Unit 20: Investigating Corporate Social Responsibility
Assignment 2 of 3: Should a large business have a CSR policy?
1
,Section 1: Benefits of Acting Responsibly
One of the first and most significant benefits that come with this is the improved public
opinion that H&M will receive. The reason behind it being a benefit for H&M is because if
customers see that H&M is behaving in a responsible way, then there is a much higher
chance that they will start to establish mentally a much better and positive image of the
company. If this were to happen, it could lead to H&M seeing an increase in their sales, as
more customers would become more inclined to shop there rather than their competitors
whose policies might not be as ethical such as Primark or Zara. Therefore, H&M would have
a very beneficial return if they were able to improve their public opinion.
Another big benefit that H&M would see is the higher retainment of customer loyalty. If
H&M can accomplish this, they will start to see large benefits for themselves because it
means that they are able to retain a larger number of their customers rather than having
those consumers purchase from one of their major market rivals. Following this higher
retainment, H&M could begin to see an increase in sales since a larger quantity of their
customers are continuing to purchase from them instead of their competitors.
Consequently, this would be extremely beneficial to H&M as it not only allows them to yield
a greater number of yearly profits, but it would also elevate them within the market and
make them more attractive compared to their rivals.
Being able to charge a premium price for your products would also be another benefit a
company could receive if they began to act responsibly. The reason why a company can
charge a higher price for their products is usually because of the quality of the product or if
it has a USP (unique selling point). In the case for H&M, acting responsibly in areas such as
having recyclable clothing would improve their USP which would put H&M in an
advantageous market spot compared to their competitors. This is because not only would
H&M receive a greater yield from the clothes that they are producing and selling, but it
would also elevate the appeal of the product compared to rivals since, as I mentioned
before, a higher price usually means better quality. This would then lead to H&M becoming
a more appealing company to shop at since their products are seen to be more luxurious
and better than other companies. Therefore, if H&M can charge a premium on their clothes
then they could gain a larger yearly profit allowing them to invest more into their business
which causes a financial surge within the business.
Having the ability to maintain staff retention, motivation and recruitment is very important
for a company like H&M and is one of the benefits of acting in a responsible way. A study
conducted by the Guardian back in 20151 found that 36% of the 2,000 people interviewed
would work harder if they worked for a company that was a benefit to society. Taking this
into consideration, H&M would benefit from higher staff retention and motivation because
the staff are the people who are selling and encouraging their products. This would then
lead to higher customer satisfaction and retention from H&M since staff that are friendly
and encouraging are far more appealing to interact with rather than ones that are unhappy
and as I previously stated, having higher retention will increase company sales. Therefore, it
1
https://www.theguardian.com/sustainable-business/2015/may/05/millennials-employment-employers-values-ethics-jobs
2
, would be in H&M’s best interest to ensure that all their staff are properly motivated to work
with them to help maximise overall company satisfaction and profits.
The final benefit that H&M could receive from acting in an ethical way is by having reduced
pressure from governments and other company stakeholders. What this refers to is how the
owners or other major stakeholders will have less issues with H&M’s practices since they
would be operating under a system that is beneficial to them and not just the company. The
reason why this is such as benefit to H&M is because if less pressure is applied onto H&M
for activities such as the environment, then it means that they continue to focus on the
development of their clothing. This could lead to H&M gaining a higher yearly turnover since
not only are they acting as a responsible company, but they are able to focus on customers’
needs and desires making them more appealing to purchase from. Therefore, H&M will be
able to outperform their competitors such as Primark who might be having to deal with the
pressure of governments and stakeholders instead of focusing on their products.
Section 2: The drawbacks of adopting a corporate socially responsible approach
Contrary to what I just mentioned, there are of course some major drawbacks when it
comes to companies like H&M having to act in a responsible way that meets the criteria of
their stakeholders.
The ‘opportunity cost’ of implementing policies is obviously one of the largest drawbacks to
having to act in a responsible fashion. Opportunity costs is the idea that an individual,
investor, or company has missed out the opportunity to gain benefits depending on if they
have chosen one alternative over another2. When it comes to the opportunity cost of having
to act in a responsible way such as having more environmental options, the major drawback
is the large amounts of cash a business would have to invest to introduce these alternatives
and H&M is no exception. One example of this is H&M’s recycling scheme which will have to
have large amounts of cash invested into it to not only cover the costs of recycling their
products, but also offering vouchers to their customers to reward them for their
contributions. The fundamental problem that lies here is that if large amounts of cash are
being invested into a specific sector of the business, then other areas such as the
manufacturers will become deprived of the cash flow. This would then lead to a domino
effect accruing since problems such as complaints about clothing quality will start to arise
but since H&M cannot invest any cash in this area, they will be stuck in the loophole of
having to invest cash in that area whilst depriving others. Accordingly, this could pose to be
quite a serious drawback for H&M since they would be left with insufficient funding in other
areas of their business causing them to lose out on their performance which would
negatively impact their overall rating and satisfaction.
Focusing too much on their CSR image could distract H&M from their core business
objectives and lower their profits. The core business objectives refer to a company’s overall
goals and mission3 and in the case of H&M, this is to make and produce textiles to sell onto
their customers to net a profit. Many problems will arise if H&M are focusing too much on
2
https://www.investopedia.com/terms/o/opportunitycost.asp
3
https://marketbusinessnews.com/financial-glossary/business-objective-definition-meaning/#:~:text=A%20business%20objective%2C%20on
%20the,and%20what%20resources%20are%20available
3
Assignment 2 of 3: Should a large business have a CSR policy?
1
,Section 1: Benefits of Acting Responsibly
One of the first and most significant benefits that come with this is the improved public
opinion that H&M will receive. The reason behind it being a benefit for H&M is because if
customers see that H&M is behaving in a responsible way, then there is a much higher
chance that they will start to establish mentally a much better and positive image of the
company. If this were to happen, it could lead to H&M seeing an increase in their sales, as
more customers would become more inclined to shop there rather than their competitors
whose policies might not be as ethical such as Primark or Zara. Therefore, H&M would have
a very beneficial return if they were able to improve their public opinion.
Another big benefit that H&M would see is the higher retainment of customer loyalty. If
H&M can accomplish this, they will start to see large benefits for themselves because it
means that they are able to retain a larger number of their customers rather than having
those consumers purchase from one of their major market rivals. Following this higher
retainment, H&M could begin to see an increase in sales since a larger quantity of their
customers are continuing to purchase from them instead of their competitors.
Consequently, this would be extremely beneficial to H&M as it not only allows them to yield
a greater number of yearly profits, but it would also elevate them within the market and
make them more attractive compared to their rivals.
Being able to charge a premium price for your products would also be another benefit a
company could receive if they began to act responsibly. The reason why a company can
charge a higher price for their products is usually because of the quality of the product or if
it has a USP (unique selling point). In the case for H&M, acting responsibly in areas such as
having recyclable clothing would improve their USP which would put H&M in an
advantageous market spot compared to their competitors. This is because not only would
H&M receive a greater yield from the clothes that they are producing and selling, but it
would also elevate the appeal of the product compared to rivals since, as I mentioned
before, a higher price usually means better quality. This would then lead to H&M becoming
a more appealing company to shop at since their products are seen to be more luxurious
and better than other companies. Therefore, if H&M can charge a premium on their clothes
then they could gain a larger yearly profit allowing them to invest more into their business
which causes a financial surge within the business.
Having the ability to maintain staff retention, motivation and recruitment is very important
for a company like H&M and is one of the benefits of acting in a responsible way. A study
conducted by the Guardian back in 20151 found that 36% of the 2,000 people interviewed
would work harder if they worked for a company that was a benefit to society. Taking this
into consideration, H&M would benefit from higher staff retention and motivation because
the staff are the people who are selling and encouraging their products. This would then
lead to higher customer satisfaction and retention from H&M since staff that are friendly
and encouraging are far more appealing to interact with rather than ones that are unhappy
and as I previously stated, having higher retention will increase company sales. Therefore, it
1
https://www.theguardian.com/sustainable-business/2015/may/05/millennials-employment-employers-values-ethics-jobs
2
, would be in H&M’s best interest to ensure that all their staff are properly motivated to work
with them to help maximise overall company satisfaction and profits.
The final benefit that H&M could receive from acting in an ethical way is by having reduced
pressure from governments and other company stakeholders. What this refers to is how the
owners or other major stakeholders will have less issues with H&M’s practices since they
would be operating under a system that is beneficial to them and not just the company. The
reason why this is such as benefit to H&M is because if less pressure is applied onto H&M
for activities such as the environment, then it means that they continue to focus on the
development of their clothing. This could lead to H&M gaining a higher yearly turnover since
not only are they acting as a responsible company, but they are able to focus on customers’
needs and desires making them more appealing to purchase from. Therefore, H&M will be
able to outperform their competitors such as Primark who might be having to deal with the
pressure of governments and stakeholders instead of focusing on their products.
Section 2: The drawbacks of adopting a corporate socially responsible approach
Contrary to what I just mentioned, there are of course some major drawbacks when it
comes to companies like H&M having to act in a responsible way that meets the criteria of
their stakeholders.
The ‘opportunity cost’ of implementing policies is obviously one of the largest drawbacks to
having to act in a responsible fashion. Opportunity costs is the idea that an individual,
investor, or company has missed out the opportunity to gain benefits depending on if they
have chosen one alternative over another2. When it comes to the opportunity cost of having
to act in a responsible way such as having more environmental options, the major drawback
is the large amounts of cash a business would have to invest to introduce these alternatives
and H&M is no exception. One example of this is H&M’s recycling scheme which will have to
have large amounts of cash invested into it to not only cover the costs of recycling their
products, but also offering vouchers to their customers to reward them for their
contributions. The fundamental problem that lies here is that if large amounts of cash are
being invested into a specific sector of the business, then other areas such as the
manufacturers will become deprived of the cash flow. This would then lead to a domino
effect accruing since problems such as complaints about clothing quality will start to arise
but since H&M cannot invest any cash in this area, they will be stuck in the loophole of
having to invest cash in that area whilst depriving others. Accordingly, this could pose to be
quite a serious drawback for H&M since they would be left with insufficient funding in other
areas of their business causing them to lose out on their performance which would
negatively impact their overall rating and satisfaction.
Focusing too much on their CSR image could distract H&M from their core business
objectives and lower their profits. The core business objectives refer to a company’s overall
goals and mission3 and in the case of H&M, this is to make and produce textiles to sell onto
their customers to net a profit. Many problems will arise if H&M are focusing too much on
2
https://www.investopedia.com/terms/o/opportunitycost.asp
3
https://marketbusinessnews.com/financial-glossary/business-objective-definition-meaning/#:~:text=A%20business%20objective%2C%20on
%20the,and%20what%20resources%20are%20available
3
