Managing Corporate Responsibility In The Wider Business

Published Date: 02 Nov 2017

Environment

Alison GAUMONT

MO97G8117

Table of Contents:

Introduction 3

Task 1 4-5

Task 2 5-7

Task 3 7-9

References 10

Introduction:

Corporate responsability refers to company’s sense of responsibility towards the community and environment (both ecological and social) in which it operates. Companies express this citizenship through their waste and pollution reduction processes, by contributing educational and social programs, and by earning adequate returns on the employed resources. See also corporate citizenship.

It is the erosion of public trust and confidence that has propelled the cause of Corporate Social Responsibility into the mainstream. Corporate malpractice and exploitation, child labour scandals, childhood obesity, environmental disasters and a host of other issues have all led to a sceptical and questioning public, resulting in companies having to do more to protect and manage their reputations.

Businesses that embrace CSR can boost both their reputations and their profits. By acting in the best interests of the wider community or by supporting local projects, businesses can have a big and positive impact. This will be rewarded in terms of positive PR, happier and more loyal staff, better relationships with suppliers and partners and, ultimately, more customers and profits.

Diageo plc. is the leading premium spirits business in the world by volume, net sales, and operating profit. The company produces and distributes eight of the world's top 20 spirits brands. It is also one of the few international drinks companies that span the entire beverage alcohol market, offering beer, wine, and spirits. Diageo's well-known brands include Smirnoff vodka, Baileys cream liqueur, Johnnie Walker Scotch whisky, José Cuervo tequila, Tanqueray gin, Captain Morgan rum, Guinness beer, and wines from Sterling Vineyards and Beaulieu Vineyard. Its products are sold worldwide

Task 1:

Effects of Globalization on Diageo plc.

This is the integration of economies, industries, markets, cultures and policy-making around the world.

Globalisation describes a process by which national and regional economies, societies, and cultures have become integrated through the global network of trade, communication, immigration and transportation.

In the more recent past, globalisation was often primarily focused on the economic side of the world, such as trade, foreign direct investment and international capital flows, more recently the term has been expanded to include a broader range of areas and activities such as culture, media, technology, socio-cultural, political, and even biological factors, e.g. climate change.

In fact, Diageo campaign to globalize has been successful. The company has achieved sustainable growth and continuously expanding around the world. Diageo products have become famous and well known and the company has been able to extend its reach to different markets worldwide.

Globalization has helped the company to gain international support and patronization. It has helped Diageo to become the world largest breweries through mergers and acquisitions forces small companies to close as they could not compete with big companies.

Therefore, globalization has been a key for Diageo success to continuously provide beverage alcohol to their customers every day, everywhere and keep them satisfied.

However, because of the needs of expanding and penetrating new markets, the company has to cope with different markets requirements which have forced them to lose their identity and product legacy.

Influence of international institutions on Diageo plc.

There are several international institutions that influence the way Diageo should run its business and be controlled. Institutions like World Trade Organization (WTO), World Bank, International Monetary Fund (IMF), Organization for Economic Co-operation and Development (OECD), The Group of 20 and European Union have had a massive impact on controlling the company activities worldwide.

Diageo has been affected by rules, norms and practices of other international organizations through legal and practical dimensions.

The company has been regulated with a comprehensive legal framework, adequate data protection standard. The respect of human rights has also impacted the company business by restricted the business to some obligations.

Regulations on child labor, completion, growth, employment, environment, science and technology have been strongly put in place in order to regulate the company activities.

The company has faced cultural factors in some geographical areas. Based on the impact alcohol has on people and the environment, Diageo has to consistently deal with tough rules and high taxes that have minimized his revenue and the company profitability.

Corruption and piracy have been a major issue the company has to face globally as well.

All the problems mentioned above have forced Diageo to establish appropriate strategy to remain successful in the market industry.

Role and Responsibility of European Union membership on the workplace, including on Diageo plc.

European Union role and responsibility on the workplace, including on Diageo have been a threat for the company and a positive aspect for the environment and communities.

In fact, European Union has to fight against all of the issues related to race and ethnicity discrimination, religion and belief discrimination, disability issues, sexual orientation discrimination, age discrimination and set up tough rules to control the workplace employment. Its role is to ensure an equitable and inclusive workforce and has the responsibility to make sure that organization follow the legislation.

Regarding Breweries Company, European Union considered the impact that alcohol has on the environment, communities and society.

The negative impact of alcohol on the workplace has been one of the priorities for the European Union. They have considered a lot of issues related to alcohol problems such as unproductivity in workplace, unemployment related to heavy drinking, absenteeism and their responsibilities are to address appropriate policies and regulation to minimize the negative effect of alcohol in the society.

Task 2:

Importance of responsible corporate governance in Diageo:

Diageo has been involved in and sponsored a number of projects in areas unconnected to alcohol, in order to improve its reputation and push an image of itself as an ethically responsible company. The investment in CSR, while making a positive impact in a number of projects, is clearly oriented towards business needs:

'We know our actions as a corporate citizen can differentiate us from our competitors in the hearts and minds of all our stakeholders'2

This section will look at some of the projects which Diageo has developed:

International Business Leaders Forum

Tomorrow's People

The Diageo Foundation

www.iblf.org/">International Business Leaders Forum (IBLF)

This is an international not-for-profit organisation promoting responsible business practice. Its line is that in developing or unstable countries, where trust in governments may be low, corporations could take on some social roles typically carried out by the state. In doing so it can ‘reduce the social risks of operating in developing and transition economies, confer competitive advantage, win support of employees and customers, and contribute to vital societal infrastructure.’3 Diageo is a founding member of the IBLF, and Diageo's CEO Paul Walsh is a deputy Chair. The IBLF’s website, which is sponsored by Diageo, suggests that ‘the organisation has become recognised as an authority on global corporate social responsibility and on facilitating partnership projects between businesses, NGOs and government agencies, and more recently with business schools’.

Other principle members of the IBLF include Coca Cola, Nestle, GlaxoSmithKline, BP, and Shell.5

Diageo sponsored the IBLF’s ‘Millennium Campaign on Human Capitalism’ which ‘aimed to establish responsible business practice as a mainstream strategic issue on the corporate agenda,’6 and make it look like corporations can 'respond to the perceived downsides of development and globalisation.’ It would also allow them a greater public involvement, so that they could play 'an increasingly pivotal role in shaping not only economic development, but also social and environmental progress. The campaign ran from 1999 to February 2001.

Tomorrow's People8 is a charity set up by Diageo's parent company Grand Metropolitan PLC in the 1980s, with the professed aim of helping unemployed people into work by being an ‘expert intermediary between government, businesses and job-seekers.’ The idea behind the charity is that 'it makes good business sense to reduce unemployment.'

In that sense, the charity clearly illustrates that CSR serves business needs: boosting social and economic conditions will benefit revenues. Such projects also benefit the company's reputation and its links with government agencies. The charity has been praised from some quarters for its work.

The charity is 'independent,' but funded by Diageo. Its Board of Trustees include Diageo staff (including Geoffrey Bush, Diageo's director of Corporate Citizenship), and other business representatives.

Because of this, priorities in dealing with employment issues will be those of the private sector, though it can apply for government funding to carry out its projects:

Regulatory requirements that shape corporate governance:

There are several regulatory requirements that have shaped corporate governance. In fact, the main ones we need to consider are Cadbury report; Rutteman guidance; Greenbury report; Hampel report and so on…which have impacted on domestic business; UK Corporate Governance Code; stock exchange listing requirements; incorporation of legal into organizational policies, practice and procedures.

Impact of regulatory requirements on corporate stakeholders’ interest in the organization:

Corporate stakeholders are all the parties that can affect or be affected by the actions of the business as a whole. There are different group of stakeholders with different interests in the organization. These groups are government, employees, customers, suppliers, creditors, community, trade union, owner(s) and investors.

All those different groups have different interests in the organization. For instance, the government interests include taxation, VAT, legislation, low unemployment, truthful reporting while employees interests include rates of pay, job security, truthful communication, compensation and respect. On the other hand, owner interests lie on the success on the business while customers’ needs quality, ethical product, value and customer.

Regulatory requirements have had a massive impact on corporate stakeholders in Diageo. In fact, they have impacted on the organization policies, practice and procedures.

Government has put regulations that enhanced more control and restricted the company activities to legal ones. Communities impacted on the way the company should consider issues related on the environment protection, job involvement and truthful communication.

Dealing with different interests of stakeholders has been a crucial challenge for the organization in pursuing its objectives. Responsible corporate governance needed to be put in place in order to align all the different stakeholders’ interests and remain a successful company.

Reports mentioned in the previous part have limited the company activities. Board members remuneration has been regulated and the company profitability more controlled.

Task 3:

Actions that need to be taken by the organization to maintain the environment:

A big part of Diageo's recent activity has been influencing the UK Government's policies on alcohol. Diageo has developed close ties with government policy makers in an effort to limit the statutory regulation of alcohol, and to steer government policy into protecting its own interests. It has achieved this through a huge investment in public relations and in its promotion of 'corporate social responsibility' (CSR) as a business strategy as favoured by New Labour, and through publicly speaking out against alcohol harm. In practice, this has resulted in policies which target individual misuse of alcohol rather than corporate liability or regulation.

Diageo promotes the idea that the major problem with alcohol is the anti-social behaviour caused by binge-drinking. Many health experts dispute this industry assumption, suggesting that long term health problems caused by sustained drinking are more serious - liver failure caused by sustained drinking accounts for the majority of people treated in Accident and Emergency for alcohol-related problems.

Aware of the limited availability of some natural resources the company has to take actions for energy conservation and comply with the most up-to-date legislation covering this issue.

The company is aware of protecting and managing the environment is important for the planet and the financial sustainability of the supply chain and the business. Therefore, Diageo has put it place environmental policy that outline their commitment to protect against the long term critical depletion of natural resources and lasting damage to species, habitats, biodiversity and the climate ,and , they introduced the GREENIQ program to continuously drive the improvement.

Economics of adopting a policy of environmental awareness in Diageo:

GREENIQ program and all the actions undertaken by Diageo have helped the company to face concerns about environmental protection addressed by the Government and Community. In fact, by promoting government campaign about green issues, the company has been able to protect their reputation and their financial sustainability.

It is necessary to put in place responsible corporate governance in order to comply with the legislation and avoid sanction and prosecution.

Environmental policies have been a response to the threat of external stakeholders on the organization.

Without an appropriate code and policy environment related, the company would not have been able to tackle the entire problem that affected alcohol beverage industry.

Despite the tough regulation and taxation, Diageo remain the world largest breweries with considerable return to shareholder and company profitability.

Measures that exist to improve workplace health and safety:

Health and safe workplaces are fundamental to achieve productive work and high quality working lives. It has been an essential ingredient to achieved world class performance that is the reason why the company has made sure employees work in a good condition.

The cost of health and safety still help the company to avoid the high cost that is caused by illness, injury, absenteeism….

- Temperature in indoors workplaces:

People thermal comfort needs to be considered. It combines environment factors such as humidity and sources of heat with personal factors such as clothing a worker working and how physically demanding their work is. Therefore, measures like introducing engineering to control the thermal effect on the workplace environment, restriction of exposure, medical pre-selection of employee to ensure that they are fit to work in these environments and the use of suitable personal protective clothing is necessary to ensure that people work in the suitable environment.

- Cleanliness and waste materials:

An effective method need to be put in place to make sure everything at the work place remains clean and waste should be stored in suitable receptacles.

- Room dimension and space:

The company needs to make sure workrooms have enough space to allow employees to move about with ease.

- Seating:

Suitable seating for people needs to be provided in order to help them work in the most comfortable way.

- Maintenance:

Equipment, systems, devices and the workplace should be maintained in efficient working order in order to prevent risks.

- Drinking water or coffee :

An adequate supply of high-quality water and coffee should be provided.

- Facilities for rest and eat meals:

Suitable, efficient and accessible rest and spaces where people eat at work should be provided.

These are all the relevant measures that the company need to provide in order to comply with the issues of health and safety in workplaces.

As mentioned above, it is really important for the organization to consider the cost involved in all the health and safety measures in order to minimize the cost and risks that could occur because of the lack or poor health and safety conditions in workplaces.