Corporate Social Responsibility as a medium of excelling in the beauty industry: A detailed review of CSR initiatives taken by The Body Shop and L’Oreal
The beauty industry has come under the scanner many times due to the malpractices that some of the firms in the industry allow to occur such as air pollution, animal testing, and the presence of carcinogens in their products. The Australian treasury define CSR as ‘a company’s management of the economic, social and environmental impacts of its activities’ (Australian Government, Parliamentary Joint Committee on Corporations and Financial Services 2006). Over the years many of the firms in the beauty industry have changed their stance on CSR and have started embracing its benefits. The two major players in the industry are L’Oreal and The Body Shop. This essay will examine and interpret how both these firms use CSR to their benefit by gaining a potential edge over the other firms in the industry. The essay will also show how the use of CSR in certain key areas can benefit the society as well as the firms. Finally, it will also show that a consistent implementation of certain principles of CSR is required for a company to not face unsuitable results.
Corporate social responsibility is defined as a business system that allows the production and distribution of wealth for benefit of the society through the use of ethical systems and sustainable management practices (Smith, 2011). Looking at business from a purely economic point of view like Milton Friedman who said the sole purpose of businesses was to increase profits isn’t applicable today. Industries today have incentives to implement CSR. In highly competitive industries, like the beauty industry, firms earn ‘normal profits’. Implementing CSR helps certain firms to gain an edge through product differentiation. Face value is really important in today’s world. CSR initiatives help improve brand value and reputation. Firms which ignore these initiatives might save up on this additional cost(meaning more profit now) but lose out in the long-term. Firms have to decide what they value more. Short-term profit or Long-term benefit? CSR serves as a fall back for companies against the malpractices that come with the daily functioning of a business. For example, The Body Shop has confirmed that it is following the ‘no-animal testing’ policy (Macrae, 2014). Firms which are known to still test on animals have seen their brand value fall. To protect this brand value, The Body Shop has adopted the policy which not only benefits the environment, but also the firm itself.
The practice of animal testing is probably one of the largest problems in the beauty industry. Animal testing is required to check the reactions that certain products have when exposed to skin. This has caused immeasurable pain and large number of deaths to animals. It is a very sensitive issue when brought up in public domain. Company reputation is largely influenced by this subject matter. Finding a substitute to animal testing might cause the firms in the beauty industry to incur more cost, but it also ensures that the reputation of the firm is intact. Public Relations goes a long way in determining which firm has an edge over the other. According to the 2015 Nielsen Global Corporate Sustainability Report 66% consumers are willing to pay a premium for more sustainable products. The Body Shop has taken cue from this statistic. They are producing environment-friendly products at a premium and earning considerate profits out of it. Its insistence on steering clear from animal testing was awarded a ‘Lifetime Achievement Award’ by the RSPCA in 2009. L’Oreal has also followed The Body Shop in CSR initiatives. It aims to run ethically so as to preserve the environment which includes animals. L’Oreal has been recognised as a global leader because of its climate change mitigation strategy in the annual CDP(Carbon Disclosure Project) ranking. It has also come first in the ‘beauty’ sector in the 2015 World’s Most Ethical Companies list assembled by Ethisphere Institute (Ethisphere, 2015). The fact that both these firms have edged out the others in the beauty industry show the value and true importance of CSR initiatives.
The Body Shop and L’Oreal have undertaken other CSR initiatives which benefit our society. The Body Shop has a commitment to assign a share of their profits to charities around the world. It may seem to some like a PR statement, but the fact remains that a leading firm in an industry needs to cultivate its brand value by means other than the products they sell in the market. Largely speaking, the donation comes from The Body Shop Foundation, founded in 1989.(The Body Shop Value Report 2005) L’Oreal also isn’t far back. They have undertaken a sustainability initiative named ‘Sharing Beauty with All (Dominic, 2014). The initiative focuses on sustainable development by encouraging environment sustainability and skill development. Social values such as women empowerment and equity has also been taken into consideration under the programme. As we can see, these initiatives do come at a slight monetary cost, but also ensure that the firms employing these initiatives benefit in the long run. There are many countries around the world where these two firms largely dominate the beauty industry. For example, in India L’Oreal is dominating the beauty industry because of the aforementioned initiative. A successful business ensures the involvement of its stakeholders. The job experience, for the employees, becomes more well-rounded. It fosters a sense of unity among the employees. Doing good for the society can only bring satisfaction to a group of committed employees (Morgan, 2014). CSR initiatives undertaken by companies are beneficial not only to the society, but also to the companies and their employees.
Hypocrisy in implementation of CSR initiatives can only negatively impact the brand value of a company. Following a set of guidelines ‘consistently’ is really important for the company. It may be less important for companies who haven’t taken up these initiatives at all, but for companies who commit to CSR initiatives have to ensure that they are consistent with the implementation.When The Body Shop’s ownership was transferred to L’Oreal for $1.1 billion in 2006, many people were disappointed. Naturewatch and Uncaged wanted to boycott The Body Shop because of claims that L’Oreal used animals for testing. Satisfaction with The Body Shop fell after that and it took long to build the reputation back (Marati, 2012). This shows that consistency in CSR initiatives is important for the consumer to have faith in the company. Inconsistency will only have a negative effect on the already existing initiatives.
As we have examined so far, CSR initiatives are valuable in the beauty industry. Image is everything and CSR is a huge boost for companies looking to build their brand value. It might cost to carry out the initiatives in the present but it brings large profits in the future. Moreover, ethically speaking, companies owe something to the society. CSR is a way of giving back to the society and ensuring that future generations have the same working conditions to function in. CSR isn’t just ‘charity’ that companies do. It has many paradigms which benefit one and all. Social responsibility is therefore an very integral part of a business. CSR is based on a concept that the interests of the community and of businesses are closely related. As Benjamin Franklin once said, “It takes twenty years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”