Unit 1.3 Business Objectives
Corporate social responsibility (CSR)
CSR chat
Alex: “I don’t understand why a company would go out of its way to increase costs with all this CSR stuff. I mean, shouldn’t they just focus on profit?”
Jamie: “It sounds that way, but CSR actually brings a lot of benefits beyond immediate profit. It helps improve brand reputation, which can increase customer loyalty and even attract more business in the long run which may allow an increase in price or even lower elasticity!”
Alex: “But how does spending more on things like eco-friendly packaging or fair labor make any difference?”
Jamie: “Well, we look at how CSR reduces risks. Companies that genuinely adopt CSR avoid fines and bad press, especially with how quickly greenwashing claims hurt reputations. Plus, it’s not just about costs—it can increase employee motivation and open up new, sustainability-focused markets.”
Alex: “Hmm, so it’s not just a cost—it’s a way to reduce risks and maybe even attract more loyal customers?”
Jamie: “Exactly! It’s about building long-term value and protecting the business from risks that could cost them way more than just the CSR expenses.”
Alex: “I get it, but isn’t there a chance that time and money is invested into CSR and nobody notices or perhaps it just gets shrugged off as bad faith. Seems like a big risk to me”!
Benefits of CSR
Enhanced Brand Image: Genuine CSR practices build consumer trust and loyalty, which can differentiate a company in competitive markets.
Risk Mitigation: CSR reduces risks related to non-compliance, such as fines and negative media, especially as consumers and regulators crack down on practices like greenwashing.
Employee Engagement: Responsible practices often improve employee morale, increasing productivity and talent retention.
Long-term Profitability: Sustainable practices may reduce costs (e.g., energy savings) and open access to markets with environmentally conscious consumers.
Drawbacks of CSR
Increased Costs: Implementing CSR can be expensive, requiring investments in sustainable materials, ethical supply chains, and community initiatives.
Short-term Profit Reduction: For companies focused on immediate returns, CSR can appear costly and potentially lower short-term profits.
Risk of Greenwashing: Poorly executed or insincere CSR efforts may backfire, leading to consumer distrust and reputational damage if the company is accused of greenwashing.
How did LEGO score with CSR?
LEGO, with an annual profit of around $2 billion, has invested over $1 billion in sustainability efforts, including commitments to renewable energy and goals for using sustainable materials in all products by 2030. However, LEGO faced a setback in its initiative to produce completely sustainable bricks when its trial with recycled PET plastic was discontinued; the process was found to increase emissions rather than reduce them.
While this investment didn’t fully yield the intended results, it has still been viewed as a sincere effort toward CSR. By comparison, smaller sustainable brands like Green Toys—which earns around $5–$10 million in revenue annually—focus on sustainability at a lower investment scale, making toys from 100% recycled plastic, primarily milk jugs. Green Toys’ approach shows a leaner, highly focused sustainability strategy, while LEGO’s large-scale efforts highlight the complexities faced by global brands in implementing ambitious CSR goals.
Define the term corporate social responsibility [2]
Explain why CSR could be described as a long-term strategy [4]
Explain what the difference is between genuine CSR and greenwashing [4]
Discuss whether or not CSR could be beneficial to lego in the long run [10]
