Ethical Audit Of Tesco Plc

Introduction

Traditionally, business practices were completely aimed at acquiring profits for business owners and shareholders. However, the impact of business practices on society, culture, and the environment has been intensely scrutinised in the contemporary business practice resulting to ethical business practice. According to Sroka and Szántó (2018) business seeking to be perceived as reliable and successful should demonstrate high level of compliance with business ethics practices and principles while practicing outstanding ethical behaviour. The purpose of this paper if to conduct an ethical audit of Tesco Plc. With a focus on its approaches to corporate social responsibility and to sustainability.

Tesco’s Approach to Corporate Social Responsibility

The UK food industry and the retail sector in particular has faced increased pressure to contribute in solving contemporary social issues such as economic inequality, obesity and environmental degradation among others (Cairns et al. 2016). Under such pressure, food businesses have become more accountable not only to their shareholders and investors but also to different societal agents (Knai et al. 2015). Most food businesses in the UK have adapted their corporate social responsibility (CSR) programmes and subscribed to pledges with public and private organisations in order to address these concerns (Souza-Monteiro and Hooker 2017). Such pledges requires business to adjust the procurement and sourcing practices, product lines, prices, community engagement, and training and personnel development programmes to better respond to the societal concerns (Souza Monteiro and Hooker 2017). Tesco PLC, hereafter Tesco, like many business in the UK retail sector has adapted its CSR programmes to respond to social concerns. For this paper, Carroll’s pyramid model is used to analyse Tesco’s approach to CSR.

Carroll (1979) defines CSR as the social responsibility of a business that incorporates legal, economic, discretionary, and ethical societal expectations of firms at a specific time period. Later in 1991, Carroll proposed that CSR consist of four dimensions namely legal, economic, ethical and philanthropic which he presented in the form of a pyramid (Carroll 1991). To Carroll, a CSR driven organisation “should strive to make a profit, obey the law, engage in ethical practices and be a good corporate citizen” (p. 43). The economic dimension of Carroll’s pyramid model requires a businesses to rationally allocate financial resources in order to gain profit and financial liquidity (Carroll 2016). According to Zimmermann et al. (2014), making profits is important for the survival and development of any organisation. Similarly, Bonini and Swartz (2014) note that by making profits, a business is able to build credibility and trust which are essential elements investors consider in making decisions. In the same vein, Carroll (2015) states that the society expects a company to secure its survival and development by effectively balancing risks and projected benefits. Tesco has continually made profits thus its meets the society’s economic expectations. For example, in the 2019 financial year, Tesco had an operating profit of £2,153m which reflects a 17.1% increase in operating profit when compared to 2018’s profit of £1,839m (Tesco 2019). With such a profit margin, the society and investors are able to trust that Tesco can secure its development through its operational activities.

The second dimension of social responsibility according to Carroll is the legal aspect (Carroll 1991). Any organisations in its actions should comply with all the applicable local, national and international laws as well as human rights laws (Souza-Monteiro and Hooker 2017). According to Carroll (2016), a legally responsible business offers products and services that meet the minimum legal requirements, fulfils legal obligations towards stakeholders, and remains a law-abiding corporate citizen. In commitment to employees, Tesco states that in order to attract and retain staff, it provides a variety of career paths and patterns of working, a good work life balance, and comprehensive employee benefits (Tesco 2016). However, there are several issues that question the commitment of Tesco to human rights among other legal obligations. For example, gender is among the protected characteristics in the Equality Act 2010 yet according to Mirror (2019), Tesco store workers who are predominantly women have been paid up to £3 less per hour than warehouse and distribution centre workers who are predominantly men. In addition, several Tesco employees including Chris Bush have sued the organisation for unfair dismissal (Financial Times 2019). Further, Tesco has been caught in accounting scandals where three of its executive officers were accused of overstating profits; for example, in 2014, Tesco was found to have inflated its profits by £250m in order to retain its share price (Financial Times 2017). However, Tesco has also complied with some regulations. For example, following the introduction of the sugar tax, Tesco has been taking sugar out of its drinks by an average of 5% each year (Tesco 2016).

The third dimension of social responsibility according to Carroll’s pyramid model is the ethical aspect. To respond to the requirements of the ethical dimension, organisations define the ethical framework in which they conduct their activities to accomplish their mission (Marek 2018). In its CSR report, Tesco states that it is committed to maintaining the highest standards of ethics and integrity in the way it does business. Additionally, Tesco relaunched the Code of Business Conduct in 2015 setting out its minimum expectations for all colleagues. The Code outlines the three values that guides Tesco to include no one tries harder for customers, we treat everyone how they like to be treated, and we use our scale for good (Tesco 2015). Tesco sees to serve its customers a little better every day and as such, innovation is at the core of its operations. According to Jones et al. (2007), Tesco is active in assessing consumer needs and responding to them by developing their products. Similarly, Kucharska (2019) states that Tesco has a continuous pipeline of innovation which ensures it keeps serving its customers better and meeting their needs better than any other retailer. Further, Tesco responds the customer complaints is a friendly way and covers up for any losses. For example, in 2016, a shopper found a worm in a cucumber he had purchased from a Tesco shop in Dinnington and complained to Tesco in the form of a poem. In response, Tesco wrote another poem and sent the shopper £10 to cover for the loss (BBC 2016). This implies that Tesco acts in line with its value for treating everyone how they like to be treated.

The fourth dimension of CSR according to Carroll is philanthropy, which considers how an organisation supports the needy groups and individuals as well as the forms of volunteering by the organisation (Souza-Monteiro and Hooker 2017). In the same vein, Marek (2018) notes that philanthropic activities are often carried out through charitable funds to help societies accomplish their goals. In the 2018/19 financial year, Tesco supported over 29,000 local projects and causes (Tesco 2019). Additionally, Tesco approved a Health Charity Partnership with Diabetes UK, Cancer Research UK and The British health Foundation in the 2019 financial year and its committee members visited these partnerships to help the organisation better understand how it can help (Tesco 2019). Further, Tesco launched its Community Cookery Schools Programme in 2019 to help community groups make the best use of the food they receive in donation programmes (Tesco 2019). Finally, the organisation has 320 Community Champions in different stores across the UK who help Tesco build relationships with communities and support local events (Tesco 2019).

Tesco’s Approach to Sustainability

Consumers in the UK have shown increasing level of sensitivity forcing organisations to adapt sustainability in their business frameworks (Junior et al. 2018). According to Chuang (2019), sustainability is revealed in the strategic missions and value propositions of organisations emphasising the importance of sustainable development in the socio-economic field. Sustainability can be defined as the ability of an organisation to achieve the direct and indirect needs of its stakeholders without compromising its ability to meet the stakeholders’ future needs (Revert et al. 2018). In the UK retail industry sustainability is a key element that organisations use to leverage their competitive advantage. This section uses the “triple bottom line” (TBL) model to critically analyse Tesco’s approach to sustainability.

The TBL model defines three dimensions of sustainability to include economic, environmental, and social dimensions. The economic dimension of the TBL model is concerned with profit and earnings per share as part of the company’s accounting (Revert et al, 2018). Tesco acknowledges that great value is more than great prices and therefore commits to provide its customers, colleagues, suppliers, and communities what is of good value which results in profit maximisation (Tesco 2019). In addition, Tesco’s sustainability programme (Little Helps Plan) has made it better in business helping the company differentiate its brand and as such respond to the changing needs of customers while reducing operating costs and minimising resource consumption and waste (Tesco 2019). The Little Helps Plan can therefore be seen to drive economic value for Tesco. Through the Little Helps Plan, Tesco was able to offer leadership training to 17,156 of its managers (Sparks 2018). In addition, the plan helped the company develop its products resulting in increased supplier satisfaction, reduced waste and increased cost saving. Having able to differentiate its brand, reduce operating costs, minimise consumption of resources and waste, Tesco was able to make a profit of £2,153m in the 2018/19 financial year (Tesco 2019).In addition, Tesco aims at having a competitive total reward package that its colleagues value; the key performance indicator for this action is Tesco average pay versus the market median which stood at 1:05 in 2018 (Tesco 2019). This data shows that Tesco is attractive to talents allowing it to retain the best human resources which means it is better placed to meet the future needs of its stakeholders.

The environmental protection dimension of sustainability considers the environmental agenda that an organisation has defined in order to meet the expectations of the market. In its sustainability report, Tesco states that its packaging will be fully recyclable by 2025 and by 2018 83% of Tesco’s packaging in the UK were fully recyclable (Tesco 2019). In addition, Tesco seeks to reduce absolute carbon emissions from its operations to a 100% by 2050 and use electricity from renewable resources by 65% in 2020 and 100% by 2030 (Tesco 2019). Tesco has lived according to its promises; according to Financial Times (2019), Tesco is among the six out of 16 global food companies that have set targets and committed to reduce supply chain emissions from livestock agriculture. Additionally, Financial Times (2012) considers Tesco an early champion of the green revolution, which signals Tesco’s level of commitment to environmental protection. In minimising food waste, Tesco worked with sustainability consultancy Anthesis to develop ways of measuring where food waste occurred from ‘farm to fork’ as seal the loops (The Guardian 2014), which has helped Tesco minimise food wastage by 81% as at 2018 (Tesco 2018). In 2018, Tesco admitted that some of its packages are hard to recycle thus promised it would remove them by the end of 2019 (The Guardian 2018). By February 2019, Tesco had removed 2.914 tonnes of hard to recycle materials from its brand packaging which is commendable progress towards its end of 2019 goals (Tesco 2019).

The social dimension of sustainability is concerned with the wellbeing of the society. To improve the health of its customers, colleagues and communities, Tesco helps its colleagues look after their physical and mental wellbeing so they can be at their best at work and at home (Tesco 2019). Tesco also partners with leading health charities in the UK to help colleagues and customers make healthy choices (Kucharska 2019). Further, Tesco encourages customers and communities to consume fruits and vegetables; in fact, Tesco given children a Free Fruit in all its major stores in UK (Johnson et al. 2018). Moreover, Tesco makes its food and drink brands more healthier while raising awareness of healthier choices (Faulkner et al. 2014). In 2019, Tesco was awarded the Bupa Health and Wellbeing Award for helping 300,000 staff tackle their health concerns (Business in the Community 2019), which confirms that Tesco is committed to fulfil its promises to the society.

Conclusion

The aim of the paper was to analyse Tesco’s approach to CSR and sustainability. Although Tesco has committed to CSR, the report reveals that it has experienced difficulties living up to its promises particularly in complying with legal obligations and observing gender equality in labour wages. Nonetheless, Tesco continues to raise revenue to sustain its business practices, respond to consumer needs and engage in philanthropic actions. Regarding sustainability, Tesco attractive to new talents while developing its staff to promote future productivity. In addition, Tesco commits to environmental preservation although there are reports pointing its inadequacy in conserving the natural environment. Finally, Tesco is concerned with the health and wellbeing of the society and even won the Bupa Health and Wellbeing Award for helping 300,000 of its staff tackle health-related problems. Therefore, Tesco’s actions are well aligned to maintain and further its profitability in the future.

References

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