Four new lines in Goldcrust's plan: Goldcrust plc runs 400 bakeries across the country. This year its plan has four new lines, and they are not about growth or profit at all.
What the board sets every year
- Open 20 more shops
- Raise profit by 5%
- Keep the dividend rising for its shareholders
What the new lines are about
- How Goldcrust treats the people who grow its wheat
- How it treats the people who bake its bread
- The bread it throws away
Ideas about what is right and wrong are ethics (moral principles). A target a business sets because it believes it is the right thing to do, and not only because it pays or the law demands it, is an ethical objective.
It sits next to the objectives you have already met, growth, profit and protecting shareholder value, and it works the same way: a clear target with a date.
Goldcrust's four ethical objectives
Pay farmers a fair price
Buy wheat from farmers' cooperatives such as Valley Grain at a guaranteed price, 8% above the market price, so a bad harvest year does not ruin them.
Treat staff fairly
Pay every worker at least a living wage, enough to live on, which is higher than the legal minimum wage. Done by the end of next year.
Protect the environment
Halve the 3 million unsold loaves Goldcrust throws away each year, by 2028.
Be open with stakeholders
Publish where every ingredient comes from and what each shop throws away, so customers can check the other three promises.
Legal is not the same as ethical: The law says Goldcrust must pay at least the minimum wage. Paying exactly that is legal.
Paying a living wage is a choice to go further than the law asks. That is what makes it an ethical objective: obeying the law is the floor, and ethics starts above it.
The four lines also show what 'ethical' usually covers in a business: how it treats its employees, its suppliers, the environment, and how honest it is with the people affected by what it does. The last one keeps the others honest: a promise nobody can check is easy to break.
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Every evening Goldcrust gives away the bread it did not sell. It calls the scheme Nothing Wasted.
How Nothing Wasted works
- When. At eight every evening.
- Where. A Goldcrust van stops at 120 of its city bakeries and loads the bread that did not sell.
- Who gets it. The van drives it to Second Helpings, the kitchen that cooks free evening meals for people with no home.
- Why it counts. No law makes Goldcrust do this.
What CSR means: Corporate social responsibility (CSR) is the idea that a business should act in a way that benefits society and its stakeholders, and should answer for what its actions do to people, communities and the environment.
Objectives and CSR: The ethical objectives are the targets. CSR is the attitude behind them and the actions that carry them out: the van, the living wage, the price paid to Valley Grain.
For people
- Paying a living wage rather than the legal minimum
- Training staff and paying for courses
- Paying suppliers a fair price, on time
- A free breakfast club at 30 local schools
For the planet
- Cutting waste, like giving unsold bread away
- Solar panels on the roofs of 50 bakeries
- Recycled or paper packaging instead of plastic
- Planting trees, and fewer lorry miles
Giving back
- Donating money or goods to good causes (philanthropy)
- Staff given paid days to volunteer
- Sponsoring a community project, such as a city park
| Goldcrust decision | CSR? | Why |
|---|---|---|
| Unsold bread to Second Helpings | Yes | Nobody requires it; it cuts waste and feeds people |
| Paying a living wage | Yes | It goes further than the legal minimum, for the staff's sake |
| Passing its food hygiene inspection | No | That is obeying the law, which every bakery must do |
| Flexible hours for managers, to fill vacancies | No | A staffing decision to recruit, not an act for society |
| A bigger dividend for shareholders | No | It serves the owners, not society or the wider community |
CSR has to be more than a slogan: Painting a green leaf on the bread bags is not CSR. The test is what the business does, not what it says it does.
A business that claims to be kinder to the planet than it really is is accused of greenwashing: looking green for the publicity.
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The same year, two headlines: Goldcrust's annual report and a newspaper told two different stories about the same year. Both can be true.
Goldcrust's annual report
- 'Our best year yet for people and planet.'
A newspaper, the same week
- 'Goldcrust cuts 200 bakers and fills the bins with plastic.'
A large business makes hundreds of decisions a year, and they do not all point the same way.
To judge whether a business is improving its CSR, take its decisions one at a time. For each one ask a plain question: does this make things better or worse for people, the community or the environment? Here is Goldcrust's year.
Improving its CSR
- Nothing Wasted. 300,000 unsold loaves a year go to Second Helpings instead of the bin, and become free meals for people with no home.
- Solar panels. 50 bakeries now make part of their own electricity, so they burn less gas and coal at the power station.
- A fair price for wheat. Valley Grain's forty farmers are paid 8% above the market price, so they can plan ahead.
Not improving its CSR
- Plastic boxes. The new Grab-and-Go range packs every sandwich in a single-use plastic box: 20 million boxes a year, most of them ending in landfill.
- Jobs cut. Ovens closed in 60 town shops; the bread is now baked in one central factory. 200 bakers lost their jobs.
- More lorries. That bread is driven up to 300 km overnight, so fuel use and emissions go up.
Look at the numbers, not the advert: Nothing Wasted is printed on every Goldcrust bag. But 300,000 of 3 million unsold loaves is one in ten; the other nine still go in the bin.
Argue both ways: A critic can argue both ways about the same scheme: it feeds people, and it is also a publicity stunt that makes a small effort look large. Use the numbers to decide which side you are on.
Notice what the right-hand column is made of. Each point is a real decision with a real effect on someone outside the boardroom: the planet, the 200 bakers, the towns the lorries drive through. That is what makes it a CSR point. A change that only affects how Goldcrust runs itself, such as new rotas for its managers, belongs to a different conversation.
At Goldcrust's yearly meeting a shareholder stands up. Why is the board spending $8 million a year that could have been paid out as dividends?
| Spending | Cost a year |
|---|---|
| The living wage | $6 million |
| The higher price for Valley Grain's wheat | $2 million |
| Total that could have been paid out as dividends | $8 million |
What Goldcrust gains
- A better image: customers and the press see a business that does the right thing
- Customer loyalty: people who share the values keep coming back, and some pay more
- Staff who stay: fewer leave, so less is spent hiring and training new bakers
- Fewer attacks from pressure groups, and investors who look for responsible firms
What it costs Goldcrust
- Higher costs now: wages, wheat and cleaner packaging all cost more
- Lower profit in the short run, so a smaller dividend for shareholders
- The benefits come slowly and are hard to measure in money
- If actions fall short of the promises, it is accused of greenwashing
| Before the living wage | One year after | |
|---|---|---|
| Bakers leaving each year | 40 in every 100 | 25 in every 100 |
| Cost of hiring and training one baker | $4,000 | $4,000 |
| Hiring and training bill (6,000 bakers) | 2,400 leavers × $4,000 = $9.6 million | 1,500 leavers × $4,000 = $6.0 million |
| What it means | The $6 million wage cost... | ...is partly paid back: $3.6 million saved |
The shareholder's answer: Behaving ethically improves a business's image and wins customer loyalty. The saving on hiring is the part Goldcrust can count; the loyalty is the part it cannot.
Why CSR is a judgement: Neither gain arrives this year, while the costs do. That is why CSR is a judgement, not a sum: the board is betting that the gains over the next ten years are worth the profit given up now.
What counts as responsible also changes. Twenty years ago nobody minded a sandwich in a plastic box; now customers, pressure groups and governments do. What society expects of a business keeps rising, so a business's ethical objectives and its CSR change over time too.
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How this comes up: CSR comes up in short questions, in a six-mark case question, and as one side of the argument in long answers.
The questions
- State two examples of CSR a business could carry out. Two marks, no case needed.
- Explain one action a named business is taking to improve its CSR. Two marks.
- Explain two ways the business is improving its CSR and one way it is not, or one way and two ways. The six-mark case question.
- One way a business is meeting its ethical objectives and one way it is not. The same shape as the six-mark question.
- The long answers. When a business must decide whether to go ahead with a plan, its CSR and its image are one side of the argument.
The six-mark pattern
- Find three decisions in the case. Two that help people, the community or the environment; one that harms them. Use three different decisions.
- Name each way in a few words. 'Giving unsold bread to a food charity.'
- Explain it with the case. Who is better or worse off, and by how much: '300,000 loaves a year become free meals for people with no home.'
- Keep each way to two sentences. Name it, then show it. Six marks is three short paragraphs, not an essay.
Three traps
- The same fact twice. The central factory cut 200 jobs and added lorry miles. That is one decision; use it once, and find your other ways elsewhere in the case.
- A staffing perk is not CSR. Flexible hours or working from home to fill vacancies are about running the business, not about its effect on society.
- No case, no second mark. 'It reduces waste' could be any business. 'Its 300,000 unsold loaves go to Second Helpings' is Goldcrust.
Explain two ways in which Goldcrust is improving its corporate social responsibility (CSR) and one way in which it is not.
Model answer plan
See the answer broken into clear points, with guidance on how each point earns marks.