On Corporate Social Responsibility (CSR)
Companies are doing business. Yes; so what? So the concept of CSR is of great import no less because the ways in which companies run their businesses have direct and indirect impacts on the stakeholders, the society, and, not least consequential, the environment. Hence, the imperative need to explore, fathom, and get acquainted with the concept of CSR.
To be sure, the concept of (CSR) has dramatically evolved with time in the business world. First considered as a mere ‘philanthropic’ gesture, CSR is now integral to business models for a numberless successful companies, operating domestically as well as internationally. In fact, it has overwhelmingly become a defining characteristic, a determinant factor of the success or failure in doing business.
Partly, this drastic change is an effort to abide by the legal frameworks under which companies and industries operate. For the most parts, however, it is to keep up with the changing business environments: the advent of the Internet, technological innovations, information revolutions, environmental issues, labor shortage, global competitions, growing demands for accountability in doing business, etc. Therefore, faced with these realities, and to increase their competitiveness and global market shares, a constantly growing number of international companies have come to consider CSR their focal center of interest.
Reputation Institute (RI), a Boston-based reputation-management consulting firm, is the world’s leading firm in tracking, compiling, and publishing international companies’ social responsibility and reputations based upon consumers’ perceptions of their governance, positive influence on the society at large, and the treatments they allot their respective employees.
According to its 2017 annual report, Lego ranks as the leading international company in CSR worldwide. As a company mainly manufacturing toys with mostly plastics as its raw materials, how Lego has achieved such a performance is particularly intriguing. I, therefore, aim to investigate its methods of doing business, and its approaches to CSR in order to shed light on the intrigue.
The concept of CSR reviewed
Before dwelling on Lego’s history and its engagement with CSR, however, it would be more convenient to briefly review the concept. With the caveat that there is no universally accepted definition of corporate social responsibility, the concept is best understood as what Wood, D. J. (1991) calls the “business-society[-environment] relationships”. Indeed, according to the Business Dictionary, the “concept includes the social and environmental awareness that organizations [and businesses] are expected to demonstrate with ethical day-to-day business practices, but also involves how companies give back to society and communities through special projects”. As such, the corporate social responsibility goes beyond companies’ ethical responsibility and encompasses their engagement with the society as well as the natural ecology. Traditionally, such engagements merely aimed to meet the minimum safety regulations, legal compliance, and ethical standards. No wonder, therefore, that their enforcement and monitoring were usually undertaken by an outside entity, an independent agency, a third party. Today, however, as companies realize the business importance of CSR, they have moved their engagements far beyond the aforementioned minimum requirements and standards, and have made CSR their focal center of interest, an integral model of their various business strategies.
Their CSR policies, therefore, follows a self-regulatory mechanism—based upon the concept known as triple bottom line that encompasses three parts: social, environmental, and financial responsibilities—for companies to ensure that they do business responsibly, gain and maintain shareholders’ trust, manage to reduce their waste and pollution throughout the production process, boost their social image through social programs, and increase their long-term profits.
Lego: A brief history
According to its official website, Lego (The Lego Group), a Danish family-owned company based in Billund, Denmark, was founded in 1932 by Ole Kirk Kristiansen. The company has a very sluggish start, however; until 1939, for instance, Lego employed only 10 people. To be sure, the slow start is quite understandable considering the historical circumstances of the late 1930s with the Great Depression and the subsequent outbreak of the devastating WWII. To make things even worse for Lego and the whole nation, Denmark was occupied by the German forces in 1940. Two years later (1942), LEGO factory was burnt down. Nonetheless, it was quick to recover for by 1948 Lego has increased the number of its employees to 50. Yet its products were exclusively sold in Denmark.
Nevertheless, by 1959, according to its official website, Lego has increased and widened its grasp beyond Denmark by establishing its branches in France, Britain, Germany, and Sweden. And by 1969, it has established itself as an international company by expanding well beyond Europe with its presence in Latin America (Peru and Curacao), North America, Africa, Australia and Asia. Indeed, by 2016, Lego employed more than 18,000 people (with no less than 70 nationalities) while its products are sold across more than 140 borders.
As aforementioned, the company is widely known for its manufactured Lego-brand toys mainly with plastics. They are constituted with various pieces that can be assembled (and easily dissembled) and connected in many ways to construct a particular object such as vehicles, buildings, or working robots. By dissembling it, one could easily construct another object at will. It is also prided for its widely built amusement parks known as “Legoland”. Its international presence is not merely illustrated by the worldwide existence of its amusement parks—aka Legoland. It is also owing to the global presence of its products in retail stores and the widespread of its operating offices in multiple countries around the world.
According to Fortune (2015), a multinational business magazine, Lego became the world’s leading company, by revenue, in manufacturing toys in 2015. More specifically, with its sales amounting to US$2.1 billion, it surpassed the erstwhile world’s largest toy company—Martel, which collected US$1.9 billion in sales the same year.
In addition to Martel, however, Lego has other global competitors. Particularly, since 1989, when its patent expired, many international toy-manufacturing companies, including (but not limited to) Mega Brands (formerly known as Mega Bloks), Best-Lock, Tyco Toys, Tianjin Coko Toy, etc. have variously engaged in producing toys with interlocking bricks similar to those of Lego, which they often sell at a lower price. With these competitors, Lego has steadily kept innovating while equally ensuring that the quality of the toys meets the expectations of its customers.
Given the nature of its products (plays for kids) and the materials utilized in producing them, Lego acknowledges its responsibility to the society as a whole. Of paramount importance, however, is Lego’s recognition of the impacts its products—from their beginning to their wastes—have on the environment. In a nutshell, it is aware that:
Support is driven by who you are as a company; how fair you are when doing business, how you support the community, how sustainable your operation is and how compelling your vision for the future is. What Lego does so well in these years is to engage with its customers, consumers, suppliers, partners and opinion leaders on issues that matter to them; workplace, governance, citizenship while producing amazing products (Forbes, 2014).
As it will be seen shortly, Lego has shifted to integrate social responsibility into its business strategies.
Lego and CSR
The RI undertakes the tasks of annually tracking international companies’ social responsibility reputations. It tracks, measures, compiles, and publishes their social responsibility in doing business by homing in on their reputations based upon consumers’ perceptions of their governance, positive influence on the society at large, and the treatments they allot their employees; these three components are also known as companies’ citizenship, workplace and governance. The measures are done with RI’s RepTrak Pulse scheme.
To measure their reputations in CSR, RI surveys consumers’ perceptions of the international companies’ performance on citizenship, workplace and governance in 15 world’s largest economies. Thus:
The results describe which companies are best regarded by consumers for having a positive societal influence, being environmentally friendly, operating with openness and transparency, behaving ethically, rewarding employees fairly and promoting employee well-being, among other factors. For a company, it is essential to be perceived as responsible in order to be able to build and defend its reputation (Global CSR RepTrak, 2016).
Accordingly, the Danish giant, Lego, ranks first in 2017 from its 6th position in the preceding year. How Lego has achieved this remarkable run is understandably intriguing. Until 2014, for instance, Lego was partnering Shell, one of the world’s leading oil companies, which supplied Lego with raw materials. This partnership, however, was environmentally harmful, ecologically deleterious, and undoubtedly unsustainable. As pressures mounted to ruin its reputation, with the most vocal being Greenpeace (The Guardian, 2014; and GreenpeaceVideo, 2014), Lego ended that 50 years long partnership in October 2014. As a result, Lego has shifted to more renewable energy sources and adopted more environmentally-friendly approaches to business.
Particularly, to regain its long-held favorable reputation in doing business, Lego adopted ambitious sustainable goals, developed socially responsible strategies, and partnered with key environmental agencies like the World Wildlife Fund (WWF). Nonetheless, the most important initiative to CSR Lego has adopted is the Sustainable Materials Center. The Center, already operational, is expected to employ more than 100 experts to find and implement, by 2030, sustainable alternatives to its existing raw materials.
Likewise, Lego has ensured that all of its manufacturing sites are certified in line with the environmental standards of the International Organization for Standardization (ISO). According to its official website, Lego recycles about 90% of its wastes and ensures that its operations are gradually more energy efficient. Also, in the efforts to attain its goal of utilizing 100% renewable energy sources by 2020, the Borkum Riffgrund wind turbines are providing Lego with sources of electricity since 2015.
These initiatives and its strategic partnership with WWF have culminated in Lego’s engagement with CSR and sustainability. By topping the rank, it is perceived as behaving ethically, operating transparently, conducting business fairly responsibly, initiating social programs, and, most important, protecting the environment. Therefore, as the RI Chief Research Officer, Stephen Hahn-Griffiths, observes, the Danish giant “has [fairly] embraced corporate social responsibility from top to bottom" (Forbes, 2017).
Shouldn’t all companies embrace CSR?
No doubt; the concept of corporate social responsibility has gained an increasing interest in business strategies. As Lego has shown this year, it is crucially important that CSR becomes a focal point for any company for mainly two reasons. First, CSR allows companies to increase their long-term profits, guarantee a sustainable business environment, and protect the ecological milieu for generations yet unborn. Second, by engaging with CSR, companies demonstrate their readiness to participate in tackling social issues, such as inequality, poverty, pollutions, hunger, etc. By thus getting involved in social programs, they boost their social image and perceptions, show that they strive to defend worthy causes, and, as a result, gain consumers’ trust. Therefore, other companies ought to learn from Lego’s experience and adapt it to their needs.
Unequivocally, any company wishing to increase its competitiveness must integrate CSR into its business strategies and strive to attain them, as Lego and other internationally leading companies have shown. It is one thing to devise strategies, and quite another to realize them. Usually, the problem with companies is not that they lack realistic and realizable business strategies, but that they lack the willingness, the courage to implement them.
Nonetheless, as Gitte Seeberg, the CEO of WWF (Denmark), observed once, companies must always keep in mind that there is no doubt:
We witness constant constraints on the natural resources globally. Continuing with business, as usual, is not an option, not for the planet or for companies. The problems can best be solved by working together… [to] amplify and accelerate the positive impact we need. Taking the lead and driving sustainable change in the value chain is showing genuine responsibility.
Therefore, other companies could also learn from Lego to partner with strategic international organizations for global sustainability. Their CSR policies, for instance, could be based on the concept of triple bottom line encompassing social, environmental, and financial responsibilities. Once they have clearly defined their goals on CSR, these companies could establish and finance research centers (like Lego’s Sustainable Materials Center) for innovations in renewable resources. As Lego’s experience has shown, such endeavors would ensure that they do business responsibly, boost their social image, and ultimately increase their long-term profits.
After all, in business, like in life, reputation is an invaluable commodity that must be earned!
Business Dictionary. "Definition of CSR". Available at: https://www.smartrecruiters.com/resources/glossary/corporate-social-responsibility/.
Forbes (2014). How LEGO Makes Safe, Quality, Diverse and Irresistible Toys Everyone Wants: Part Two". Available at: https://www.forbes.com/sites/michaelvenables/2013/04/20/how-lego-makes-the-safe-quality-diverse-and-irresistible-toys-we-all-want-part-two/2/#47461d166cfd .
Forbes (2017). “The 10 Companies With The Best CSR Reputations In 2017”.
Fortune (2015). Here's why Mattel ousted its CEO Bryan Stockton".
GreenpeaceVideo (2014). https://www.youtube.com/watch?v=qhbliUq0_r4.
Lego’s official website. Available at: https://www.lego.com/en-us/aboutus/lego- group/the_lego-history
Reputation Institute (2016). The 2016 Global CSR RepTrak. Available at: https://cdn2.hubspot.net/hubfs/2963875/Reputation_Institute_Jun2017/pdf/2016_global_csr_press_release_60915.pdf?.
The Guardian (2014). “Greenpeace urges Lego to end Shell partnership”.
Wood, D. J. (1991). Corporate social performance revisited. Academy of management review, 16(4), 691-718.
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