Introduction
Corporate Social Responsibility (CSR) has assumed great importance in management academia and practice. The integration of CSR initiatives with the business strategies and practices of the company has become extremely important for companies (Carroll 1999). A failure to include CSR into business practices adversely affects a company’s performance and stakeholder relationship (Mitchell, Agle & Wood 1997).
The substantial impact of the effect of industrial wastage on society and the environment has been known. Thus, companies are responsible for controlling the extent of harm they do to the environment, and the goodwill and responsibility they can show towards the community (Schwartz & Carroll 2003). One of the sectors which have been brought under the scanner is the tourism industry, which, though has great benefit to the community, also has extreme negative social and environmental impact. With the spread of the tourism industry, it has been important to look into the social activity the companies do to ease their negative impact on society. Further disclosure of the CSR efforts of the company is also an important aspect to demonstrate transparency. This paper is a discussion of the CSR models. The models are applied to understand CSR as a strategy adopted by a British company. The chosen organization is British Airways.
Corporate Social Responsibility Theory
CSR is defined as the evaluation of the impact of a company’s actions on society and the environment. With more business houses emerging, society’s expectation of businesses is increasing (Carroll 1999). CSR is essential for businesses, because “it is in business’s self-interest to have a healthy climate in the environment” (Castka et al. 2004). CSR is often dubbed as philosophy or practice that corporate managements do. CSR has two dimensions in which it is analyzed – economic and moral philosophy. The ethical concern relating to CSR is based on the ethics of conduct of the activities of the company. The interrelatedness of business, society, and environment becomes the crux of CSR. With this understanding, the next section will deal with the business theory of CSR.
The pioneering thinker and formulator of CSR theory for business are Peter Drucker. According to his theory, companies have three primary tasks: to increase the financial performance of the company, to increase the efficiency of the employees, and manage social and environmental responsibilities (Drucker 1954). The main idea of Drucker’s theory is that companies are institutions, and institutions do not exist in isolation. The institutions are an organ of the society where they operate. The institutions must share responsibility towards the society where they operate. They must be “concern for the quality of life, that is, for the physical, human, and social environment of modern man and modern community” (Drucker 2001, p. 17).
The basis of CSR lies in the theory of morality and ethics: “A corporation can and should have a conscience,” and “the language of ethics has a place in the vocabulary of an organization” (Goodpaster & Matthews 1982, p. 134). Hence, the ethical and morally upright conduct of a company may be considered as socially responsible action taken by it (Garriga & Melé 2004). On the other hand, the accounting aspect of CSR is considered as a strategy that enhances efficiency and productivity. The next part of the paper is an understanding of the background of British Airways and its CSR activities.
British Airways Overview
British Airways is one of the leading premium airline groups operating mostly from the United Kingdom. Though it is one of the major operators in the sector and has a huge international presence, the company faces financial troubles due to the imminent global financial crisis, and especially in Eurozone. The changing climate and global consensus on an agreement regarding the sustainable environment safety law is a problem for the company. Further, the low cost carriers are injurious to the company’s revenue as they compete fiercely at low price points. Further, the lowering of capacity at Heathrow airport in London and the increase in traffic of European airspace also post a challenge for British Airways.
British Airways CSR Components
The major components of CSR for British Airways are corporate governance, stakeholder management and risk management. Corporate governance allows British Airways to establish a structure that distributes the rights of the people. Stakeholder management refers to the strategic objective of British Airways to mitigate the internal and external environment of the company. Risk management by British Airways helps to prioritise and alleviate the risks that the organisation faces.
Organisational Corporate Governance
Based on the challenges presented above, British Airways identifies the areas where their CSR activities must be based on. The first is the economic area where they feel that sustainability of their financial performance is an area they must concentrate. This is a concern as the company has posted a loss in 2012. Their operational profit dipped by 47.1 percent (British Airways 2012).
Environmental Ethics
The company also has to concentrate on its operating efficiency, which is declining due to the congestion in airways, increase in fuel price, and increasing competition leading to reduction of customers. Environmental issues, that the company intends to look into, are cutting its emission, which increases effect on climate change and environment. Other forms of air pollution, such as noise and air quality impact, have to be controlled by the airways (British Airways 2012). Further wastage and recycling are important aspects of the environmental concern for the company.
Management of organisational stakeholders
Stakeholder management is an essential part of the CSR of British Airways. Various forms of community and social activity, that the company plans to participate in, are charity and partnership with community organisations and NGOs to invest for community development. Aspects related to employee relations and engagement and support of employees have to be undertaken by the company. Branding of the British Airways and managing it, as a socially responsible brand, the company can gain strategic advantage. Managing customer experience is also an important aspect of developing the British Airways brand. Customer and employee safety is of paramount importance to an airline company. Another responsibility that has gained prominence for all multinational companies is to engage diversity and create an inclusive culture. Further, the procurement activity that the company engages in has to be done in a responsible fashion.
Given this, the paper presents a few of the CSR activities of the company in 2012 as presented in its CSR report:
- The company’s participation in the London Olympics and Paralympics games had made it successful.
- The company has shown greater responsibility by creating greater care and support system for their disabled customers. This is a part of the company’s Disability Assistance Program.
- The company has created a low-carbon project with the aid from their customers to fund the building of a community swimming pool in the UK.
- They have actively participated in the formation of the EU Emissions Trading Systems. However, the process has been delayed due to geo-political reasons. The system will establish a process of development of a solution for the global climate change.
- They have selected fuel providers who are committed to development of an alternative, greener form of jet fuel.
- The company has also developed a CSR website.
- Further, as the company has its hub at Heathrow, it has acquired another airline, the British Midland International.
- Its partnership with an NGO called Comic Relief UK helped to raise a hefty sum of £4.5 million within 2010-2012.
- Keeping in view their concern regarding customer experience, the company has upgraded its fleet from Boeing 776 to 777, which promises to provide improved customer experience.
Obstacles to CSR Policy Implementation
One of the challenges of implementation of CSR lies in the development of a trust base within the organisation. Further, identification of the problems related to corporate governance without a proper reporting system is also a difficult task. Another issue is establishing rights of all and a system of justice within the organisation.
Internal and External CSR Initiatives
Figure 1 presents the broad division of the CSR activities of British Airways. The internal drivers of CSR are flying start and CR senior sponsors group. The economic drivers that establish the performance of the organisation are internal drivers. The external drivers are environmental compliance, climate and ETS strategy and fuel efficiency groups.
British Airways CSR Evaluation
Strategic Evaluation
The CSR strategy of British Airways is evaluated using Caroll’s pyramid of CSR (Carroll 1991). This approach helps in identifying the broader range of responsibilities of the corporation and suggests that hierarchical importance of ethics vis-à-vis other responsibilities (the CSR hierarchy is presented in figure 2). The figure demonstrates that the use of CSR responsibility helps in understanding the relation between the sustainable responsibilities of the company as well as grade the responsibilities in order of hierarchy. An analysis of the CSR activities of the company as disclosed in its CSR report of 2012 is done using this hierarchical structure, which is then segregated based on the CSR activities presented by Caroll (1991).
Economic Responsibility
The first and the foremost economic responsibility of any company is to look into the financial performance. This again is related to taking care of the people who keep the functioning of the company i.e. the employees. In this respect, it is of utmost importance to establish an equitable pay system, a culture of inclusion and diversity. In this case, the reward system in place for the employees is an important unit to understand the fulfilment of the economic responsibilities (Cowper-Smith & Grosbois 2011).
In this respect the importance of economic activity of the airline towards its employees is important, for airline is in a service sector where employees are the main touch points of the customers and the company (Phillips 2006). British Airways has devised employee reward scheme wherein they award the staff who have achieved extraordinarily results to recognise them and their effort. Another award system that the company has begun in 2012 is the “Lean continuous improvement award” (British Airways 2012, p. 14). Other monetary awards are given to the staff, which are believed to have a direct connection to the key performance indicators of the company and its environmental and social responsibilities.
Economic sustainability of the organisation is another area where the company has to concentrate considerably in order to function properly. According to the CSR report of the British Airways, aviation is an important part of the industry as it “provides employment, trade links, tourism and support for economic development through air travel.” (British Airways 2012, p. 16). The aim of British Airways is to continually strive to provide higher growth to the companies, provide greater financial performance through generation of revenue, operating profit and creating cost reduction methods. The company also strives to garner partnerships, which would help it to strengthen their financial position. Further, the company places great importance on increase of their operating performance (see figure 3).
Figure 3: Comparison of economic performance of British Airways and other international Airlines.
Legal Responsibilities
The environmental responsibilities, which the company participates in, are related to climate change, minimising noise pollution, bettering air quality and managing waste and recycling. The company strives to reduce carbon dioxide emission in the atmosphere by 50 percent until 2020 (British Airways 2012). This endeavour will be immensely helpful to the imminent climate change, which may cause great harm to human society. The company strives to reduce its carbon footprint. They also aim to minimise the noise pollution in atmosphere, while the craft operates and the improvement of air quality, waste reduction and use recycling whenever possible. The company has also changed its fleets to enhance customer and employee safety.
Philanthropic Responsibilities
The company has undertaken many community service programs and engaged in local community development activity. For instance:
A new landscaped field extension to the parkland, which opened to, the public in 2011 continues to develop well. The extension is adjacent to the Great Barn at Harmondsworth, which is considered a remnant of heritage landscape for West Middlesex, and as of 2012, is now under the ownership of English Heritage, highlighting its importance. (British Airways 2012, p. 40)
The company is committed to the development of the society, it has participated in various disability programs and cooperated with NGOs to provide benefit to the disadvantaged groups of the society.
Conclusion and Recommendation
From the analysis of the CSR initiative of British Airways with the aid of Carroll’s CSR hierarchy, it is evident that the company presents a clear picture of its CSR related activities. The company shows presence in most of the broad categories presented by Carroll except for the ethical responsibility area. The company does not mention any activity that it has done in the span of a year, which they themselves could have categorised as ethical initiative.
However, many of the responsibilities conducted by the company are ethically correct, but they cannot be solely demarcated as ethical or moral responsibilities. The initiatives undertaken by the company are part of a broader strategy to brand the company as a socially responsible business and little initiative is done to show its moral duty. All the initiatives are a part of economic or legal initiatives, which had to be taken by the company, even if not categorised as CSR (Matten & Moon 2008). But not many initiatives can be segregated as purely moral duties of the company. The recommendation of this study is that British Airways would do better if it tried to take more ethical and moral initiatives.
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