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CHAPTER 17 CORPORATE SOCIAL RESPONSIBILITY AND ETHICS
a premium for ethically produced goods; conversely, they will punish companies not seen as 
ethical (by demanding a lower price); the punishment exacted is greater than the premium 
customers are willing to pay; and companies do not need to be 100 per cent ethical to be 
rewarded (Trudel and Cotte, 2009).
Certainly, there is a strong argument that, to be effective, social initiatives must be 
consistent with a firm’s operating objectives and values. Indeed, there is some evidence 
that when social initiatives are not aligned with corporate objectives and values, they may 
become a liability and diminish previously held beliefs about the firm. There is some prior-
ity for social initiatives and responses to be chosen carefully to reflect the firm’s values and 
domain, so that consumers perceive initiatives as proactive and genuinely socially motivated 
(Becker-Olsen et al., 2006).
Executives should be aware that the potential impact of ethical consumers may remain 
hidden for some time. One important concern is ‘conflicted consumers’ – they currently buy 
the product and on the face of things appear to have high satisfaction and display loyalty, 
but actually they would rather not buy from you and are poised to switch as soon as a viable 
alternative appears. They constitute a ‘stealth segment’ of apparently loyal customers who 
actually have major ethical concerns about your company (Fraser, 2007).
17.5.2 Business-to-business customers and CSR
The escalating demands of business-to-business customers for their suppliers to implement 
CSR policies and initiatives that are acceptable to the customer organisation have already 
been noted. For example, to reinforce its ethical credentials, jeans maker Levi Strauss & Co. 
now offers financial incentives to suppliers in Bangladesh and China to meet environmental, 
labour and safety standards, providing those suppliers with access to lower-cost working 
capital – publicised as adding ‘ethical cred to street cred’ for Levi’s (Donnan, 2014).
The ‘vendor compliance’ programme at Target Corporation is illustrative. Target 
Corporation is a US retailer that prides itself on its high ethical standards and business 
principles, emphasising the protection of human rights, and extends these principles and 
standards to its suppliers. Target sources its purchases globally, through its Associated 
Merchandising Corporation subsidiary. Purchasing officers are required to uphold Tar-
get Corporation social responsibility standards wherever they buy in the world, even 
when these exceed the requirements of local laws – Target engineers do not just inspect 
suppliers’ factories for product quality, but also for labour rights and employment condi-
tions. Target operates a formal ‘compliance organisation’ for its purchasing, to enforce 
its vendor standards, focusing on vendor education and verification, with the following 
components:
● 
Implementation of a compliance audit programme, where audit staff conduct random 
visits to supplier manufacturing facilities, following which any compliance violations 
are subject to administrative probation or severance of the relationship.
● 
Limitation of subcontractors used by suppliers to only those approved by Target.
● 
Regular vendor evaluations, as well as formal audits.
Target is not unusual in its attention to the ethical and social responsibility standards it 
demands of its suppliers throughout the world. The introduction of formal social responsi-
bility dimensions to supplier relationships is becoming the norm rather than the exception 
with large customers. These social responsibility mandates impact on supplier selection, 
and on the continuation of relationships with existing suppliers.
Customer-orientated social strategies directly influence supply chain relationships. In 
dealing with suppliers, Home Depot (one of the biggest buyers of wood products in the 
USA) demands that all its wood products come from suppliers who can provide evidence 
of sound forest-management practices. Organisational customers’ evolving social respon-
sibility requirements mandate effective responses. Certainly, one response may be that a 

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DEFENSIVE CORPORATE SOCIAL RESPONSIBILITY INITIATIVES
customer’s social responsibility demands reduce the attractiveness of that customer to the 
seller, and the business should be sacrificed. Nonetheless, the spread of vendor evaluation 
approaches, which make CSR demands on suppliers, requires continuous and systematic 
evaluation as the basis for an appropriate response.
17.5.3 Investors and CSR
There are growing signs that many corporate boards of directors are under shareholder 
pressure to adopt more acceptable environmental policies and keep a closer watch on 
environmental issues, reflecting investor concerns about global warming and shortages of 
natural resources. We noted earlier a growing trend for linking executive remuneration to 
sustainability targets. In major companies it is now commonly the case that sustainability 
has become an important part of the activities of every board of directors (Lublin, 2008).
The attitude of investors towards CSR initiatives, however, may be positive or negative. 
For example, it may be that from an investor perspective the case for sustainability is essen-
tially a business case – initiatives are not about ‘saving the planet’, but about cutting waste, 
reducing costs and becoming more efficient. In 2006, Google launched a strategy to switch 
to renewable energy; while this reflects the personal beliefs of the founders of the business, 
it is also true that Google is a massive user of electricity, and renewable energy provides a 
way to cut costs (Senge et al., 2008). Nonetheless, when Google announced its renewable 
energy strategy, one leading New York stock analyst downgraded the company’s shares, 
despite clear indications that the initiative would cut costs – his view was that the company 
was no longer focusing on its real priorities (Witzel, 2008).
On the institutional investment front, there are active pressures towards ‘responsible 
investing’ – both exclusion in removing certain companies or sectors from an investment 
fund based on environmental, social or government criteria, and integration by including 
environmental, social and government factors in the traditional analysis conducted by fund 
managers. The divestment campaign against fossil fuels and the Pope’s eco-encyclical have 
brought social investing into the spotlight. Globally, more than 30 per cent of institution-
ally managed stocks have a social mandate, accounting for $21.4 trillion in assets (Authers, 
2015). The ability of a company to raise capital, and its attractiveness to investors, will be 
influenced in part by its social and ethical initiatives.
17.5.4 Lobby groups and CSR
There is strong evidence that companies with poor CSR records risk serious negative con-
sequences, such as large-scale consumer boycotts, weaker brand image, or reduced sales. 
Part of this effect may be accounted for by the growth of consumer groups who actively 
promote awareness of what they believe to be company wrongdoing, and actively promote 
consumer boycotts (Snider et al., 2003).
Certainly it appears that activist organisations have become far more aggressive and 
effective in bringing public pressure to bear on companies. They may target the most vis-
ible companies, to draw attention to the issue, even if the company in question has little 
impact on the problem. Nestlé is the world’s largest seller of bottled water, and has become 
a major target in the global dilemma about access to fresh water. In fact, Nestlé’s impact 
on world water usage and availability is relatively trivial – but it is a very convenient target 
(Porter and Kramer, 2006).
In another example, in 2015, animal rights protesters opposing the UK badger cull pres-
sured Caffè Nero to stop selling milk from badger cull areas by threatening to target them 
in an ‘anti-austerity’ march. Interestingly, Caffè Nero then found itself on the end of vocal 
public criticisms from farmers’ groups for threatening their livelihoods by giving in to black-
mail. The CEO somewhat publicly lost his cool when asked to apologise to farmers. This 
is the type of situation where it is difficult for a company to emerge unscathed. The same 

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