ETHICAL AUDIT REPORT OF TESCO’S

APPROACH TO CORPORATE SOCIAL

RESPONSIBILITY (CSR) AND
SUSTAINABILITY
Alex Agapidis: 21414515; Monir Boutaib: 21320936;
Festus Efosa Efosa: 21404251; Dim Diambwana
Mambote: 21410748

DECEMBER 22, 2019

DO IT RIGH FIRM
 Table of Contents

Executive Summary .............................................................................................................................. 2

Introduction ........................................................................................................................................... 4

Findings and Analysis ........................................................................................................................... 4

Corporate Social Responsibility ...................................................................................................... 4

Applying Carroll’s Pyramid Model to Tesco Corporate Social Responsibilities ........................ 5

Sustainability ..................................................................................................................................... 8

Applying the Triple Bottom-line to Tesco Sustainability .............................................................. 9

Recommendations ............................................................................................................................... 11

Conclusion ........................................................................................................................................... 12

References ............................................................................................................................................ 13

Appendix .............................................................................................................................................. 17

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Executive Summary

Abstract Purpose – This report presents findings from the ethical audit evaluation of Tesco’s

use of Corporate Social Responsibility (CSR) and sustainability framework to meet the firm’s

strategic goals and sustainable development initiatives.

Design/methodology/approach – The research included literature reviews on Carroll’s

pyramid model which comprises of the Economic, Ethical, Legal and Philanthropic approach

to evaluate Tesco’s corporate social responsibility practices on how its business activities have

an overall positive effect on the society. Also, it included the John Elkington framework of the

Triple Bottom line to assess and report Tesco’s activities against Environment, Economic and

Social on its sustainable development initiatives.

Findings – By applying Carroll’s pyramid model to Tesco’s corporate social responsibilities,

it focused on its economic, legal, ethical and philanthropic responsibilities. Tesco’s profit keeps

growing over the years despite losing market shares. Tesco is committed to complying with

the law in its business activities. The company maintains a high ethical trading standard. Also,

it is engaging with philanthropic actions towards charities and communities as well. Likewise,

Tesco has three goals to target; Environmental, Economic and Social which help to promote

the whole business performance for sustainability by applying the Triple Bottom line

framework. Tesco is focused on the UN Global Compact to achieve the improvement of the

environment. Also, it contributes to the UK macroeconomy and provides employability skills

and career start-up opportunities for young people.

Research implications – As regards CSR, Tesco needs to improve its Economical, Legal, and

Ethical Responsibilities. Also, Tesco’s sustainable developmental initiatives will be better

achieved by establishing sustainable partnerships for teamwork and collaboration with other

organizations and firms which can bring mutual benefits.

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Keywords – Corporate Social Responsibility (CSR), Sustainability.

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Introduction

This ethical audit report critically evaluates Tesco’s approach to Corporate Social

Responsibility (CSR) and Sustainability. Jack Cohen founded Tesco in 1919 and has grown

over the years as one of the largest retail chains with a turnover of £56.9 billion and an

estimated employee number of 450,000 in 2019 (Tesco PLC, 2019). Tesco’s core intent is

“We make what matters better, together” (Mihăiloaie, 2013). To achieve the objective of this

report, theoretical considerations were illustrated by presenting some examples from Tesco’s

practices as well as the results of research on its corporate sustainability and conclusion were

drawn from the findings and analysis.

CSR is a very vital part of the firm’s strategies. As Business and society depend on each

other, most firms promote their business activities from a different viewpoint. Now and then,

CSR is involved in specific actions that are beneficial to staff, customers, suppliers, and society

(Abreu and Carreira, 2007). CSR is closely correlated with firms’ sustainability. Presently,

several businesses include in their mission statement the concept of sustainability which refers

to people, planet, and profitability by mixing the concern of traditional business issues

regarding workers with preservation of natural resources, and profitability. According to

Elkington (1997), the actual approach to sustainability through CSR focused on the three

pillars; Planet, Profit, and People. Hence, the sustainability initiative is the one that can take

care of the present situations without causing damage for future generations (Myclimate.org,

2019).

Findings and Analysis

Corporate Social Responsibility

CSR is “often used as a key criterion in gauging corporate reputation” (Ellen, Webb, &

Mohr, 2000). CSR shows the company’s concern and commitments through sustainability and

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development, likewise the moral conduct of a firm to society (Carroll et al. 2012). However,

there is currently a nonunified definition of CSR. Thus, in a 2006 study of Dahlsurd; he

identified and reviewed that there are around 37 various meanings of CSR (Dahlsrud, 2006).

CSR demands that firms’ business activities produce an overall positive effect on society.

The regulation of firms’ business activities and the promotion of positive influence

through their activities as regards the environment and many stakeholders, is one of the

objectives of CSR. It is contended that companies are faced with different issues of demand

from many stakeholder groups. This pressure may come from multiple stakeholder groups such

as employees, customers, suppliers, government, groups and other institutional stakeholders

with different objectives and conflicting interests (McWilliams et al., 2006). Therefore, it is

vital that companies cautiously meet their responsibilities, fulfil their objectives and comply

with legal expectations.

Applying Carroll’s Pyramid Model to Tesco Corporate Social Responsibilities

This approach indicates that it is ethically correct for firms’ to be economically and

legally responsible when they carry out their business activities in the environment they exist.

From this perspective, it is a social requirement for firms to be economically and legally

responsible, it is expected socially for firms’ to be ethically responsible while philanthropic

activities should be socially desired (Windsor, 2001) and the components of the total social

responsibility of firms comprises each of these responsibilities.

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Economic Responsibility

Economic activities support growth and reduce job loss in the macroeconomy. Tesco’s

profit keeps growing over the years despite losing market shares. However, Tesco was

implicated in accounting outrage by exaggerating its profit by £250 million which was later

reviewed up to £326 million in 2016 (Chapman, 2016). Consequently, Tesco’s shares crashed

by 20% and wiped out £2 billion of the company’s value. Tesco was fined £129m by the

Serious Fraud Office for overstating profits of £250 million for the first half of the year (Cox,

2017). Shareholders’ wealth maximization can be achieved through the increase in the value

of shares and dividend growth. Moreover, in 2018; Tesco made a profit of £1.64bn on sales of

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£57.5bn in the consecutive quarter of growth and beats forecast with a 28% rise in annual

profits (Butler, 2018).

Legal Responsibility

When staff are paid their wages correctly, it stimulates the perception that their work

effort is being appreciated. Hence, it encourages better staff engagement and performance for

good customers’ service and satisfaction Tesco is not without its critics, and in 2010, Tesco’s

USA store was alleged to have exploited weak labour laws and staffs bullying to prevent them

from joining unions (Dudovskiy, 2016). Similarly, in 2016; Tesco faced legal action from staff

in the UK in gender discrimination, age and pay dispute after it cuts the wage rate of its staff

(Topham, 2016). As a result, the staff felt their loyalty was taken advantage of as the

management was aware that they may not leave their job and it made them vulnerable with

high risk of pay cuts or no choice.

Ethical Responsibility

Tesco is committed to maintaining high standards of ethics and honesty in the manner

it conducts its business activities. However, it failed to abide by the industry norms when it

knowingly did not pay suppliers in order to boost the company’s financial position and to avoid

underperformance. Hence, the grocery Ombudsman’s investigation of Tesco’s accounting

scandal in 2015 revealed that it breached the code of conduct of the industry when it failed to

protect suppliers ((Simpson, 2016). Therefore, to ensure best practice and compliance with the

industry code of conduct, Tesco code of business conduct describes and sets out expectations

for all colleagues to perform their ethical obligations (Tesco PLC, 2016).

Philanthropic Responsibility

The organization’s survival depends on a sequence of exchanges between the

organization and the environment it exists. Tesco’s partnership with the national food

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redistribution charity, Fareshare, to ensure that food waste is reduced through donations to

charities and community groups. For example, Tesco through its Community Food Connection

and food surplus redistribution, has helped meet the needs of people by donating 77 million

meals to charities and community groups since 2012 from its stores and distribution centres

(Dave, 2019). The FareShare, chief executive, Lindsey Boswell said that the organization is

collaborating with charities to support and ensure people in need of food are fed every week

with Tesco’s help (Smithers, 2019). Hence, one of Tesco’s philanthropic responsibility is to

ensure that food waste is reduced by giving to the needy in the society. Likewise, Tesco donated

£55 million in 2014 and 2015 financial year, which numerous accounted for 3.96 % of its pre-

tax profit to charities and noble cause in total, and £37.9 million has been raised from Tesco

employees through customers fundraising (Dudovskiy, 2016).

Sustainability

The Chartered Institute of Personnel and Development (CIPD, 2012), defined

sustainability from the organizational sense as the concept of improving the social,

environmental and economic structures in which a business operates. The Triple-bottom line

framework is used to measure and report corporate performance against economic (Profit),

social (People) and environmental (Planet) parameters (Elkington, 1990).

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Applying the Triple Bottom-line to Tesco Sustainability

The Triple bottom line perception relates to the concept of sustainable development—

the idea that development should happen in a manner that it does satisfy the need of present

generations without causing damage to maintain conditions and opportunities for future

generations to do the same (World Commission on Environment and Development, 1987). This

is shown by the increasing number of corporate organizations focus on sustainability in similar

issues such as the impact on corporate responsibility, investment, and the environment.

Environmental Sustainability

Tesco incorporates the UN Global Compact mission statement concept in its

sustainability initiative to attain viable advancement of improving the environmental condition

of the wider society. The UN Global Compact suggested in its environmental section that a

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sustainable corporation should back a preventive method to ecological issues; take on

initiatives to favour larger eco-friendly responsibility; promote the change and dissemination

of ecologically responsive skills or knowledge (United Nations, 2013). Tesco also contributes

to the UN Sustainable Development Goals (SDGs), which offer objectives that businesses,

governments, and civil society may achieve to contribute to a sustainable future (United

Nations, 2015).

Tesco’s environmental strategy focuses on five main elements such as climate,

freshwater, marine, forest and sustainable agriculture (Sekkides and Andrew, 2016). However,

some environmentalist groups, NGOs, industry analysts and Friends of the Earth (FOE)

criticized Tesco to have claimed to be environmentally and socially responsible corporate

citizen but it distributed 1.4 billion plastic bags in 2004, which ended up in landfills

(Icmrindia.org, 2006). Nonetheless, Tesco CEO Ireland (Sir Terry Leahy, 2008) suggested,

“The key to success is to turn green consumption into a mass movement”. The most energy

source used globally are fossil fuels, which include coal, petroleum and natural gas, and they

are limited, non-renewable and their combustion produces carbon dioxide, which affects global

warming (Arnold et al, 2014). Tesco gets 58% of its electricity from renewable sources and

aims to achieve 65% by 2020 and 100% by 2030 (Tesco PLC, 2019).

Economic Sustainability.

The purchasing behaviours of consumers have a direct economic impact on Tesco’s

performance. Besides, the macroeconomy is responsible for what to produce and the methods

to apply for production (Craig & Campbell, 2012). Tesco is concerned with the type of

economic system of host countries regarding exchange rates, inflation rates, and the level of

employment (Tesco and Society Report, 2013). These factors are vital for Tesco’s financial

safety and long-term plans. Tesco’s sustainable development through employment also

contributes to the UK economy. For example, a report from KPMG estimated that Tesco

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indirectly supports the equivalent of approximately 450,000 jobs and contributes £37bn to the

wider UK economy (Quinn, 2018).

Social Sustainability

Tesco supports its employees and colleagues by providing them with opportunities to

get on and reach their potential through empowerment and collaboration with other notable

organizations. According to Tesco’s sustainable development initiative report, 17,156 of its

colleagues have received manager development training in 2019 and 84% agreed that there is

an inclusive culture at Tesco (Tesco PLC, 2019). For example, Tesco signed up to the UN

Women’s Empowerment Principles by partnering with NGOs and the wider industry as a

reaffirmation of its commitment to achieving gender equality by promoting it in the workplace,

marketplace, and community (Tesco PLC, 2019). To achieve gender equality, Tesco target and

support female colleagues with talent for future development. Tesco’s Executive Sponsor for

Diversity and Inclusion, Alessandra Bellini said that Tesco cherished and welcome

collaboration opportunities with other organizations to learn from and share best practices

(Tesco PLC, 2019). However, Tesco’s aim is to provide colleagues with the flexibility and

skills to carry on and succeed by having a remuneration package that colleagues value. Also,

Tesco provides opportunities for young people to help them develop employability abilities

and start their careers.

Recommendations

As recommendations, Tesco should:

• Take strategic actions in to regain its market share and tackle the breakthrough

of “low cost” companies such as Aldi and Lidl;

• Ensure best practices and comply with the law in dealing with business

activities as it affects people’s lives and the society as well;

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 • Ensure a thoughtful and good application of the Code of Business Conduct by

everyone in order to prevent upcoming ethical misconduct;

• Partner more with other organizations and companies to achieve global

sustainability.

Conclusion

In conclusion, the audit report findings and analysis show that even though Tesco is

performing well as regards Corporate Social Responsibility, it needs to improve on the

Economical, Legal, and Ethical Responsibility. On the other hand, Tesco is a leader in its

Sustainable development initiatives and need to partner more with other organizations and

companies to achieve global sustainability.

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Appendix

YouTube link of the Group presentation

video https://www.youtube.com/watch?v=7PuZRYuOD64&feature=youtu.be

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