized? These questions will be answered during the course of the paper. Possible problems of this approach during the analysis will be illustrated and swept aside with countermeasures. To demonstrate the possibilities of using CSR as an international marketing tool, the aspects which can be of use to this approach will be identified. The approaches are underlined by examples making it easier for the reader to follow. Moreover parallels of CSR aspects will be demonstrated to clarify the similarities between them. It has to be mentioned as well that there are approaches by companies to Copyright © 2010. Diplomica Verlag. All rights reserved.

mislead consumers with false claims for their own profit. But countermeasures against these “black sheep” have been taken and the result will be revealed. What role does marketing really play for CSR? The relationship between a company’s CSR philosophy and its possible marketing approaches involve different kinds of commitment which will be looked at in detail. But companies also have the possibility to find prominent partners for their efforts to show their

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Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

social involvement. As a consequence several parties can profit from it due to mutual engagement and goals. In today’s times in which globalization plays a big role, a company’s CSR initiatives cannot be kept solely on a small scale but must be transferred onto an international level. The question how CSR aspects can be merchandized globally will be examined. Since the world’s population is growing at a fast rate environmental problems are steadily increasing. Therefore people became more and more conscious of the possible consequences. They started to keep an eye on corporation’s involvement in respect to social and environmental problems, in order to prevent further damage. This is the reason why CSR initiatives are gaining on importance. The key aspects they are concentrating on are, among others, child labor, equal human rights, discrimination of any kind. In difficult times like these a lot of companies have understood their obligation towards society at large, recognized the potential they have, and are willing to

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play their part as a corporate citizen.

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Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

2. The CSR Approach The general idea of the concept of corporate social responsibility (CSR) is that society at large believes modern businesses should have more duties for society and not just towards their shareholders, meaning to ensure long-term wealth for the organization. They believe that their stakeholders: consumers, employees, the community at large, government, and the natural environment should be taken into stronger consideration. The CSR approach applies to all sizes of organizations, but citizens focus on large companies because of their high level of transparency. This chapter defines the main frame of corporate social responsibility to fully recognize its meaning and what stands behind this phrase. It is easier to understand the importance of its role in these modern times, when a certain basic knowledge is given. How CSR can be defined, what its historical background is and why enterprises are suddenly increasing their interest in the subject of being more responsible towards society and its environment? Most of these questions will be answered in this first part of the paper.

2.1 History and Definitions of CSR The idea of corporate social responsibility (CSR) can even be traced back to a time before Christ was born. “In ancient Mesopotamia, around 1700 BC, a king introduced a code in which builders, innkeepers or farmers were put to death if their negligence caused the death of others, or major inconveniences to local citizens.”(BRASS, 2004)

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The field of corporate social responsibility did not concentrate on the enterprise as a whole, but on individuals such as their leaders. Society itself looked at how these managers contributed to society through their companies. In the 1950s, the focus of CSR shifted towards the actions taken by organizations, and not by their head individuals. This made social responsibility transparent to the companies’ direct surrounding, so that citizens could see, or estimate, to a certain degree how involved an organization was in the environment in which it is operating. 3

Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

This spawned the concepts of ‘corporate social responsiveness’, and then `corporate social performance’ (CSP) in the 1980s. In the 1990s the term ‘corporate sustainability’ (CS) was introduced to stress companies to take more awareness of environmental concerns. This underlined the aspect that companies themselves, and not the management, were accountable for their part in being socially active. One could say, the organization became a person, a citizen, and thus the term ‘corporate citizenship’ (CC) was born. Inevitably there is no single definition of the construct “corporate social responsibility” since there have been diversities on interpretation, thus many terms have been applied equally when stating, what “Corporate Social Responsibility” actually comprehends. There are a number of similar terms that are often associated with CSR. This is the reason why many authors refer to the meaning of CSR with a different word. Most commonly used terms are: ‘corporate business responsibility’ or ‘corporate business citizenship’, ‘corporate citizenship’, ‘community relations’ and ‘social responsibility’. Other associated terms are enclosed within the CSR perspective: social and environmental auditing, stakeholder theory, business ethics, sustainability, environmental sustainability and strategic philanthropy are just to name a few. The Kellogg Company is a good example of how CSR can be managed by a multinational company over a period of more than one hundred years. Since W.K. Kellogg founded the company in 1906, he sought to “invest my money in people,” and that legacy continues to guide the company and its people from that point on to the future. The company understands that its social responsibility extends to the quality of its products, and states that customers can rely on Kellogg products to be “great-tasting, high-quality foods”. Kellogg’s revenues in 2008 stood at 12, 8 billion US-Dollars. The company claims, “social

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responsibility is a way of life at Kellogg”, and it involves “investing in and enriching our communities”, “encouraging employee volunteerism” as well as a “commitment to being a good corporate citizen”. The range of Kellogg’s CSR activities is long and includes: protecting the environment, selling nutritious products and advocating healthy lifestyles. Acting with integrity and adhering to the highest ethical standards, promoting diversity in its work and partnering with various suppliers, just as to ensure a safe and 4

Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

healthy workplace are just a couple of more codes the Kellogg company follows. This shows that Kellogg strive their morals ever since it was founded, and stood by their moral code of what they thought “Corporate Social Responsibility” stands for (Mackay, 2009).

Fig. 1: Kellogg’s Square Dealer

In the early 1990s the first CSR consultancies were established in Sweden. These consultants were acknowledging social responsibility as a new field of

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work: Convincing organizations of the potential benefits CSR brings along.

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Fig. 2: Categories of Consultants Selling CSR Services However, throughout the 1990s consultants, presenting the social responsibility of business, addressed it under various labels: sustainability, corporate citizenship, corporate philanthropy, business ethics and to some extent CSR (den Hond / de Bakker / Neergaard 2007, pg 39). Because several labels were abandoned at the beginning of the 21st century, consultants continued by solely using the label CSR. Yet when asked to define CSR the consultants often took pen and paper and drew intertwined circles, showing that they could not verbally define what CSR exactly implies. The explanation was that the field of CSR is still under construction and they themselves were in the learning

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process.

Fig. 3: Visual Accounts of CSR and Coexisting Labels

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The „Business & Finance“ Magazine published an article presenting that EBS Building Society defines CSR as anything it does as a business that has a positive impact in the workplace, amongst its members or the wider community (Business & Finance / 2009). The World Business Council for Sustainable Development defined CSR as a continuing commitment in which ethical and environmental aspects are integrated into their day to day economic business activities (The Business Times Singapore / 2009). The Social Economic Council of the Netherlands defines CSR as follows: Corporate social responsibility incorporates two elements. 1. Sufficient focus by the enterprise on its contribution to the welfare of society in the longer term 2. The relationship with its stakeholders and society at large Four well renowned economic authors, Friedman, Elkington, Carroll and Buchholtz all have different perceptions of what CSR really means. Friedman (1962) sees CSR only as a tool to increase a company’s profit and that all social and environmental activities are something the government and communities have to deal with. He also argues that otherwise, you are preaching pure socialism. For Elkington (1997), in his triple bottom line reporting, social responsibility is a three-fold: to create economic, ecological, and social value. Carroll and Buchholtz (2003) expanded this idea and argued that CSR is a four-fold: economical, ethical, legal, and philanthropic responsibilities are to be taken under consideration.

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Many more examples could be listed here but you will not find one single definition which would show that all companies, that integrated CSR in their business activities, are in the same way conscientious companies because they all tend to stress different aspects of CSR. So the question remains, is there really one definition of corporate social responsibility? The position from which the International Organization of Standardization (ISO) is trying to work, since there is no explicit definition of the three letters and the meaning what CSR stands for, is to rethink if the “C” in CSR should actually be 7

Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

there. Other people have also challenged what the “C” refers to. Should CSR also embrace NGOs and governments or is it all about corporate behavior? The ISO believes that corporate social responsibility could then be renamed into “organizational social responsibility”. That is the reason why they believe the “C” in CSR could be left out. They believe “SR applies to more than just private companies. Corporate Social Responsibility, CSR, has been broadened to include governmental agencies and other organizations that have a clear interest in showing how they work.” (ISO 2006a). A set definition of the term corporate social responsibility does not exist. How a major company in the United States defines CSR will not be interpreted the same way as by a major company in Europe or Asia. Another problem, when trying to define CSR, is that it is used interchangeably with the concept of “corporate governance”.

2.2 Company’s Motivation for CSR The range of reasons why companies should become interested in being socially responsible is diverse. In the course of time companies should detach themselves from seeing CSR only as a strategy which slows down profits and that it is something the corporation itself should not have to get involved in (Friedman, 1962). Instead CSR should be regarded as a chance to create a better image for the corporation, promote social responsibility to society at large and eventually raise revenues in the long run. Companies have different reasons for developing and implementing corporate social responsibility policy. Primarily the corporations will contribute to CSR if

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they believe that CSR will pay off in the future. There are several ways in which CSR can affect profitability. First, it can improve the company’s reputation in the consumer market and environmental stewardship also creates a reputational advantage that enhances marketing financial performance (Miles and Corvin, 2000). More empirical studies that were carried out all together have shown how a good social reputation can influence the buying decisions of consumers. Yet one has to

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Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

emphasize that with respect to the consumer stakeholder companies have a social responsibility both for the product itself (quality, safety) and product information (advertising, packaging, and warrantees). This is to achieve that the consumers specifically know what they are buying, what they are investing in and that they are doing something good – trying to make the world a better place. A negative social reputation can ultimately have a damaging effect on a product as a whole. In the year 2000 the private energy company BP, which formally stood for “British Petroleum”, changed the meaning behind its name. It now stands for “Beyond Petroleum” in order to show that they are socially active, e.g. initiating sporting events in Poland. Second, a good CSR reputation will also most likely be rewarded by both potential employees and the current workforce. Ethical commitment in an organization results in a better climate under the workers, consequently more trust in the company and stronger dedication from the employees which eventually leads to higher profitability. The absenteeism of the employees and employee misconduct will reduce, if the climate under the workforce is healthy. A good ambiance between the employees and the company will result in complete job satisfaction and higher productivity. The results of these two points are that the degree of the organizations corporate identity will flourish thus giving it a better reputation on the market in comparison to the competition. Of course there also is a financial motive behind the implementation of a CSR – strategy in an organization. Milton Friedman stresses the financial aspects of business. That the main focus should be satisfying the company’s shareholders and not social activities for communities and stakeholders in terms of social activities (Friedman, 1962). Although almost every multinational organization has taken a certain distance from such a claim, the necessity of the financial

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motive still is to be taken under consideration. If a company wants to expand its social responsibility, it has to have the necessary liquid assets to follow the above mentioned goals, which eventually lead to long term positive effects on their reputation and raise their returns.

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2.3 Examples of CSR carried out The following 2 examples clarify how corporate social responsibility can be carried out. Since CSR also involves society at large, and in the CSR world Non-Governmental-Organizations (NGOs) are considered to be synonymous with civil society, the first example will cover the reasons why companies invest in NGOs. This example will argue in general why this investment is the right step to create and implement a CSR philosophy in an organization. The second example goes more into details. McDonalds, mostly known for its fast-food restaurants, is along with “The Bodyshop” one of the leading organizations who implemented social responsibilities into their philosophy and is known for their engagement in a spectrum most people don’t even know about. The range of initiatives, the spectrum of what McDonalds has created over the last few decades is almost as hard to believe as they have their own coffee shop label, named Mc Café.

2.3.1 Investing in NGOs The trend of businesses investing in NGOs has developed drastically over the last two decades. Global leaders – including various governmental institutions – have realized the importance of cooperating with companies for their international development and recognition. Companies see an opportunity to raise their credibility towards the public when wanting to be socially responsible because of the fact people doubt that, for example numerous multinational corporations (MNC) have included CSR into their day-to-day business activities.

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Since it is commonly known that the core business of NGOs is to interact in helping, preserving, and securing on a multi plane level, a corporation’s credibility is better assured when investing in NGOs rather than to just provide money to certain charities from time to time. Seeing as NGOs have the knowledge, training and dedication in their field of work and that the program of a certain NGO is ever growing and persistent, it is promotional for a company to financially support an NGO in the long run. But not just the financial aspect is of importance and interest to the Non-Governmental-Organization, also the 10

Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

company’s managerial knowledge can be useful. For example when planning to expand certain insurance to an NGO target group in another country. This is why NGOs around the world tend to increase corporate partnerships with businesses. This movement is of great importance to the social responsibility of a company, because when investing long term in an NGO, their social trustworthiness is secured. Secured because since telecommunication has evolved with increasing speed, the activities of companies are more transparent as “the whole world” can see in what manner and in what way a company is socially responsible. An article by Elkington and Ferrell presented the results of a research done on NGO-corporate partnerships in the perspective of environmental issues. This research was requested by BP, the third largest global energy company, – Beyond Petroleum – to find out what kind of NGO would fit to their core business. BP wanted to show their environment that they are increasing their social performance. This action was done to boost the recognition of the brand “BP”. A company by the name of “SustainAbility” was hired to execute this research. The surveys they had carried out came to the result that 85% of the reviewed NGOs found that both the company and the NGO would profit from a partnership. (Elkington, Ferrell, 1998)

2.3.2 McDonald’s CSR Activities McDonald has one of the biggest frameworks when it comes to corporate social responsibility. All of McDonald’s CSR activities arise from their main field of work: providing fast-food at reasonable prices, but not at any cost. The Copyright © 2010. Diplomica Verlag. All rights reserved.

foundation of their entire CSR movement begins with the philosophy “responsible food for a sustainable future” (Skinner, 2008). Yet how is this philosophy put into practice? McDonald decided to ensure their social behavior by implementing a Board of Directors, who are responsible for keeping the McDonald standards guaranteed to their stakeholders.

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Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

Fig. 4: McDonald’s “Corporate Responsibility: Oversight and Coordination

One of the first initiatives of this board was to create a code of conduct for suppliers, so that the company is insured that a supplier lives and works under the compulsory McDonald code. Every new potential supplier has to read and

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sign this code before the company takes their service under consideration.

Fig. 5: Acknowledgment of terms to be signed by potential suppliers

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This Code of Conduct (CoC) for the suppliers is only one part of their CSR ideology. The whole McDonald supply chain has 3 responsibilities, the “3 E’s”. Ethical, environmental and economic responsibility has to be upheld.

Fig.: 6 McDonald’s Sustainable Supply Chain Vision

McDonald cares just as much about the employees of their suppliers as of their own. Suppliers are expected to support the fundamental rights of their employees as well as of all other people. A generated team tracks and assesses suppliers performance from time to time and provide support if violations to the CoC should occur. Another aspect of McDonald’s supply chain is the assurance of humane animal treatment. For this, McDonalds ordered an animal welfare expert who designed a comprehensive audit program. This was created to support McDonald’s Animal Welfare Guidance Principles which were created to assure that the animals were not abused, neglected or harmfully treated. McDonald is working closely with its direct suppliers in order to cut down on their water, energy, air, and waste impact on the environment by implementing a self developed Environmental Scorecard. Furthermore, McDonald is helping Copyright © 2010. Diplomica Verlag. All rights reserved.

the environment by working with NGOs and industry partners on rainforest protection efforts. The companies’ attention on the subject of obesity was awoken long before the production of the movie “Super Size Me”, a documentary on a person who only nourishes himself on McDonald’s products, in 2004. The increasing concern on obesity from NGOs, governments and others was the beginning of McDonald’s initiatives to start communicating this issue on potential health-risks with their 13

Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

customers. Nutrition information in easy to understand bar graphics demonstrated on product packages was the first step taken.

Fig. 7: Nutrition-Facts on Product Packaging McDonald became the largest restaurant retailer thanks to the community in which they are operating. The way they are repaying the communities are in diverse ways, from sponsoring and partnerships to the birth of the Ronald McDonald House Charities (RMHC) (Skinner, 2008). Established in the 1970s, the RMHC became the largest CSR initiative taken by McDonald. It lives on donations given by McDonald’s customers over the internet or right into a restaurant’s donations box. The three core programs of the RMHC are the Ronald McDonald House, Ronald McDonald Family Room,

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and Ronald McDonald Care Mobile.

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The Ronald McDonald House (RMH) was intended for the health improvement and well being of children across the globe. It was planned for children who have to travel a great distance to obtain medical treatment. The idea behind the Ronald McDonald House was to give close relatives the possibility to have an accommodation in the area close to the medical facility in which their child is being treated. The house is solely for close relatives of a child needing medical treatment. Family members staying at the RMH can find support from other families who are in the same or a similar situation. Families are only asked to make a donation between 5 and 20 $ per day, and if they cannot afford these amounts they do not have to pay anything.

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Fig. 8: Ronald McDonald House in Philadelphia

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The Ronald McDonald Family Room (RMFR) is installed inside a medical facility in which a terminally ill child is being treated. The room is right next to a neonatal or pediatric unit where their child is being treated. It includes a kitchen with snacks and drinks, a living room, a private quiet room, restroom with shower and a washer and dryer for families to use. Most of the staff that is responsible for the family rooms are volunteers who, besides making sure the families have everything they need, are there when family members need to talk or just need to be distracted. The RMFR is a place where the family can find some peace and quiet, but also be by their child’s side within seconds. All of these services are, because of the volunteers and generosity of the donors, free of charge.

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Fig. 9: Ronald McDonald Family Room

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Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

The Ronald McDonald Care Mobile was established by McDonald cooperating with local health care providers. It serves the purpose of giving cost-effective medical and dental care to children, who live in rural areas and/or are not insured. The Ronald McDonald Care Mobile is a health care unit which unlike other mobile care units, is designed and build specifically as a pediatric health care unit. It has two primary functions: giving medical treatment, and educating medical knowledge. It is approximately 40 feet long and 8 feet wide and accommodates: two exam rooms, pharmacy, laboratory, a reception and medical records area (http://www.ronaldmchouse.com/care-mobile.asp , 2009).

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Fig. 10: Ronald McDonald Care Mobile

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3. Benchmarking CSR Due to the fact of the rising awareness of society towards companies being socially active, many of them see CSR as a topic of increasing importance. Knowing that the attention on this subject can affect the decisions of possible investors, the progression of companies increasing their investments into CSR activities is remarkable. They feel the rising necessity of strengthening their involvement in meeting the expectations of the triple bottom line. This means, integrating people and planet into the company’s philosophy, instead of just their profit, to focus on maximizing shareholder value (Subhabrata B.B., 2007, pg. 5-6). The idea behind the “triple P bottom line” (People, Planet, Profit) is to create bigger value in the long run with fewer risks by taking the social and ecological dimension, people and planet, also into consideration, and not just the profit. If the right balance between these three Ps is found, it would contribute to a better and more sustainable world (Brenkert G.G., 2004, pg 254). Firms, who do not align these dimensions, meaning the three Ps, will risk getting a negative reputation. This would lead to loosing market shares and downgrading their reputation. If that were to happen it would be a lot harder for companies to be attractive for potential new stakeholders. Since people are more conscious about a company’s social involvement and if companies fulfill their indirect demands, the firm will develop a social identity. One can generally say that this is just as important as brand identity. Yet this reputation boost will not be acknowledged if the organization’s CSR policies towards society and environment are not transparent. After the successful implementation of these dimensions it is legitimate to say

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that a company is caring about sustainability. This is, as mentioned before, good for the reputation and the image on the one hand, but just one single unlucky incident can destroy this positive reputation again, letting the company become less credible from one moment to another. If companies are not transparent, customers, Non-Governmental-Organizations (NGOs), suppliers and society at large cannot judge their contribution to CSR.

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Through benchmarking by independent institutes, company’s CSR involvement will be made transparent making it easier for shareholders to recognize its effort. The creation of an index with just one variable would clarify the position a company has and would improve the comparability between one and others. The amount of benchmarking methods is enormous. One reason is that not every benchmarking selects the same aspects of CSR. Another, that you can differentiate the sectors of certain CSR aspects. For instance, when a company stresses the sector of the stakeholders, it can separate between employees and customers. And these two can again be differentiated, by what the company focuses on. For the employees it could be focusing on their human rights or the equal opportunity for women. For customers it could be the safety and quality of products and services or the respect given towards the customer.

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Fig. 11: Aspects of Corporate Social Responsibility per Stakeholder

Of course the number of aspects could be easily expanded, although not equally for every company. Some chose to emphasize certain criteria more than others. For example, the automobile industry will stress the aspect of emission more than the dialogue with NGO’s. Nevertheless this does not mean that one criterion is more important than another. The differences lie within the core business of a company, which aspect they want to emphasize. 19

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The needed data for carrying out a benchmark can be sampled in various ways. One way of improving the transparency of the CSR efforts of companies is benchmarking by independent institutes. When analyzing the interaction with society, many companies have made extensive use of the London Benchmarking Group’s (LBG) model. It identifies three basic motives for company involvement in the community: social responsibility, long-term corporate interest, and direct commercial interest. The LBG comprises senior community affairs managers from leading companies, headquartered in the UK. It was established to meet the need for accurate and comparable information about how different companies define, fund and manage their community involvement activities. In 1977, the London Benchmarking Group Model was devised and then tested by a group of 18 companies across different industry sectors. The model puts a realistic conservative value on a company’s contributions and measures the benefits of the community investment (Hancock, J., 2004, pg. 18 - 20). Ecological and social data can also come from KLD Research and Analytics (Kinder, Lydenberg and Domini, an American statistics bureau). Construction of an index that weights the contributions of companies into one number would clarify the position of individual companies and improve the comparability of their CSR efforts. Some use complicated scorecards and case studies, differentiating between quantity and quality. This is carried out through giving points to each aspect, from -1 to +1 for example. After all the chosen aspects have been weighted, the “negatives” are being opposed to the “positives”. After having done this the accumulation of the scores can be compared with the scores of another company. Others simply investigate CSR reports published by companies, believing that they are accurate, and then create a benchmark through the

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aspects listed on the reports. It is important when using reports as a tool for creating a benchmark to compare companies from the same sector. It would be inaccurate if you evaluate a car dealership with a multinational telecommunication enterprise.

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3.1 Advantages of Benchmarking According to the Social Economic Council/Sociaal Economische Raad (SER), the enterprise can be regarded as “a value-creating-entity”. Another crucial aspect seen by the SER is that of the relationship between a company and its stakeholders. The enterprise is described as a form of cooperation of different stakeholders. The company should find a good balance between the stakeholders partial potentially emerging interests. Stakeholders are satisfied when the company is transparent, and the company is pleased if their stakeholders have nothing they can hold against them. A good relationship with the stakeholders requires that the firm can always answer justified questions to certain actions taken by the company, opening up their way of doing business. The SED distinguishes between primary and other stakeholders. To the primary stakeholders belong the employees and shareholders, other stakeholders include consumers, suppliers, competitors, the government and society at large (Social Economic Council, 2001, pg. 15 - 19). Having undertaken this differentiation it is understandable that it is very difficult to identify the advantages of benchmarking which are solely for the company and those that are in favor of the stakeholders. Benchmarking can therefore have several purposes.

3.1.1 Advantages for the Company Not just the stakeholders benefit from benchmarking. The company itself can upgrade their recognition for stakeholders by improving their transparency.

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Through benchmarking, companies are being recognized for their efforts and actions in the field of being socially involved. If the element of transparency is given, the company would alleviate the range of reasons why a stakeholder should start its business activities with the company. Furthermore, the probability of receiving a general better image increases. Another aspect which shows an advantage for the company is the point of the accountability. After a benchmark is carried out and the results are published the company can identify its weaknesses. The score could hold certain employees accountable for the 21

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CSR achievement and would make the correction process a lot easier. This is fundamental for a quick modification of the areas where the mistakes were made. Being able to compare a company with a direct competitor is one more example of an advantage that benchmarking brings along. First, it can develop a better process for the internal comparison by being able to judge the progresses. It enables the comparison of scores for chosen CSR aspects to the prior year. Second, it renders the possibility of the own CSR score results in comparison to the score of other companies. This increases the odds of a company to compete with others on the basis of CSR. Benchmarking can actually lead to a direct competition between companies in regards to their process in the field of CSR. In the past, before benchmarks were done in the domain of CSR, it took a lot of effort to gather information and use these to make an analysis of one’s own company with respect to CSR. Also, some information were not accessible for people who did not have any direct contact to the company. These problems were taken from companies and started a new field of business. Firms that concentrate solely on analyzing companies, like the LBG, were founded. This simplified the analyzing work of a company. Having the luck of being compared through benchmarking by external third-member parties, who are experts in analyzing the field of CSR, another advantage is the possibility of having a systematic approach. A systematic benchmark that includes all relevant aspects of the performance of a company will therefore produce a much more stable view on the class of its CSR policies. Since benchmarking is done by external professional parties, the benchmark results are consequently much more reliable, because they guarantee an objective view. A benchmark that is

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executed solely by internal groups is likely to be falsified because the probability of including personal interests is much higher, if it is not done by external analysts. Finally, benchmarking requires that companies are able to deliver the information that is needed to construct a benchmark. Companies therefore have an incentive to create and implement a department which only has the duty to organize a systematic database. This enables companies to provide the needed information ongoing to analysts (Graafland, J. et al, 2004, pg. 137-142).

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3.1.2 Advantages for the Stakeholders Even though benchmarking has several advantages for a company itself, most of them find more acceptation for the stakeholders. The more transparent a company’s CSR policy is, the more trustworthy it becomes for the stakeholders. A published report written by a company itself, out of the perspective of the stakeholder(s), is not as credible as one that is done by independent outsiders. A high score given by outside analysts has a much better acceptation, raising the company’s credibility and enhances the transparency of a company by multiple. Benchmarking increases the transparency, this directly leads to a higher accountability of the company vis-à-vis its stakeholders. When a score is evaluated it is much easier for the stakeholders to confront them with upcoming questions. The revolution in communication technology, which fueled the ubiquity of the internet, puts pressure on the companies and gives the stakeholders previously unimaginable monitoring possibilities (Wearther, W.B., Chandler, D., 2005, pg. 25-27). Suddenly stakeholders can have a much bigger influence on a company’s activities. Whatever companies publish can almost immediately be read by stakeholders and potential new stakeholders. The internet can also be seen as an instrument for the stakeholders that enhances their possibilities of a cross company comparison. This allows the stakeholders to evaluate various companies and facilitate with which company it is best to do business. By giving shareholders the possibility of directly comparing the CSR philosophies of companies with another makes it for them generally easier to pick out that philosophy, which they want to support. Another benefit of benchmarking is its simplicity. This means, giving a company scores on different aspects of their social involvement. This simplicity however, has a rather high level of abstraction since some data is not accessible for people that

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do not belong to the company or a research group. In the past it used to be complicated and very time-consuming to gather all the information needed to get a picture to what degree a company was socially involved, and if they were doing a good job at it. One can say that the benchmark that was constructed by the researchers was free of any shareholder choices, who want to judge the company. Knowing this, shareholders should be aware that the outcomes are based on many assumptions of the researchers. That is why it is very important to explain the exact method used to calculate the benchmark results. Another 23

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bonus given to the stakeholders through benchmarking is that it provides a systematic approach, letting them judge the contribution of the company to certain aspects of social responsibility. A systematic benchmark of all relevant aspects of the behavior of the company will consequently produce a much more balanced view on the quality of its CSR policy. Having external independent third parties carry out a benchmark guarantees a much more objective view compared to a presentation of CSR policies given by the companies themselves. When talking about benchmarking, independent in this case means that the researchers are gathering knowledge, to create a picture of the performance of the company, in a neutral way. The involvement of

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personal interests is inadequate.

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4. Role and Potential of CSR shown on 4 Aspects In the following, four aspects will clarify the role and potential that CSR generally has for a company and what benefits it can gain through the effects that occur during the implementation process. The explanation of the effects during the course of their implementation will be displayed. Some parallels will show up as these will be demonstrated during the course of the examination. The role and potential that: • human resources (HR) • brand differentiation • enhancing the organizations image • and improving revenues have on CSR, are the topics which will be elucidated. To clarify potential analogies, the equality of aspects will be revealed. For example: Showing the relationship between human resources (HR) and enhancing the organizations image through professional human resource management (HRM) focused on the potential of CSR. After having read the examination of the role and potentials of the above mentioned aspects, you will be able to answer questions like: What role does the aspect of human resources have when wanting to successfully implement CSR into a company’s philosophy? What does the company’s CSR image have to do with its revenues? Why is brand differentiation through CSR in a

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globalizing world becoming essential?

4.1 Human Resources Not only can CSR improve a company’s brand image and reputation by a multitude, which leads to the improvement of sales and customer loyalty, it can also enhance the ability to draw new and preserve old employees of a company. The key character when a company decides to implement the CSR

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philosophy along with its policies is the top management and their view on business ethics and social performance. They initialize the field of becoming a social responsible organization. Although the managerial platform cannot initiate and create the complete spectrum of CSR all by themselves, they have to involve the non-management employees. Getting the non-management workforce included demonstrates the part of Human Resource Management (HRM) in CSR. The significant element HR plays for an appropriate implementation of CSR and the importance it has during the process where the company’s objectives are determined and values are re-aligned is never to be forgotten. The determined objectives and values are then also customized to match them with the staff expectancies. A study found out that employee and job applicant views of the CSR involvement of a company determines the desire towards an organization (Greening D., Turban, D., 2000, pg. 254-280). Another factor that is important to the workforce of an organization is the way that they are treated. This affects the standing of the company to the outside, because the managerial behavior towards its workforce leaves it with the employees creating either a positive or negative reputation. This makes the employees one of the most important stakeholders to a company because they divulge the atmosphere which prevails within it. An unpleasant atmosphere among the staff could lead to a bad reputation because they take this negative energy to the outside of the company. This can spread through mouth-to-mouth propaganda and that could eventually lead to a bad image downgrading the credibility which is important for the company to attract new investors. A satisfied workforce leads accordingly to additional benefits that incorporates a better public image, increase employees

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morals and also support from the community in which the company operates. This shows the growing importance of HR capital as a factor for success to today’s organizations. The role of a company’s HR has become more important because the organization has to improve its leading and educating the values of CSR, and how to advantageously implement CSR policies and programs locally and internationally.

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After having gone through twelve case studies, Redington (2005) stated that employees, even though they are the most disregarded, are the most important stakeholders of a company for performing CSR activities. Knowing this, one can say creating a good social connection between the company and its employees is very important. Through this the employees feel as equals because to them the external stakeholders are seemingly more important for the company. This boosts their moral and attaches them more to their employer. Employees who are happy with the company’s engagement are likely to be more constructive, be in a better mood and more productive. On the grounds of a survey Murray (2008) stated that more than 30 per cent of respondents answered that it is more important for them to work for a responsible employer who cares about social responsibilities than the salary that they earned. Another result was that almost half of the respondents would leave an employer that does not care about corporate social responsibility policies (Sharma, S., Sharma, J., Devi, A., 2009). The different information from the above mentioned researchers lead to the conclusion that the role of employee involvement in various socially responsible initiatives of a company has been emphasized. But they do not go into details on how the internalization of CSR can be achieved with the proposals of HR departments of an organization. To demonstrate how an organization’s CSR values and policies can be reflected all the way through various HR functions and how HR functions can be a powerful tool for affecting a company’s CSR progress, it is necessary to show the initiatives of HRM. An organization can display a healthier image to external stakeholders and society at large by simply presenting itself as an exceptional employer who cares for his workforce and involves them in being a social responsible citizen. Copyright © 2010. Diplomica Verlag. All rights reserved.

Knowing that the employees are more involved in a company’s CSR initiatives shows the strategic importance of HRM to a company. Guiding principles of human resources build up a consciousness towards the necessity of accomplishing business goals in the best possible ethical manner (Agrawal, K., 2007, pg 6-16). The HR functions can aid to indoctrinate and sustain the social responsibility values in the company’s culture in different ways. HRM could develop a 27

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sustainability policy for practices which directly involves employees, i.e., volunteering in the local community, encouraging them to raise funds for different charitable purposes which indirectly have to do with the core business of the company. For example the employees of a telecommunication company which fund for a local facility that supports deaf citizens, or enhancing the development of new hearing aids, etc. Another possibility of how HR can influence the organizational culture is by creating an orientation program through which the company highlights its CSR philosophy for newly recruited candidates. But the HRM has to be cautious when building up such a program. There can be a big age difference between the new recruits. Newly employed professionals are often older compared to the recruits that come straight from college. HRM has to consider the different understanding of the company’s CSR policies, and problems that can occur while the different groups adapt the CSR philosophy. Six points have to be taken into consideration that HRM can use to help diagnose, prevent, and resolve generational misunderstandings: • Identify the problem areas • Get to know the individuals inside their role and position • Understand and anticipate expectations of different generations • Develop a personal growth and development plan for each employee • Engage and communicate • Be a leader, not a friend First you have to identify the problem areas and see if, among other things,

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there are resentments between the treatment of younger and older employees or find the source of the potential problem. To be able to counter problems from the start it is helpful getting to know certain individuals that seem to play a key role within their position in a generational dispute. Professional HRM can anticipate the expectation for certain employees’. A balance between the employee and the company has to be found so that there is no possible misunderstanding in a generational gap. New recruits enjoy learning and benefit from their work when they are engaged. Developing personal goals for each 28

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employee can help the motivation and increase the productivity. This will focus their work ethic and energy toward positive effort and outcomes. Younger recruits in the workforce are accustomed to being engaged, not mandated in an authoritarian way. If criticism should occur, it is best to communicate one-onone and not in a group. This heightens the employees’ moral because he is engaged individually and feels that there is a certain connection to his supervisor. And every new employee, regardless of his age, wants to be led. They are looking for a role model when entering a new workforce and not a buddy. But this does not mean that they want to be led by authoritarians or unreasonable leaders (Weiss, J., 2008, pg. 344-348). Also, a code of ethics can be installed in an organization to motivate social responsibility upon the employees in employment. That could lead to a stimulation of the feeling of being social responsible which would tend to a great extent underlining the values of the company’s CSR philosophy. The training and implementation of such a code should be carried out by the organization itself. It can be assumed that the HR department is a kind of coordinator of CSR activities for getting the workforces relationship to the company right. This can be seen as the basis for building a valuable relationship with external stakeholders, because the company’s credibility has increased since the HR department inculcated the employees with the right approach and attitude towards CSR and they carry it to the outside. Having a strong organizational culture supported through responsible Human Resource Management can benefit the company by improving their profitability, employee morale, legal

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adherence and social approval by society at large.

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4.2 Brand Differentiation Before pointing out the role and potential of brand differentiation for CSR, you have to understand what the term “brand” actually stands for. Two authors define a brand as follows. Kotler defines a brand as a “name, term, symbol or design, or a combination of them, which is intend to signify the goods or services of one seller or group of sellers and to differentiate them from those of competitors” (Kotler P., 1991, pg. 442). Alternatively, John Murphy, founder of the Interbrand Organization, defines a brand as a “trademark which, through careful management, skillful promotion and wide use comes in the minds of consumers to embrace a particular set of values and attributes both tangible and intangible”. (Murphy, J., 1990) In Germany the organization “brands & values” created the ethical brand monitor to measure the effect corporate social responsibility has on brands and

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the society:

Fig.: 12 Ethical Brand Monitor

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The Ethical Brand Monitor… … determines the representative status of responsible consumption and the relevance of CSR activities out of the consumer perspective … determines the meaning of corporate social responsibility for the image and the preference of product and company brand out of the consumer perspective … determines the social value of product and company brands in Germany … is the quantitative foundation for the development and examination of brand and company strategy … is a corporate project of the brand organization brands & values. The importance of a product or service brand is generally to distinguish itself from the competition and point out the brand recognition for consumers and customers. Knowing this, we can show the connection to the potential of brand differentiation and CSR. In today’s world brand differentiation is very important because product and/or service distinctions are getting harder to detect. Therefore a company has to find a differentiating factor for its product/service to distinguish the brand by giving it an extra characteristic. This is vital because the characteristics of, for example consumer products, are very similar. Thus it is recommendable for a company to communicate their social responsibility initiatives to the broad public efficiently. Through integrating their social activities into their brand, consequently these activities will be connected to the brand and will influence the buying decisions of potential consumers and customers. Awakening emotional feelings through integrating CSR initiatives on a product brand can facilitate brand differentiation and lead to a better reputation of a company and its brand. For example, Pedigree dog food has chosen to work together with the American Humane Society, who is involved in humane treatment of dogs and trying to find every dog that is in a dog pound a

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new home as soon as possible. Pedigree makes customers aware of this on their dog food products and has also posted a commercial spot on their homepage showing a dog that is held in a small cage. The message of this commercial is, if you buy Pedigree dog food products you will automatically help dogs to find a new home. The partnership is good for all sides. Dog owners and dog lovers suddenly prefer to buy Pedigree products, instead of others, because they know that pedigree is involved in helping dogs (McElhaney K.A., 2008). Pedigree improves its revenues and helps the community by “clearing 31

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out their dog pounds”. Pedigree chose the right partner, because it helped the brand and the community at large. In a way, one could say that such a relationship can be seen as a symbiosis. The one profits from the other one and vice versa. Stories are better than facts. A lot of companies show numbers on their packaging that are demonstrating their social engagement, although probably not too many people will directly understand what the company does, how their brand is “socially involved”. When a story, at best an emotional heartbreaking one, is connected to a brand just like Pedigree has exemplary done, a strong relationship between brand and customer/consumer has been created. This source of competitive advantage is solely a difference from the competition. Communicating CSR can be in this sense a source of sales, profit and new business opportunities if the investment concept is directed towards future preferences and life attitudes of consumers/customers, and will eventually build a stronger brand which meets people’s expectations. After a brand has differentiated itself from others through communicating its social activities, how can this brand separate itself out from the non-social ones to improve the company’s reputation, credibility and revenues? The key question here is: how is the company communicating its differentiated brand? McElhaney (2008) speaks of the “Three Act Buying Experience” which has three distinct parts: prebuying, buying, and postbuying. Most of the companies tend to concentrate on the prebuying experience. This means making products attractive by communicating their CSR activities through commercials, in hope that the potential customers/consumers go into a store with a certain affinity toward their product. Other companies concentrate on the buying experience. In

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this case they try to connect their brand with potential buyers by giving them a direct impression of how they are socially involved. A company that produces wines could, for example, put a hangtag on each bottle of wine showing that the wine came from biologically grown grapes. The postbuying experience is hard to solely make use of. Pedigree applies the postbuying experience along with the prebuying, and buying experience. A consumer can have a prebuying experience by watching a Pedigree commercial. Or the person goes into the store and sees on the packaging of a Pedigree product that $1 of every 32

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purchased product will go towards pet adoption. And the postbuying experience can be witnessed when a person goes to the web site and looks at the pet adoption guides and adoption information that the company provides. It can generally be said that the composition of a company’s good CSR reputation is closely connected to its brand, thus through its brand differentiation. Consequently, if a company wants to be successful in the long term, its brand (company and product) must be connected with a good reputation as well as with uniqueness.

4.3 Corporate Reputation Corporate reputation can be seen as one of the most vital elements pushing organizations to take the issue CSR under intense consideration. It is a nonstatic, multidimensional approach created through the sentiments of past behavior and a vision of future expectations. Since nobody knows what organizations and people can expect from the future, it is important to anticipate the perceptions of both of them. In today’s world, where the progress of telecommunication systems is increasing by a multitude and intangibles lead the market capital, reputation steadily claims a key role on corporate agendas (Wayne V. et al, 2007, pg. 390-392). In a research on reputation and corporate strategy, Fombrun and Shanley (1990) argue that a good reputation allows a company to charge premium prices and improve their access to capital market. This is of great value, considering that the modern world is led by intangibles. A good reputation, so Fombrum and Shanley, also attract better applicants and investors. Their study suggests that the greater a company’s contribution to social welfare, the better is its reputation.

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Reputation aids the act of brand differentiation, which we have already discussed in point 4.2, and consequently helps an organization to gain or lose competitive advantages, depending on a good or bad reputation. Fombrum and Shanley state that “well-reputed firms have a competitive advantage within their industries, but poorly reputed firms are disadvantaged”. A company’s reputation is not sealed within its walls, but is also known in their supplier factories, local communities and in the consumers’ trash after having bought and used a product. Not only can corporate reputation serve CSR as a tool, but CSR can 33

Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

also be used to aid the reputation of a company through building an emotional connecting to consumers/customers by implementing a company’s CSR activities into the brand. This connection differentiates the brand from direct competitors, builds a relation to the consumers/customers and consequently gives the company a good reputation through its brand. Reputation, in the context of CSR, is based upon the supposition that the company has knowledge of product quality, environmental impact, supply chain management, governance, distribution, and marketing. If one of these aspects fails to achieve the recognition for social activities and the public finds out, the loss of the good reputation towards, consumers/customers, suppliers, media, community, etc. will be difficult to fix. Alsop (2006) published eighteen laws of corporate reputation subdivided into three parts. Part one concentrates on establishing a good reputation, part two concentrates on keeping the established reputation, and part three describes how to repair a damaged reputation. The message Alsop tries to deliver is that everything an individual or company does or produces contributes to its reputation. A reputation is an intangible asset, but an extremely important one. And that it is even better to have than money. A good reputation is its own advertizing and quality seal which can engender loyalty through building a direct connection to customers and is possible to cross several generations and time zones. It can also bring in more customers in good times and act as a shock absorber in bad times.

4.4 Corporate Social Marketing The role and potential of corporate social marketing, or CSM, to CSR is

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remarkable. To elaborate its meaning, 2 different but similar definitions will be presented: “Corporate social marketing is a means whereby a corporation supports the development and/or implementation of a behavior change campaign intended to improve public health, safety, the environment, or community well-being.”(Kotler, P., Lee N., 2005, pg. 114) “Corporate social marketing programs are defined as corporate initiatives that have a primary goal of persuading people to engage in socially beneficial behaviors.” (Goldberg et al, 1997, pg. 313) 34

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A company can raise the awareness towards its brand by implementing a permanent association to a social engagement linked to an organization in the minds of people. Meaning, people that change the way they act, and benefit through these changes, will feel a strong connection towards a company and its brand that initialized these changes. CSM can be performed under various intensions. It can be performed by non-profit organizations as well as by forprofit organizations. The most common use of CSM programs revolve around informing society on certain behaviors that address specific issues. Behavioral awareness subjects are health issues, injury prevention issues, environmental issues, and more. These topics present CSM through non-profit organizations. Although their actions will be linked to the organization, they will bring no surplus. Corporations that see potential value for their actions will choose to engage in partnerships. Most common partners are public sector agencies and NGOs’, although the decision, which partner to choose, can sometimes be initiated through topics that concern the public and are spread over the media. CSM can also support a company’s CSR initiatives by strengthening its brand, thus increasing its credibility. Subway, for example, contributed to its local community by forming a partnership with a publicly funded program, the North Carolina (NC) Cardiovascular Health Program funded by the Center for Disease Control and Prevention (CDC). Subway wanted to benefit through this initiative by promoting their brand with such a partner, the CDC, because the fast food industry has the reputation of only serving non nutritious food products. Meaning, Subway has chosen a partner that cares about the health of society and tries to prevent diseases which could originate by consuming too much fast food products.

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Simultaneously, Subway wanted to invigorate the brands profile to the public by positively influencing the eating behavior of people. Creating awareness of how to live a healthy and disease free life was the message they wanted to send out with the CDC, giving them an advantage in the fast-food industry. They achieved it by sponsoring the messages of the CDC, which automatically let people associate Subway with supporting the eating behavior and wanting the public to stay healthy (Kotler, P., Lee, N.). Through such an action, this fast-

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food restaurant positioned its brand on a whole new level, a level that shows the public that they care.

Fig. 13: Subway’s cosponsored message provides strong support for a

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desired brand positioning

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Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

4.5 Similarities between Aspects As already mentioned in the introduction of this chapter, some parallels of the before elaborated aspects will now be pointed out with the help of the graphic below.

Fig. 14: Own illustration: “The Relationship between CSR Aspects” The purpose of this illustration is to demonstrate certain similarities between two aspects, in two cases even three. The numbers are there to underline the

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relationships and make the connections clear: 1. When a for-profit organization manages to influence the behavior of a target audience, the brand will gain credibility and raise its awareness to society. Thus, putting the brand into the spotlight and raising its reputation, and the reputation of the company itself. Nobody would think that a company, which draws attention to itself through forming a partnership with organizations from the public sector or non-profit organizations from which society 37

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benefits, has a bad reputation. And vice-versa, when a company already has a good reputation, it will be easier for them to find adequate partners to support a social cause. 2. After a company has accomplished to differentiate its brand from others of the same kind through communicating its social initiatives, e.g. dog food 1 vs. dog food 2, the next goal would be to form an emotional connection. When a connection has been created between customer/consumer and the brand, the emotional link to the brand and the company will generate a strong reputation. Customers/consumers will pass their knowledge of the company’s social initiatives within their community, letting the company’s/brand’s reputation grow completely on its own.

3. When wanting to communicate that your brand is different from others because of the social initiatives implemented within it, HR can “create a cadre of internal employee brand ambassadors” (McElhaney, 2008, pg 103104). Brand ambassadors are employees who best represent an organization’s brand internally as well as externally. These ambassadors are much more reliable compared to a commercial which costs a couple of million dollars. Also, people often seek word-of-mouth recommendations to get credible information on a company’s social efforts. Commercials or newspaper ads do not reflect an organization’s social responsibility through its brands. Word-of-mouth recommendations through HR will illuminate a company’s social activities which are presented on a brand product, differentiating it from similar products.

4. Generally speaking, we defined corporate social marketing as an action Copyright © 2010. Diplomica Verlag. All rights reserved.

taken by companies attempting to change the behavior of people, communities, society. Intended for improving issues such as public health, safety, the environment or community well-being. Since employees represent their company, thus their brand, it is vital that the employees reflect the good image of the company to the outside world. When a company markets its employee training internally and externally, the company’s reputation of being a good place to work will spread rapidly. This 38

Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

makes them credible for potential partners from the public sector and nonprofit organizations. A partnership with an organization that supports subjects like a safe working place, equal treatment of all employees, fair working conditions, giving employees a perspective for the future, can strengthen the company’s own brand. Besides making his own brand more recognizable and credible, they would automatically also serve a good cause for society, supporting its citizens. Companies that offer their employees perspectives for the future will be seen as good corporate citizens, thus being a socially responsible organization. 5. Similarities between a company’s reputation (CR) and its human resources (HR) are quite easy to explain. Companies that offer their employees a good future perspective will be recognized as a good place to work. Alsop (2006) tenth law “Make Your Employees Your Reputation Champions” underlines the importance of the company’s employees. He says that employees are the first direct contact between a corporation and its customers, and since their behavior has a large impact on the company’s reputation it is vital for them to work within a good atmosphere. Employees’ satisfaction is also very important to the company’s reputation since the range and sort of their contact to customers is versatile. It goes from how they serve the customers, thus representing the company, to how they talk about the company with friends and relatives.

6. As seen in the example of Subway – the fast-food restaurant – of how they formed a partnership with the CDC from which both benefited, Subway gained a substantial advantage through such a partnership to their direct competitors. They differentiated their brand by showing society at large that Copyright © 2010. Diplomica Verlag. All rights reserved.

they care about the health, eating behavior, and lifestyle of their customers. Nevertheless Subway may have raised their revenues through such a partnership, but by entering one with a social program that provides important health information, Subway differentiated their brand over a period of time and put it in the spotlight.

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The following two points will exemplify, described through two triangles, the direct connection of the role and potential of 3 aspects of a company’s CSR initiatives. I will demonstrate the relationship between CSM, CR, and brand differentiation, and II will show the similarities between CSM, HR, and brand differentiation.

Fig. 15: Own illustration: “The Relationship between CSR Aspects” annotation of “I”

I What relationships do CSM, CR and brand differentiation have with respect to

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a company’s CSR initiatives? In few words, CSMs’ main characteristic is the attempt to influence the behavior of people towards social initiatives such as safety, environment, health, etc in a long term. CR is to ensure that the company obtains a good reputation to gain credibility towards the public and possible investors, and the idea behind brand differentiation is to create an emotional connection between a brand and potential customers. In the past few years a growing number of citizens believe that modern businesses have responsibilities that go beyond a company’s obligations 40

Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

towards its shareholders. CSM ensures this aspect by trying to implement a company’s core business with a social program in a public sector or a partnership with a non- profit organization amongst others, to change the behavior of citizens towards a social aspect, such as health – child obesity, heart diseases, etc. Through such actions organizations attract attention towards its social initiatives and strengthen their brand. A good reputation attracts the attention of society, letting the company become more transparent, thus giving shareholders the possibility to get a clear picture of how they are being socially active. What also has to be mentioned here is the fact that the bigger a company is, the more power it has got. The more powerful a company is, the greater are the expectations of shareholders that such a dominant company has a great responsibility. A reputation can also influence the brand(s). If a popular brand from a big company implements a social activity into its brand, differentiating it from similar products, it will become trustworthy concerning its social actions. Summing up, CR shows the importance for a company to have a good reputation. When a company has acquired a strong reputation (CR), it will become more transparent because of the general interest of shareholders. Shareholders are the key to winning the respect of society, thus making a company more credible. It is easier for an organization, which to the outside is very credible, to form a partnership with a social program or nonprofit organization that fits right into their core business. The brand of one’s company will distinguish itself, by showing clear social commitment, from similar brands or products. As presented here, one can say that all of the connected aspects in triangle I share an immense role and great potential regarding a

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company’s CSR activities and initially presenting them to the outside world.

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Fig. 16: Own illustration: “The Relationship between CSR Aspects” annotation of “II” Triangle II displays the relationship between attempting to influence societies behavior towards social issues (CSM), distinguishing ones brand through the implementation of CSR activities into the brand (brand differentiation), and the importance of the employees and the whole workforce of a company (HR). The attempt of revealing the role and potential that these 3 aspects have as a whole on a company’s CSR activities can be easily understood. First, we briefly have to present the sole role and potential of each aspect with respect to CSR. Influencing the behavior of society over a long period of time towards social

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topics with the assistance of social program partners or non-profit organizations can be a giant step for a company when it wants to show its potential regarding CSR activities. Implementing a company’s social initiative into a brand, thus attempting to create an emotional connection with consumers/customers can raise awareness and strengthen the image of the company. Motivated employees, that are given a future perspective within the company, will spread the positive atmosphere that surrounds the employees inside the company, to its family, friends, and relatives. 42

Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

A company could appoint a group of brand ambassadors, giving employees the responsibility to implement an organization’s social activity into a brand. This would most likely lead to motivating employees by putting them in charge of an important issue. It is easier for a company to develop a brand which differentiates itself from similar products through the implementation of CSR activities into the brand. This would raise the awareness of the company to the outside world, thus making it easier to find an appropriate partner that would help the company to expand its image as a social responsible citizen who

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supports social issues locally, or even globally.

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5. Critical Review on Greenwashing The following chapter will introduce an aspect which could narrow down consumers’ faith on social committed organizations. Kent Mey et al (2007) defines greenwash as “to try to convince people that you are doing something which is good for the environment by being involved in small, environmentally friendly initiatives, especially as a way of hiding your involvement in activities which are damaging to the environment.” A similar, yet more up-to-date definition is introduced by Friend (2009). She defines greenwashing as “the act of misleading consumers regarding the environmental practices of a company or its environmental benefits of a product or service – even with the best of intensions.” The number of consumers that are socially observant is rising steadily, and companies see this as a possibility to increase their reputation and credibility by informing people to what degree and in what way they are involved in preserving the natural environment. Sadly, not all companies are as honest about their actions in helping the environment as they should be. Some simply make false claims on their product packaging; others promote environmental responsibilities that are irrelevant because they are legally bound by law. These are just some ways greenwashing is used by corporations as a marketing tool, with the intent to give them a “green” reputation, although their so-called involvement does not reflect the truth. This is damaging for companies that are actually involved in preserving natural resources. They suffer from the fact that it is becoming harder and harder for consumers to distinguish between companies who are greenwashing, and those who are not. Government in partnership with organizations, most of them being non-profit, are accommodating consumers helping them to differentiate between Copyright © 2010. Diplomica Verlag. All rights reserved.

companies who greenwash, and those that are actually involved in protecting the environment. The most familiar ways are: Informing people on how to identify greenwashing activities over the internet, and the development of, through the government and green activists certified, “eco-labels” (e.g. EcoLogo, Green Seal) on product packaging, guaranteeing consumers that products tagged with these labels are trustworthy supporters of

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helping the environment. Assuring consumers that the product they are buying is 100% environmental friendly during its whole product lifecycle.

Fig.: 17 Examples of Eco labels Baby Milk Action, for example, “is a non-profit organization which aims to save lives and to end the avoidable suffering caused by inappropriate infant feeding.” (Baby Milk Action, 2009). But this organization does not stop there. On their website, they published a document from “Corporate Watch” with the title “Exposing Corporate Greenwash Activist Tool Kit” (Baby Milk Action, 2009). This document demonstrates how companies, through ads and commercials, try to show people just how environmentally responsible they are. These actions are taken by organizations in hope of persuading them to buy their products… because they care so much about the environment. Corporate Watch listed the following six greenwash activities influencing consumers: • “Seduce you with image ads”: placing a gas guzzling SUV, for example, in a natural environment setting with no specific explanation on how this product is eco-friendly. The producers hope that consumers will associate this environmental unfriendly vehicle with the thought, that the

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company itself is environmentally committed. • “Impress you with their environmental projects”: In this case, the organization/brand wants to emphasize on how environmentally involved they have already been. Although without giving the viewers any proof. If they want to make sure that such claims are true, they have to get that information themselves.

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• “Distract you from their destructive products”: Companies distract on how unfriendly their product itself is for the environment (for example insectpesticides) by implementing claims on their product such as “produced in energy-efficient factories”. • “Gain your sympathy by focusing on YOUR solutions”: Here

organizations employ PR firms that make us believe, we – the people – could solve problems through investing more in alternative energy just like the polluting company is. They say, they are investing in solar energy and want to make us believe that, so we buy their products because they support this issue. • “Avoid regulations by claiming they will solve the problem

themselves”: This, more or less, means getting the focus off of governmental regulations because they will solve their concerns themselves. This is supposed to let people think that this company is “ahead of this regulation”. • “Tug at your heart strings with their concern for the world’s poorest

people”: Drawing the attention towards human rights issues is another form of pursuing greenwash activities. By implementing human rights initiatives, they want to take the issue of ecological subjects out of the picture. Greenwashing is a result of green claims undertaken by organization about themselves, their services or products. When a company’s green claims are verified by the government, non-profit-organizations or a partnership of the two they acquire a label. This by governments and environmental institutions Copyright © 2010. Diplomica Verlag. All rights reserved.

certified label implies that a company, its service, or product(s) have met the characteristics of being environmental responsible. When green claims are false, they fall into the category of greenwashing. The marketing firm TerraChoice published a report called “Seven Sins of Greenwashing” based on its analysis of environmental claims in North American consumer markets.

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5.1 Green Marketing as a Countermeasure What can green marketing do to slow down, or better stop, the act of greenwashing? The attempt to influence the consumer habits through informing them about the potentials of “green products”. Consumers play a key role in minimizing greenwashing activities. But what do responsible consumers look at when wanting to buy responsible: claims on the packaging. Green claims are a fundamental part of green marketing. Incorrect or overstated green claims can have a hazardous impact on the market. This again would lead to the fact that consumers will lose faith in the green claims that are pointed out on products. TerraChoice’s “Seven Sins of Greenwashing” (2009) point out green claims made by companies, through an analysis they carried out by frequency*. • The “Sin of the hidden Trade-off” is presented when an organization states a green claim on a single product attribute which hides an aspect that is not green. One example of the research is that paper companies, who promote their use of recycle practices, without awareness to their manufacturing actions which have impacts on the environment, such as air and water pollution. • The “Sin of no proof” is found when a company’s green claim cannot be proven to the consumer through extra information given on the product, or by having a certified label. Any product that promotes an environmental initiative (“not tested on animals”, for example) and explains no evidence so that claim commits the “Sin of no proof”. • The “Sin of vagueness” is committed when a product’s green claim is so vague that a consumer cannot understand what actually is behind such a claim and can be misled. Famous examples are environmental themes

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on products. To name a few: “chemical free” (nothing is chemical free; even water is a chemical as well as animals and plants). “Non toxic” (everything can be toxic). “All natural” (Uranium, arsenic are “all natural”, but also “all poisonous”). “Green” and “Eco-Conscious”, just to name few, do not make a clear statement, if not elucidated. • The “Sin of Worshiping Wrong Labels” is committed when a product, either through words or images, is certified by a label of a third-party 47

Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

environmental group which actually does not exist. False certification, false claims. • The “Sin of Irrelevance” is committed when a green claim is promoted even though the mentioned environmental friendly claim has been legally banned. Consumers who buy such a product could buy a “greener” product, since such a claim is irrelevant because of legal regulations saying that certain ingredients are illegal. Most common irrelevant statement is made by claiming to be free of a certain, for the ozone-layer harmful, chemical. • The “Sin of the lesser of two evils” is committed when green claims are implemented on to a product even though the product itself is harmful to the environment. For example, green insecticides. • The “Sin of Fibbing” is committed when green statements on a product are obviously false. For example, shampoos that claim being “100%

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organic”, yet have no certification proving that this claim is correct.

Fig. 18: Breakdown of the Seven Sins” in the American Market Marketers who commit any of the sins mentioned above are endangering the potential behind preserving the environment through promoting false claims.

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The potential benefit for the environment, consumers and organizations will be lost. Consumers, by being misled, will lose faith in green claims promoted by companies because they cannot be sure that their money will be put into good use. Organizations who invest in being environmental responsible and promote their actions cannot differentiate themselves from “greenwashers”. Making them become doubtful if their invested money is really put to good use, because their actions in informing people that their products are “environmental friendly” do not reach the consumer. Also, greenwashing slows down the potential benefits the environment could gain through green marketing of companies that actually are environmentally involved and want to preserve the environment. So what is to be done? There is now a substantial tide in consumer concern about the effect organizations are having on the environment. One example to illustrate this concern is the success of Al Gore’s book and documentary movie “An Inconvenient Truth”. Al Gore presents the effects that the population of the world have on the environment and stresses the aspect of global warming. People who read the book and/or watched the movie automatically become more aware of how they treat their environment. John Grant (2007) describes in his book “The green marketing manifesto” that he sees green marketing as something that has very little to do with the original brand image. In his eyes it is about education and participation, that knowledge has already eclipsed the image in mainstream marketing. “True green marketing, leading to a more sustainable culture, is antithetical to dumbing down. If you remember that, many of the perils of greenwashing go

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away.” (Grant, J., 2007, pg. 53)

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5.2 Possible Effects of Greenwashing After having researched a lot of articles on the internet, one can basically estimate that the trend towards “going green” or “being eco friendly” has increased by a multitude over the last couple of years. Every industry sector is already doing it, or is planning on doing to “be green”. It is clearly not a disadvantage if companies, or whole industries, are implementing an environmental philosophy into their business, as long as it is not misleading consumers, or other parties for whom it is difficult to differentiate between true green initiatives and greenwashers that only want to benefit from environmental conscious consumers. Greenwashing has damaging effects on all three protagonists: the environment, consumers, and businesses that clearly get affected by being misled. The negative effect greenwashing has on the environment is that it pushes consumers at large to do the opposite of which is good for the environment. This is due to the fact that people think they invest in green products, even though they are not. Buying paper towels with the label “100% recycled paper”, and there is no proof of this claim being true, the conscious consumer does not help the environment even though he believes he is. The false claims that get distributed through greenwashing are neither good nor bad for the environment generally; they just endanger the trust of consumers who want to actually help making the world they live in more sustainable. Another negative effect greenwashing has on consumers is the fact that their willingness to pay more for a green product is being used against them. Their hard earned money, especially during this financial crisis, is not being spent into good causes, even though they are paying more for a product which supposedly was meant to help the environment and support the investment Copyright © 2010. Diplomica Verlag. All rights reserved.

taken by responsible organizations to help preserve natural resources. Businesses that invest into being environmentally involved and not get the benefit they should receive for their engagement are confused. Since they do not gain a better reputation through their commitment, they are dependent on the government, NGOs’ developing guidelines and indexes that reveal greenwashers, thus making their efforts visible and facilitate that these actions are being rewarded. This assists the consumers, the environment and, of 50

Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

course, the businesses. Another, more modern way, to inform consumers in the .

sake of business and environment is spreading information over the internet. As already mentioned before, organizations that have a good reputation, thus being more transparent to their stakeholders, can easily be examined over the internet. NGOs’ and the government support companies that initiate groups on the internet that inform users on how to identify greenwashing activities. The seven sins of greenwashing, an examination of greenwashing actions analyzed by TerraChoice, done by companies that want to profit from environmental friendly consumers, is one example of informing people over the internet. EnviroMedia (2009) created a “greenwashing index” on their homepage on which users can vote, which company ads and commercials are authentic and believable and which are not. Consumers who want to buy only authentic goods from companies that actually are environmentally involved can get enough information over the internet. This is, at the moment, the safest way to avoid the negative effects that greenwashing has on the environment, the businesses, and the consumers. So it is safe to say that the consumers are the key to minimizing greenwashing activities. It is vital giving the consumers the possibility to easy accessible information sources, thus helping the environment and businesses. This is the primary way to go, as long as the governments alone or with NGOs’ do not create clear guidelines and labels which consumers

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can trust.

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6. CSR as a Marketing Approach The following chapter will illustrate the potential of integrating an international marketing approach into a company’s corporate social responsibilities philosophy. The demonstrations that will be shown are based on the facts that are stated in the previous chapters. At first a short overview on the basics of international marketing will be given, followed by an explanation of the role and commitments of Corporate Social Responsibility and marketing, finally showing the effects after a successful implementation of CSR as a marketing tool.

6.1 The Role of Marketing in CSR The role of CSR is gaining more and more importance to the public, so it is understandable that organizations see an opportunity to raise not only their revenues, but also their reputation. The reputation of the whole organization is likely to get reflected on to the company’s products and brands. A good reputation of a company, its brand and products will ultimately end up in having advantages to potential customers. Companies that have a good reputation and promote their CSR activities through branding can clearly distinguish their products to those of the direct competition. Marketing is the main tool to communicate CSR activities to the potential customers, making a positive customer approach through brand differentiation (see chapter 4.2). The most prominent way to spread a good reputation is by satisfying customers. Not only do price and quality count as the major aspects that influence their buying decision. Today, the social responsibilities are playing just as big a role.

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Climate change, child labor and a social responsible behavior towards the environment are all aspects that customers take under consideration when deciding whether or not to buy a product. These aspects are likely to make a product more expensive, but are customers willing to pay more for products that are labeled? Does the marketing approach have a deterring effect on customers? In 2008 a Harvard research team carried out an experiment that shows how involved society is with respect to companies being social responsible (Prais, T., 2008) They went to a New York furniture store and 52

Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

labeled two brands of candles and towels with a fair labor label and recorded the sales. Subsequent sales of the labeled products, relative to the unlabeled ones, grew by eleven percent for the towels and twenty-six percent for the candles. This clearly shows that the customers recognized the labels and letting these influence their buying decision. But then they did something to reveal if customers are willing to pay more for labeled products. They put up the price of the labeled candles and towels by ten percent compared to the unlabeled ones. Surprisingly, the price increase led to even higher sales of the labeled products. A twenty percent increase for the towels and a thirty percent increase for the candles. This verifies that customers are willing to pay more for products that are produced by a social responsible corporation. Another important role marketing has on CSR is the possibility to directly engage stakeholders. When a company communicates its social responsibility activities to the public, and they acknowledge the messages of the corporation, there is a high possibility of developing a relationship with the customer. “In 20 developed countries surveyed, CSR-related factors collectively accounted for 49% of a company’s image…“ (Business and Sustainability Development, 2001) Another study by Business and Sustainability (2001) came to the result that stakeholders can punish corporations by not buying their products if they

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neglect their social responsible duties.

Fig. 19: Percentage of consumers who have punished companies for being socially irresponsible, by region

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Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

This figure points out the positive effects marketing can have on a company, its products and its brands. Dawkins (2004) points out that companies are expected to be socially responsible. Not being responsible can lead to reputational damage.

6.2 CSR Marketing Commitments – The Company’s Approach In the following, the three most prominent approaches will be illustrated, showing how a company can present and merchandize its social responsibility initiatives. The benefits resulting for the company as well as for other stakeholders will be made clear. Examples and figures will help to clarify how these initiatives work, and what they result in.

6.2.1 Corporate Cause Promotion This corporate commitment describes an initiative taken by an organization to provide funds, contributions and further corporate resources. The goal is to increase consciousness and worry about social issues that have to do with the core business of a corporation. The corporation can start these contributions by managing promotion by itself (i.e. The Body Shop who promoted the banning of test for cosmetics done on animals) or be a major singular partner in an effort (i.e. Aleve who promoted the Arthritis Foundation fundraising walk (AFNCC, 2006); afterwards became “official pain reliever of the PGA Golf tour” (Aleve,

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2009)). But a corporation can also be a member in a joint federation promoting a cause which does not directly have to do with its core business, but helps build a positive reputation with respect to social responsibility issues (Keep America Beautiful – “Great American Clean up”, 2009). Strong arguments for corporations to engage in promoting social causes are to strengthen their brand’s positioning, create a brand preference, differentiate their brand from others, and turn regular customers to company’s loyal customers. Ben & Jerry’s, for example, promoted the cause of making their consumers aware of 54

Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

the rising concern about global warming (Ben&Jerry’s, 2009). In a partnership formed with the rock band “The Dave Matthews Band”, Ben & Jerry’s were inspired by the band’s concern. This gave them a push into creating a new ice cream flavor which promotes the awareness of being more environmentally conscious. Since Ben & Jerry’s were inspired by the band to introduce the new flavor, which has an environmental message on the package, onto the market, “The Dave Matthews Band” could choose into which project parts of the sales where contributed. They chose “Save Our Environment”, a program launched by the World Wildlife Foundation, Greenpeace, the Sierra Club and many more eco-conscious organizations with the intention to promote the rising concern about environmental issues and global warming.

Fig. 20: The Dave Matthews Band” promoting global warming through Ben

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& Jerry’s Ice Cream

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Fig. 21: 2009 “Keep America Beautiful – Great American Clean Up” Sponsors But knowing all the good that can arise through promoting partnerships for Corporation, NGOs’ and the consumers there are of course downsides. Just to name two obvious ones. The visibility of the corporation may be lost when a partnership is being introduced. When initializing a partnership on promotional material and the marketing department does not make one partner visible, the investor might believe that the investments does not bring the achievements that it should have.

6.2.2 Cause-Related Marketing The practice of a company distributing its corporate social responsibility through marketing instruments is referred to as cause-related marketing (CRM). Atkins (2009) states that CRM “is defined by Business in the Community as ‘a commercial activity by which businesses and charities or causes form a partnership with each other to market an image, product or service for mutual benefit’.”. One of the earliest examples was the initiative taken by American Express. They assured to donate one percent of every charge carried out with an American Express Card over a specific period of time to the repair of the

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Statue of Liberty.

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Fig. 22: Promotional material for American Express’s campaign to help reopen Lady Liberty

It is very common that such partnerships are only created over a short period of time. Philip Kotler and Nancy Lee (2005) describe several common types of partnerships through product links and contribution agreements. Here some of them are listed: • A specified dollar amount for each product (when a company promotes its promise to donate a certain amount for each product sold to a charitable cause, e.g. ten cent if proof of purchase of a certain product is given) • A specific dollar amount for every application or account opened (when a bank donates a certain amount if a transaction by a consumer is carried out or a new account has been opened, e.g. Wells Fargo donating ten dollars to local schools) • A percentage of the sales of a product or transaction (e.g. seventy-three percent of the purchase price donated to a charity) • A portion of the sales of an item, sometimes not visible, will be donated to a charity (When a real estate agent sells a house, an apartment, a certain amount of his commission will automatically go into their foundation which could, for example, benefit NGOs’) • The company matches consumer contributions (an airline matches miles donated by passengers for the transportation of children with medical

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needs) • The offer may only be for a specific product (e.g. one dollar donated for each Big Mac sold) or a whole array of products (e.g. Avon’s line of “pink ribbon” products) (Kotler et al, 2005) “Although cause-related marketing campaigns support a wide range of causes, those with the most visibility are the ones with the biggest followers…” (Kotler et al, 2005) Cause related marketing is a “… way to build brand equity…” and “… 57

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it creates the most added value and most directly enhances financial performance.” (Mullen, 1997, pg. 42-48). Also it “supports efforts to attract new customers, reach niche markets, increase product sales, and build positive brand identity” (Kotler et al, 2005, pg.84). Gourville and Rangan (2004) demonstrate among other things the expanded benefits of cause marketing in their article “Valuing The Cause Marketing Relationship”. They illustrate to what degree who benefits from whom and to which cause.

Fig. 23: The Expanded Benefits of Cause Marketing

According to Gourville and Rangan (2004) the black arrows in this figure symbolize the relationships that contribute to first order benefits and the dotted arrows symbolize the relationships that contribute to second order benefits. In their article they mention, that “the original framework not including the dotted Copyright © 2010. Diplomica Verlag. All rights reserved.

arrows previously limited the focus of CRM benefits to increased sales and alike and neglected benefits that were not as easy to observe”. (Gourville, Rangan, 2004). Direct monetary benefits, such as an increase in sales, are understood as first order benefits, where as second order benefits are less focused on the direct monetary aspects and the benefits are a result of the adaptability between the company and its stakeholders.

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To understand in what relationship the entities stand to one another, Gourville and Rangan (2004) created a table that elucidates the numbers on the arrows.

Fig. 24: Elucidation of Benefits of CRM

When looking at fig 20 and 21, Gourville and Rangan point out that, out of the corporation’s perspective, there are three basic stakeholder groups that can be influenced. Stakeholder groups, which can interact with the company, are current and potential new consumers, employees and investors and finally the general public which are represented through the arrows 2b and 4 in the figure illustrated above. Because of the weight of efficient CRM activities of the corporation, their potential benefits through these stakeholder groups are, according to Gourville and Rangan (2004), as follows: • The current and potential consumers – increased possibility of a sale and reduced differentiating costs for an offering in the minds of the consumers.

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• The employees and investors – lower cost in investor and personnel management due to the higher possibility of long term commitment between the parties because of a better match between employees, investors and the company as well as the retention of current employees and investors. • The general public – improving the relations with government regulators, local interest groups and the general public. 59

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6.2.3 Corporate Philanthropy While Porter sees Corporate Philanthropy as a non strategic initiative taken by organizations in today’s world (Porter, M., 2008), Lauffer understands that Corporate Philanthropy is used as a business strategy of Corporate Giving. “By investing in their communities, business concerns have increased the size of their markets and the productivity of their employees. In a corporate world, giving is not just good for business; it is good business.” (Lauffer, 1997, pg. 130). Craig Smith explains in his article “New Corporate Philanthropy” that “philanthropic and business units have joined forces to develop strategies that give their companies a powerful competitive edge.” (Smith, 2003, pg. 157). The definition of Corporate Philanthropy is often used alongside the term Corporate Giving: “Corporate Philanthropy or Corporate Giving is the act of corporations donating some of their profits, or their resources, to nonprofit organizations.” (Fritz, J., retrieved 10/2009). Kotler and Lee take it one step further. For them Corporate Philanthropy is not just donating to NGOs, but “a direct contribution by a corporation to a charity or cause, most often in the form of cash grants, donations and/or in-kind services.” (Kotler et al, 2005, pg. 144). According to them, it is also the most traditional of all corporate social initiatives. Donations given by corporations are often critical to NGO, because these donations cover a part of their operating budget, capital expenditures, and special projects. Most agree that the face of corporate philanthropy has changed over the decades, primarily because of the internal and external pressures to balance the concerns for shareholder wealth “with expectations to demonstrate responsibility for communities contributing to the corporation’s livelihood.” (Kotler et al, 2005). But how can philanthropic activities be integrated into a marketing concept?

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Kotler mentions one example, among others, in his book that shows how a company can do this: Kenneth Cole, founder of a clothing line based in New York which specializes in shoes, implemented his philanthropic activities into his commercial ads. The Washington Post published some of these headlines: • “Our shoes aren’t the only things we encourage you to wear” (tagline that appeared in an ad for safer sex)

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• Buy a pair of Kenneth Cole Shoes and you might be responsible for bringing one homeless person in from the cold” • “Have a heart, give a sole” (campaign promoting the support for giving in your old shoes, getting a percentage on a new pair. Through this he supported the homeless in the rural areas of New York with shoes)

Fig. 25: Kenneth Cole ad with a philanthropic intention This ad’s intention was to influence potential buyers. Conscious buyers were confronted with the idea from Cole, that through buying his shoes they would support New York’s less fortunate citizens. Cole benefited from such initiatives, strengthening the brand, the reputation of the company and presenting it as a “corporate citizen”. But also the community benefited from the actions taken by Cole, making them take social issues more serious and influencing them in

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general to become more conscious buyers regarding social concerns.

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6.2.4 Green Marketing Green Marketing is probably the most efficient tool that a company can use to promote its social initiative towards environmental sustainability. We have already gone into the aspect of green marketing in chapter 5.1. Now we are looking at the possibilities green marketing offers. The increasing necessity of implementing green marketing into a company’s marketing department, and the potential benefits a company can obtain from it. Since CSR is gaining importance in purchasing decisions, it is vital for a company that pursues CSR initiatives to promote their “non greenwashed” products effectively. The preferences of consumers in today’s society have changed. Companies are getting pressurized by society to engage in CSR because of increasing public demands on responsible actions towards sustainable services and products. The Greendex 2009 survey underlines this statement: “Fifty-five percent of consumers across 17 countries agreed they are “very concerned about environmental problems”; only fourteen percent disagreed.” (Greendex, 2009). But a “… change in preferences demands know-how, intelligence, and education…” (HNWI, 2008). Since it is not the company’s primary duty to educate society on how to support sustainability, it can do its part by using green marketing as an educational marketing tool. This supports the merchandizing of the company’s true green products, decrease greenwashing, and enhance the credibility of the company’s CSR philosophy which could lead to brand preferences with respect to the consumers. One segment that does not need to be educated, are the consumers who live by the standard of LOHAS (Lifestyle of Health and Sustainability). “LOHAS are

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a broad group buying a great variety of products and services – organic food, yoga, alternative medicine, hybrid cars, eco-travel, green building, solar panels, green clothing…” (Croston, G.E., 2009, pg. 142-143). Croston also states that the LOHAS market in the US spent $300 billion and included thirty percent of U.S. consumers. This shows that green marketing can benefit a company, but also society in many ways including: Educating consumers, help them differentiate greenwashing from true green products and through this build a relationship between consumer, the company, and its brand(s). Strengthen the 62

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brand, its image, and the relationship to its stakeholders, making the company more credible, increase sales and its revenues.

6.3 NGOs as Most Prominent Partners for Companies Partnerships are of great importance to a company that wants to promote its CSR activities. Partnerships can be formed over a short, or a long time period. Examples of a short time partnership is the promotion of CSR on certain products that inform on a social responsible aspect, e.g. global warming (see chapter 6.2.1). Partnerships formed with products on which the information is given that a certain amount of the sale will go to a good cause, e.g. educational sponsorship (see chapter 6.2.2). All these examples give the public an impression to what degree a company is socially involved. In the public eye, NGOs are more trustworthy than companies in regard of benefiting society. NGOs are able to put a lot of pressure on a corporation, because the public believes initiatives taken by them are solely for the benefit of a good cause. Thus, wanting to achieve credibility from society, a partnership with an NGO is a secure way to achieve this goal. The importance of partnerships between NGOs and corporations has been increasing over the last years. The following chapter will present the influence and benefits evolving through a partnership between an NGO and a corporation. Companies with the will of integrating CSR policies into their business do not quite have the dedication and knowledge to start a development program. Since society believes and trusts that the sole business of NGOs is to serve a aspect

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of general social welfare, companies see the opportunity of gaining recognition from society through such partnerships. For the NGOs, partnerships with corporations may assist financial, human resources and reputation benefits. For the corporation, a partnership with an NGO provides them with skills, knowledge and capabilities that would assist their CSR efforts (Yaziji, M., DohJ., 2009). Such benefits for a corporation’s CSR initiatives cannot be achieved by forming an alliance with a for-profit organization. Knowing this, one can say that collaborations between a corporation and an NGO provide “both partners with 63

Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

discernable benefits” (Yaziji, Doh, 2009). Yaziji and Doh (2009) point out four principal NGO strengths that can benefit a corporation. In the following, they will be pointed out: • Legitimacy: An NGO can provide a corporation with the status of being a legitimate CSR activist. NGO spokespeople are more credible towards CSR issues than any CEO or marketing manager of a corporation, thus after having formed a partnership, the voice and subject of an NGO spokesman will automatically include the corporation’s standpoint. Many companies communicate their social initiatives on products and the public interprets that as being socially involved but also trying to gain profits. Having an NGO as a partner demonstrates to the public that a corporation is not mainly interested in improving revenues, but making a contribution to a social aspect. • Awareness of social forces: Corporations can learn to take awareness of social forces and use them to rule out potential dangers. For example, if a company that produces cosmetics would know about the humane concerns regarding animal testing, they could reduce the risks of getting bad publicity by simply modifying their practices. • Distinct Networks: Most companies have a simple network. Its roots would belong to Michael Porters five forces model, which include suppliers, buyers, competitor firms, new entrants and substitute producers. NGOs networks mostly consist of other NGOs, public interest, and regulators. The benefit this has for a corporation is the probable way of gaining access to the information network of the NGOs, thus giving the corporation an advantage to the competition.

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• Specialized technical expertise: Companies can profit from members of an NGO that are specialized on certain CSR aspects. So could a member of an NGO know about a new technology which ensures less pollution to the environment, but be as productive as any other. Such a possible new technology might go unnoticed by managers in a company since the majority of information regarding this new technology is concentrated on informing environmental friendly issues.

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7. International Valuation of CSR with Focus on Marketing Because the term “International Marketing” can be used in multiple ways, this paper will only go into the basic details giving a brief but functional overview. In the following chapter the assumption will be made that the reader is broader familiar with the basic principles of marketing. The primary concern is to illustrate the problems a company faces when wanting to detach itself from its domestic marketing operations, and expand it onto an international level. The easiest way is by letting an organization make one or more marketing-mix decisions over its domestic boundaries. A more complex way is to build manufacturing facilities in a different country and implement a diverse marketing mix strategy in what perhaps are different markets. An example for the easiest way is when a company hires a foreign agent who promotes, places, distributes, and so on, its product(s) in a foreign market. Although this can only be an option when an organization wants to enter a country’s market with an established home country product having the same characteristics, e.g. same packaging, brand, price. This cannot be done when the target country has different perspectives on certain standards. It would be inappropriate to promote the German Milka chocolate in India with the same commercial ads as in Germany – purple cow with Milka written on the side of it , because the Indian culture sees a cow as a holy animal, thus feeling offended by such a commercial. This shows that a lot of planning has to be done when wanting to enter a foreign market. A company has to consider certain variables. For example, be aware of the distinctions between the target and home country’s differences in morals, lifestyle, and religion. The cost and price structure, the opportunities for

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advertising, and the infrastructural environment surrounding the target market are also to be taken into consideration. To emphasize the examination that has to be carried out carefully before entering a global market, Bradley (1999) created a five-stage process model of internationalization.

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Fig. 26: Five-stage process model of internationalization

At the first stage, the firm has to decide whether or not they want to internationalize. They have to understand the role marketing plays within the

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organization. The values of the organization in international markets have to be understood, just as the resources and managerial capacities have to be retained. When deciding to internationalize, strategic options will have to be examined. Indeed, the firm’s resource base and the requirements of the market may constrain the firm in its selection of a feasible international marketing strategy. At the second stage the potential international marketing environment has to be examined. This means a decision will have to be made if to enter global, 66

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regional or emerging markets. It is important for a manager to understand the sociocultural environment of international markets to know what can and cannot be done (see Milka example above). Public policies, local laws and the influence they have on the market must be respected. Through understanding and respecting these restrictions, a company, and also the host country can gain advantages compared to their competitors. A company can achieve them by building a manufacturing facility in a country where the employees are paid fair salaries and the market’s demands for the company’s products are high. The country can also profit from it by becoming a more attractive partner for other multinational corporations. Examining the potential ways of entering a market is the third stage of the process. Before entering a new market, you have to know how the economic environment in the host country works. Understanding its competitive characteristics, mechanisms, role, and evolution over a certain period of time facilitates the decision of when and where to enter the market. It has to be carefully divided to ensure that a market segment, which is already saturated, will not be entered. When talking about the segmentation of the market, it has to be understood that the choice will also have to be made by taking the potential new customers into consideration. Entering a segment where the population is low, thus having a low purchasing power, but the industrial environment is good could eventually lead to more transportation costs when wanting to get the product to the customers. Another aspect, which cannot be neglected when choosing where and when to enter the market, is the competition. Having examined the market, and its competition, a company can decide more effective if they want to enter a market with the pioneer-, or follower strategy. The decision is based upon the question if the target market is emerging, has

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already been exploited by other corporations. The pioneer strategy ensures at the beginning that the produced goods will be bought because there will not be any competition when entering a market in which a company’s product has not yet been introduced. Schmalensee (1982, pg. 349) defines a pioneer, with respect to the market entry strategies, as “being the first entrant in some sorts of markets.” It is recommended that the pioneer strategy will only to be pursued when entering a market which has a high purchasing power and no competition. Through globalization everything 67

Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

becomes more transparent and competitors will soon enter the market with the same product but sell it at a lower price because they already know the markets potential. When this occurs, the pioneer strategy will show similar characteristics compared to the follower strategy. Corporations that are entering a competitive market are usually pushed into pursuing the follower strategy. A company has to assert itself by finding possibilities to communicate with potential customers, persuading them into buying their products. When entering a competitive market, an organization has to ensure that their product has greater value compared to the pioneer. To make sure that people get the information of an improved product, the marketing mix of a company has to be able to let potential buyers recognize it and its quality. Otherwise the product will not be able to distinguish itself from the competition, even though it is better. Placing a similar yet improved product onto the market mostly means having to raise the price for it. The marketing management’s function is to make sure that the buyers of the old product know if they purchase the new and improved one at a higher price, they are getting good value for their money. Another way the follower strategy can be carried out is by going into the market with the same product but at a cheaper price. This will lead to the effect that the pioneer will successively loose market shares and will have to react. The aspect of the market entry timing plays a big role for the follower. It is harder to gain market shares when you are the first follower since you have to bring an innovation onto the market to awake the interest of potential buyers. This is not the case for later followers since they have observed how the market reacted. They only have to imitate the products of either the pioneer or the first follower, because of their knowledge of the markets demands

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.

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Fig. 27: Market pioneer, early follower and late follower within the products lifecycle

The fourth stage of the process model examines the dimension of international marketing programs for three different types of businesses. When a corporation is planning on “going international”, Bradley (1999) sees it as an advantage to understand their specific demands: • Consumer products – e.g. different tastes due to cultural preferences • Industrial products – e.g. diverse negotiation strategies due to different cultural habits • Services – e.g. customer needs vary by country (advertizing, accounting, financial services, etc.) These three sets give an insight and cover the broad range of experiences that

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a corporation goes through over the evolution of becoming an international firm. At the fifth and final stage of the process, possible ways of implementing the international marketing programme are observed. How a company has to cope with new distribution channels based on internationalization. Understanding the nature and structure and using these international distribution channels to their advantage. Moreover, the selling and negotiating strategies in international markets as well as the managing of international marketing operations have to

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be understood. According to Bradley, it is vital to consider these five stages to become a long lasting and successful international acting company. This means, when implementing an international marketing strategy a number of areas have to be observed closely. It is important for the company to understand the dimension of an effective implementation concerning international marketing strategies. In addition to that, the firm has to decide the right approach for its business to operate within the target market, and finally the aspect of realizing the necessary standards in order to set the fundamental base to put their decision of “going international” into practice.

7.1 Transferring CSR to an International Marketing Level Firms operating on an international level have the duty to merchandize their products according to their CSR philosophy. When entering a host market, it is vital to operate “in a responsible manner, namely due respect for local cultures, customs, traditions, and religious feelings…” (Keinert, 2008, pg. 28). Neglecting these aspects will most likely lead to boycotts and disagreements with the host country’s civil society. Keinert also elucidates the fact that corporations have increasingly become “culturally sensitive” due to the fact of respecting the mores of a host country. Examples are daily prayer times and religious holidays. She also points out that corporations face certain problems when wanting to implement their CSR values because they would collide with societal view on certain aspects. Respecting local values could interfere with the company’s regard on “equal rights for all employees”, regardless of race or gender. Another

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example is the difficult choice a corporation has to face “when having to decide on how to handle equal opportunity for female employees within countries that demand gender segregation, or do not accept women as negotiators.” (Keinert, 2008, pg. 29). Hypothetically, CSR cannot be merchandized because it is more a philosophy, a moral code, than a product or service. Knowing that the basic thought behind

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CSR is to conduct business in a more socially responsible matter, it can be understood that CSR as a whole cannot be treated as such. A corporation can ensure that its whole value-chain follows the morals and codes through which its CSR philosophy is demonstrated. For example, it can guarantee that their globally sold goods are not produced through child labor, thus making them more credible and giving them a good reputation. This shows that a company engages in such causes, underlining their social initiatives on a global level. But how do consumers know that a product was not produced by children? “Consumers can keep their eyes open for labels stating that the product is union made, or watch for labels of campaigns such as Rugmark and Fair trade.” (http://hubpages.com/hub/CildLabourStillExists, 2009)

Fig. 28: Fair trade Logo Fair trade is a globally known player fighting poverty, promoting fair price conditions, and fair wages to producers in third world countries. Fairtrade has Copyright © 2010. Diplomica Verlag. All rights reserved.

attracted so much attention that even celebrities promote it. “Television and movie star, Charlie Sheen, has appeared on a public service announcement on the U.S. Transfair’s website to encourage people to drink fair trade coffee.” (Micheletti, M., 2003, pg. 97)

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7.2 Examination of International Marketing Potential of CSR Activities The aspects of CSR introduced in chapter 4 will now be tested if, and in what way they can solely help to internationally merchandize the CSR philosophy with respect to the whole value-chain. Human Resources can ensure fair working conditions for every employee of a corporation, regardless of the country in which they operate. “The more the workforce is a mirror image of the external employment community, the easier it will be to promote diversity internally.” (Reilly, P.A., 2006, pg.78). Knowing this, human resources of a corporation have the ability to promote a good company image to the domestic community. This can be assigned to an international level if sub companies and franchisee are living the parent company’s CSR philosophy. If this should be the case, the international marketing ability of one aspect of CSR is given. A better reputation and image can evolve through this and may lead to improving the corporation’s international revenues. The aspect of brand differentiation has in some sort already been mentioned above. Brands that are certified by Rugmark are more likely to be bought because of society’s rising awareness to social issues. An online study of September 2009 came to the result that “Three out of four consumers are willing to pay more for brands they believe act responsible…”, and ”Today’s consumers increasingly expect brands and companies to help change the world, even if only in small ways,” said Bib Kenney, principal of Context Marketing (PRWeek, 2009). Although Rugmark and Fair Trade are the most prominent labels that stand for CSR activities, there are more certified labels that show how corporations and their brands are socially responsible. Summing up, brand differentiation can be regarded as a good international marketing tool.

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Corporate Reputation is an aspect that cannot be seen individually when looking at its international marketing potential. It is more the achievement of other aspects. For instance, when differentiating your brand through green labels a large number of people will buy the green product even though it is more expensive. The reason, as already mentioned before, is the fact that society increasingly becomes environmentally conscious but is willing to pay more for these products. Employees who are satisfied with their work and the working conditions reflect this positive image by word of mouth to the outside 72

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world, improving the company’s reputation. Corporate reputation cannot be regarded as an international marketing tool, because it is an achievement of other initiatives taken by a corporation. Looking at corporate social marketing, it is something completely different. Corporate social marketing “is a means whereby a corporation supports the development and/or implementation of a behavior change campaign intended to improve public health, safety, the environment or community well-being.”.”It is most easily distinguished from other corporate social initiatives by this behavior change focus.” (Kotler, P., Lee, N., 2005). A corporation that starts a campaign with the intention to make the general public aware of an issue is most often influenced by a natural connection to its core business, i.e. Crest toothpaste and children’s oral health. Knowing that the public, in this case especially parents, will react to the notion behind such a campaign, a corporation could consider to globally promote such a campaign. Crest toothpaste probably does not run by this name in other countries, yet the message behind the campaign can be translated into every language. If, for example, Crest already exists in another country, the corporation’s marketing managers would only have to start the “children’s oral health” campaign. In almost every country, children’s oral hygiene plays an important role for the parents so it would be profitable for a corporation to launch the “home campaign” in other countries too. The corporation’s international marketing input could be kept at a minimum, but the output would achieve a maximum. The field of social marketing also concentrates on social and cultural aspects. Doole and Lowe (2008) include social and cultural considerations into their interpretation of an international marketing strategy in their book “International marketing strategy: analysis, development and implementation”. They believe that “social and cultural factors influence all aspects of consumer and buyer behavior, and the variation Copyright © 2010. Diplomica Verlag. All rights reserved.

between those factors in different parts of the world can be a central consideration in developing and implementing international marketing strategies.”(Doole, I., Lowe R., 2008, pg. 72). Summing up, the aspect of social marketing could play an important role when considering to internationally merchandize CSR. Because of the fact that we have discussed further marketing approaches of CSR – chapter 6.2 “The Company’s Approach” – it is necessary to identify the 73

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potential that these points have when wanting to internationally merchandize CSR. These are: • Corporate Cause Promotion • Cause Related Marketing • Corporate Philanthropy • Green Marketing Could the aspect of corporate cause promotion help to internationally merchandize CSR? As already mentioned in chapter 6.2.1, the main characteristics of such an initiative is to provide funds, in-kind contributions “or other corporate resources to increase awareness and concern about a social cause or to support fundraising, participation, or volunteer recruitment for a cause.” (Kotler, P., Lee, N., 2005). Corporate cause promotion has been a common form of corporate giving and is in no way intended to increase its revenues. Quite often, corporations are approached by an NGO to “give” to a promotional cause, rarely a corporation starts such a campaign on its own. This initiative provides customers with practical ways of contributing and/or participating in a cause, and also gives the employees an opportunity to get involved in something they care about. This promotional marketing aspect of CSR cannot be compared to marketing initiatives that are solely meant to promote a product or service. Kotler et al. describe in their book “Principals of Marketing” the way a company decides how to, and in what way to use the marketing budget for a service or product. Such an aspect is unfit when considering promoting a cause with respect to CSR. The reason for this is that corporate cause promotion is not in any way after the business aspect profit, but rather being socially involved. If one had to identify an aspect of corporate Copyright © 2010. Diplomica Verlag. All rights reserved.

cause promotion that would be of benefit to a company’s profit, it would most likely be achieved by forming a social cause partnership with NGOs that lead to strengthen the corporate image giving it a better reputation. This can lead to higher sales when considering the increase of consumers who support socially active corporations. Summing up, corporate cause promotion, sometimes initiated by NGOs, is a form of corporate giving which solely supports raising

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awareness to social causes and cannot be seen as a marketing tool for the philosophy of CSR.

When examining cause-related marketing on its potential to internationally merchandize CSR, we find that it has some variables supporting this thought. “Cause-related marketing is about using marketing money, techniques and strategies to support worthwhile causes whilst at the same time building the business.” (Adkins, S., 2009, pg.: xvii). Kotler and Lee have a similar definition. They believe that “in cause related marketing (CRM) campaigns, a corporation commits to making a contribution or donating a percentage of revenues to a specific cause based on product sales.” (Kotler, P., Lee, N., 2005). This aspect of CSR can be transferred onto an international marketing level. For example, if a German product was sold in China and there would be an earthquake creating a damage of millions of Euros, the parent company in Germany could give the marketing managers the task of creating a cause related marketing campaign. Considering the effects of an earthquake, it would be best if the German product had something to do with the construction industry, i.e. steel to strengthen the concrete of bridges so that they do not collapse as easily. The result would be, if a company buys steel to strengthen concrete, a certain amount or percentage of the sales go toward helping the injured or improving the general constructions, preventing the destructive effects of such a catastrophe. Summing up, cause-related marketing has the potential to benefit CSR on an international level. Having read chapter 6.2.3, regarding corporate philanthropy, one knows that this aspect of CSR cannot be a factor when wanting to internationally promote CSR. The reason is that corporate philanthropy describes a direct contribution Copyright © 2010. Diplomica Verlag. All rights reserved.

by a corporation. These contributions, “most often in cash grants, donations, and/or in-kind services…” (Kotler, P., Lee, N., 2005), can be carried out from anywhere in the world and does not have to concern the core business of a corporation. Summing up, corporate philanthropy is a social initiative carried out by a corporation to support all kinds of causes. If its name is mentioned after donating, it may strengthen the company’s image, but would not benefit international marketing commitments regarding CSR.

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Green Marketing on the other hand can be considered as an aspect of CSR which could help a company’s international marketing activities. We know now that society has “reached a ‘tipping point’ in awareness, concern and potential for change in relation to green issues.” (Grant, J., 2007, pg. 20) Grant also says, that “many green innovations make a better economic sense too, and they can be highly competitive.” (Grant, J., 2007, pg. 27). Since societies around the world became more environmentally conscious and support sustainability, there is a great opportunity for a company to internationally merchandize its CSR initiatives. This can be best seen in the automobile industry. Through media, NGOs and governments increasingly make society aware of the dangers that, among other things, automobiles contribute to global pollution. Since all gasoline using vehicles are damaging the ozone-layer by producing carbon dioxide, companies saw a possibility to improve revenues by selling eco friendly cars. In 2007, Daimler launched the global initiative for more environmental friendly commercial vehicles, and by this demonstrated their contribution concerning this important subject. “Daimler is the global leader on the market for hybrid commercial vehicles, having delivered some 1,500 Orion hybrid buses, more than 100 Freightliner trucks from Fuso. Added to this are 1,500 Mercedes-Benz trucks and buses that run on natural gas. As a result, Daimler has the world’s largest fleet of environmentally-friendly commercial vehicles in use by customers.” (www.germancarscene.com, 2007) Summing up, green marketing has the potential to internationally differentiate corporation’s CSR initiatives from others, giving them an advantage towards the competitors. Green marketing is probably the most effective tool which can be

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used as an CSR international marketing approach.

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8. Conclusion CSR is a philosophy of an organization, which has developed many definitions over the last two decades. Yet, there still is no single one that suits every corporation. The reason is that it depends on the degree of social involvement and general CSR interest of a company. As this paper points out, there are benchmarking techniques that can give a company feedback if implemented CSR investments are worthwhile. Some companies simply stick to the oldfashioned way of philanthropy by writing a big check once every year supporting a single good cause, even though you can see similarities in marketing activities. But this notion has changed. For a company that knows the potential benefits it can gain from promoting its CSR initiatives, it makes sense that they are increasingly involving their employees, business partners, and other stakeholders to bring out a change. Their goal should be to draw attention and become a global player that shows and promotes its CSR initiatives. To become a global CSR player, you have to get noticed by society. Communicating your CSR philosophy through internationally merchandizing it by, for example promoting your social views on human resources, social and cause-related marketing, will set you apart from the competition. As this paper shows, some analyzed international marketing approaches could get the global community to notice your social actions. This will highlight your company’s CSR initiatives and will be perceived by society, community at large, and maybe even catch the world’s attention. Once you have gained the trust of people and have been able to build a relationship between consumers and your brand(s) on a global level, which assists not only your sales, but also increases your image, brand, credibility, and your reputation at large, it is easier to spread the message of being a company which globally supports social initiatives and

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causes. Thanks to globalization, it has become easier for potential consumers to notice any CSR initiatives taken by a company because of the increase of innovative telecommunication systems, e.g. the internet making corporations more transparent. Having understood the development of the increased importance of CSR, its meaning, the reasons and motivations for implementing it into a

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Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

company’s core business, it now has to be elucidated why a corporation should attempt to internationally merchandize its CSR initiatives on a global scale. The role of marketing in CSR has been described, and was transferred onto an international marketing level. But what can companies gain from such an initiative? The characteristics examined in this paper cover aspects of CSR that have a potential regarding its use as an international marketing tool. This can be interpreted as a motivation of starting the revolution to internationally merchandize a company’s CSR philosophy and engagements, attracting global attention to your initiatives. Other reasons underlining the idea of developing international CSR marketing activities for the future are: • The increasing numbers of people interested in issues such as global warming • The environment is going to remain a big subject for CSR and the general population • Sustainability is gaining importance. Not just for consumers but also for employees, influencing their decision to prefer working for a company with CSR involvement • An increasing number of foreign governments are ordering CSR as an obligation for doing business in their country. In the future, the question will not be if to engage in CSR but in what way, because corporations are increasingly pushed into a corner, having no choice but to take on CSR initiatives. An early integration of CSR activities and strategic build up for implementing social initiatives into a company’s day-to-day business is becoming vital. A company’s brands will also increasingly find more

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competition in differentiating themselves. The bandwagon of “going green” is putting pressure on the market. Good results after the implementation of CSR initiatives onto their brands will become more difficult as time progresses and the number of conscious consumers increases. The media will boost its coverage of environmental and social issues in the future creating an enlargement of the “conscious consumer market” on a global spectrum. It might be recommendable to already have your place in the existing market, making it harder for competitors to enter it. A company pursuing the “follower strategy” 78

Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

when “going green” makes consumers become more alert of greenwashing. The reason is, customers become suspicious when a brand suddenly “goes green”. Summing up, it can be said that if a company is known for its CSR philosophy it will soon find its secure place within the “conscious consumer market”, giving the company an image of being a good corporate citizen and thus making it

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difficult for competitors to cope.

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Dawkin, J., “Ethical Companies”, URL: http://www.ipsosmori.com/researchpublications/researcharchive/poll.aspx?oItemId=849, Accessed: 10/2009 AFNCC, URL: http://www.arthritis.org/media/chapters/nca/documents/AFNCC2006-Ann-Rpt.pdf, Accessed: 10/2009 Aleve, URL: http://www.aleve.com/caregiver.html, Accessed: 10/2009 Keep America Beautiful, URL: https://secure2.convio.net/kab/site/SPageServer?pagename=gac_sponsors, Accessed: 10/2009

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[ Lebenslauf ]

Persönliche Daten Name: Geboren: Geburtsort: Familienstand: Beruf:

Kolja P. B. Paetzold 17.12.1979 Bonn Ledig Diplom Kaufmann (FH)

Schulausbildung 1986 – 1990 1990 – 1996 1996 – 2000

Grundschule, Meckenheim-Merl Deutsche Schule, German School Washington DC Otto Kühne Schule, Bonn Bad-Godesberg Schulabschluss: Abitur

Hochschulstudium 09/2001 – 02/2002 09/2002 – 12/2009

Studium „Angewandte Informatik“ an der Hochschule Bonn-Rhein-Sieg, Sankt Augustin Studium „Wirtschaft“ an der Hochschule BonnRhein-Sieg, Rheinbach Studienschwerpunkte: • International Management • B to C Marketing

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Ergänzungsfächer: • Wirtschaftsfranzösisch • Management von Business Development Projekten Abschluss zum Diplom- Kaufmann an der Hochschule Bonn-Rhein-Sieg (Gesamtnote: 2,6) Thema der Arbeit: „Corporate Social Responsibility (CSR) as an International Marketing Approach“

Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,

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Paetzold, Kolja. Corporate Social Responsibility (CSR): an International Marketing Approach : an International Marketing Approach, Diplomica Verlag, 2010. ProQuest Ebook Central,