Integration of the EFQM Excellence Model with CSR

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Theoretical Analyses

Sustainability & Sustainable Development

Sustainable development is defined as the conversion of the commitment and thinking ways of the management and the capacity of the organization to perform and include key stakeholders (Waddock and Bodwell, 2007). However, for an organization to be completely sustainable is a big challenge and requires a very strong management and leadership which integrates economic business performance, social and environmental performance (Johnson 2007; Schaltegger and Wagner, 2006; Epstein and Roy, 2003).
According to Schaltegger and Wagner (2007), managing sustainability may raise some key concerns and issued within the organization like the measurement of non-economic issues and aspects of performance. Therefore, the measurement of sustainable development has to be done considering several aspects regarding societal, ecological and economic issues (Epstein, 2008; Johnson, 2007; Waddock and Bodwell, 2007; Schaltegger and Wagner, 2006; DeSimone and Popoff; 2003).
A lot of people believe that sustainability simply means being ―environmental friendly‖, but in actual it is a lot more than that (Enquist et.al, 2007a, Petros and Enquist, 2007).

The Phenomena of CSR

CSR has been a under debate since its evolution in the world of business management. Friedman (1970) had a very controversial point of view stating that businesses have the sole responsibility of increasing profits, which has been greatly disagreed by other scholars.
Corporate social responsibility is about how companies manage the business processes to produce an overall positive impact on the society (Baker, 2008). Carroll (1991) presented the CSR pyramid with emphasis on four different types of social responsibilities namely: Economic, legal, ethical and philanthropic, hence, combining CSR with the stakeholder perspective. Caroll stated (1991, p.43), “there is a natural fit between the idea of CSR and an organization‟s perspective”. This idea was later also supported by Kotler and Lee (2005). CSR has originally been associated with ‗profitability, compliance and philanthropy‘, nevertheless, after the 1970‘s, the imperative shifted to ‗corporate social responsiveness‘, Zadek (2001) referred to this idea as ‗Responsible Corporate Citizenship‘.
The concept of CSR is not new to business world as commonly perceived. Sometimes ago corporate responsibility was not difficult to understand as we all know that the debate on ―organizations pollute‖ is an old one. Then came recycling, fair market practices, good governance, safe packaging, sustainable development, and accountability (Danesi, 2007). In the past companies have been practicing CSR but most of the time it has been viewed as something to fill annual reports and corporate PR statements. In fact it has never been taken seriously enough so as to make it part of corporate business strategy. At the same time it is undeniable that companies have responsibilities towards the communities that surround them (Kitchin 2003).
Caroll (1991) has discussed about philanthropy in his CSR pyramid, Gummesson (2006) at the same time argues about the incorporation of ‗corporate citizenship‘ with charity. Vogel (2005) argues that ―doing good to doing good‖ is the old thinking of CSR. The under lying theme of corporate social responsibility is that business and society are interwoven rather that distinct entities (Wood 1991). Corporate social responsibility is fast gaining importance as more and more firms realize its value (Chaudhry and Krishnan 2007). For the first time brand owners all over the world have started thinking in terms of integrating its activities into their core business strategy and started assessing its impact on brand seriously.
Yuaan and Ning, 1999 argued that CSR has basically three basis which are Economic, Sociological and legal basis. These bases are foundation of the existence of CSR and are subject to across the board debate among theorists, researchers, and industry practitioners. The rationality behind taking economic as basis of CSR is obvious because every company is basically formed with the concept of profit maximization and it is an economic entity. Therefore fore it is eminent that CSR has to be co-related with economics of business. Research is still needed to find relationship between economics of an organization and CSR and efficiency during the long term process of the company so that a positive correlation of the two is derived (Yuaan and Ning, 1999)
The rationality behind making sociological basis of CSR is most important and it makes complete sense. Company is part of society from where it takes its most prominent input like human skills along with factors of production. Economic cycle impacts industrial process which in turn impacts social development process it either slows it down or speeds it up this will in turn impact. Social development relies on the growth of companies (Yuaan and Ning, 1999). The concept of giving it back to the society is not new; shedding away from the traditional concept of profit maximization it is now being said that companies must plough back some part of their profits into social development work.
The most debated basis for CSR relates to Legal basis of CSR. Yuan & Ning , 1999 argued that society will suffer if corporation embark upon making aggressive profits and in a process damage justice and fair rules of the society. It is understandable that company is a legal entity which has to abide by rules and regulations set by the Government. But the debate able point is that does abiding by rules comes under the domain of CSR? For example paying regular tax is CSR or making employee friendly code of conduct is CSR activity. Davis (1960) gave a very accurate description of CSR he described CSR as business decisions and actions taken for reasons at partially beyond the firm‘s direct economic or technical interest. This means that compliance with mandatory rules is not CSR as commonly believed. It is something that is done.

CSR Theories

CSR of companies is in principal based on two completely different theoretical frameworks, which are in contrast to each other. Traditionally, CSR is formed on the basis of the classical thought which entails ―business of business is business‖. According to Friedman (1974), this thinking is based on the traditional perception in which businesses are taken as one dimensional entities of the business organization. It explains that, businesses have the sole responsibility of making adequate provisions regarding goods and services to the society at a profit under authoritarian framework. This theory only emphasizes the cost which businesses incur for social involvement; therefore, it does not highlight or even fail to bring into attention the benefits of CSR. These benefits and advantages can be in the form of resource productivity, cost savings, and product differentiation. Another modern and contemporary theory of CSR is the stakeholder theory; this theory states the concept of the social contract, which holds that CSR is a function of terms of general agreement between business and society. These terms have undergone basic changes in recently, involving a wider corporate commitment to the surrounding community. This theory reaches beyond the narrow angle of cost considerations, profit making and compliance (Dunfee et al., 1999).
This theory assumes that organizations are not only responsible to their shareholders; they are also accountable to a variety of groups in the society who have stakes in the corporate behavior and decisions that affect societal interests. Therefore this theory assumes that corporations have an enormous power base in society, both in financial and political terms. If organizations neglect their social responsibility they will have to pay a price in terms of increased regulatory compliance, fines, lost business and corporate image in the long term. The theory takes into account the possible profit potential arising out of social commitments in the long run, in terms of increased market share, positive customer ratings and loyalty (Quazi.A, 2003).
There is one debate about justification of the existence of CSR and its being essential component in firm‘s core business strategy. As pointed out by (Porter & Kramer, 2006) that the justification of CSR is based on four primary assumptions. First is moral obligation which comprises that companies should be a good citizen and its actions should not harm any element of the society. Second assumption is license to operate which states that firm‘s must have permission from Governments and public to do its commercial activities. Third assumption relates to Sustainability which essentially means that companies should plan their business actives keeping in mind long term perspective. Fourth assumption for the justification CSR related to reputation which states that CSR helps company to create a good reputation among communities. These four justifications have been able to draw attention of companies to work more with CSR (Porter, Kramer, 2006).
The sustainability aspect of CSR bases is also well documented another model which discusses five dimensions of sustainability of business namely ethical, social, nature-philosophic, economic and legal dimensions which is quite relevant with CSR bases (Enquist B, Evardsson B, and Sebhatu, S ; 2007). In my opinion any business model which is integrated with CSR.
Initiatives but lacks sustainability in the long run is a weak model. CSR activities of the firm must be aimed to create a long term impact on communities which will ultimately translate into customer loyalty and profitability. In other words the pay back for investment on CSR should be seen in long term rather than short term. A third wave of service models are clearly emerging which is based on sustainability of business (Enquist B, Johnson M and Camen C; 2005).
Investment made on CSR has been matter of debate among management and company stakeholders. Most of the time it has been termed as waste of resources and burden of company bottom line. It is therefore important that the decision to whether a company should step in or not must be based on evaluation of the opportunities and threat (Falck & Heblich, 2007). Also (Preston, Post 1975) showed that level of commitment can be conceived if as a socialization process in which corporation recognize their social role. Commitment of resources by top managers of the company will be the direct measure of company seriousness towards embracing CSR and this is key indicator where research efforts should be directed as well.
Although the debate on CSR spending has many implications and it takes many forms but the fact is that theorists and researchers who are making this cry do not understand the real meaning of CSR. In order to clarify we went through literature to find out the most suitable definition of CSR and found out that (Davis 1960) gave a very accurate description of CSR he described CSR as business decisions and actions taken for reasons at partially beyond the firm‘s direct economic or technical interest. This implies that firm‘s interest beyond making profit lies in engaging itself in such activities which may or may not directly contribute towards its bottom line.
Extensive study of theoretical framework covering the aspects of management priorities, stakeholder‘s stakes, management and CSR was done explored further amplification of CSR and its importance. The key question therefore emerges is that why corporation should invest on CSR? Can CSR initiatives be used as competitive advantage in the long run? Can companies use CSR as leverage for their brand building efforts? Comparative studies like the one which is being carried out, aims to find out answers to these questions.
Another theory attempts to explain management priorities in order to determine where CSR stands in terms of resource commitment and seriousness of efforts. In this regards (Falck & Heblich, 2007) have tried to explain in terms of company‘s stakeholders classification, they argued that company stake holders can be classified into three major categories, key stake holder, emerging stake holder and minor stake holder each group having different set of expectations in terms of return on investment which in turn tied up with company‘s cash flow. Company sets its priorities and business goals. As far as CSR is concerned it is not yet clear that where it stands in terms of management priorities but definitely stakeholders expectations and employee‘s rewards take the front seat.

Misinterpretation of CSR definition

CSR has initially been misinterpreted with the company‘s code of conduct- ‗Voluntary‘ such as H&M, IKEA & Body Shop, and the regulations imposed by the authorities, which is equal to every company. We believe that codes of conduct are basis for CSR and change, which is also a part of quality improvement.
Whereas we believe CSR is much more in wider scope it is not at all complying with rules and regulation set by the Government. It is purely based on volunteer initiatives we again want to refer to definition of CSR by European Communities which we cited in the opening of this report. In which it is clearly stated that:
“A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis” (Commission of the European Communities”, 2001)
If we carefully analyze this definition we can see that it is clearly pointing towards concern towards stakeholders on voluntary basis. Nowhere in code of conducts of any corporation can one find concerns regarding community development, sustainable health efforts, concerns for education, improving quality of life of communities. Very few companies are focusing of this issue. Most of the big to medium companies focus too much on improving their internal hygiene conditions and caring about their house keeping. That is not CSR in its purest form.

Service Quality

As Enquist and Edvardsson (2006), have discussed about Service Dominant Logic and CSR can act as driving forces for value creation through enhanced service quality. As we have already talked about the discussion of Vargo and Lusch (2004) on the shift taking place from the ‗Goods Dominant Logic‘ to ‗Service Dominant Logic‘. Improved Service Quality depends on a single imperative, and that is a vital business strategy (Enquist and Edvardsson, 2006).
The paradigm of shifting Total Quality Management to Total Responsibility Management (Waddock and Bodwell, 2007) is a key point in determining the change of the management‘s thinking. TRM is made up of procedures and systems to ascertain responsible business practices and management (Sebhatu, 2008).

Integration of the EFQM Excellence Model with CSR

To be able to understand and analyze the CSR activities of the three business case studies we have picked for our thesis and also to co-relate them with value co-creation and value in use (Vargo and Lusch, 2004), we have used an altogether new approach of integrating the EFQM business excellence model with the three core activities of CSR with emphasis on the stakeholder‘s perspective.
EFQM business model has been incorporated with the CSR phenomena using the ‗Framework of CSR Reporting‘. The model has a strong basis on service quality and further probes the integration of policy and strategic decision making with CSR having a strong focus on the stakeholder‘s perspective.
The EFQM Excellence model is a self assessment framework used widely to measure the strengths and improvement areas of an organization and across all of its activities. The model is termed as the ―Excellence Model‖ due to the reason that the model has its main focus on what the organization does, or can do, in order to provide excellent service and products to its consumers, stakeholders‘ and the society in general.
“A lot of the success of the model is in changing the way people think, looking for links between „Results‟ and „Enablers‟ outside „formal Self-Assessment‟ and realizing the Model can make a difference.”
Thames Reach
It is a useful theoretical model which is very commonly used to determine the quality aspect in firms‘ processes and delivery. We will use this model to further evaluation of firms‘ formulation, implementation and control aspects. The EFQM Excellence Model can be considered as a holistic and integrative approach, where strategic, managerial and operational control processes are integrated in the model (Dahlgaard Su Mi – Dahlgaard Park & Jens J.) The EFQM Excellence Model (―the Model‖) is highly regarded as an organizational management framework, and is used not only within Europe but around the globe, either as it is or with the approach applied in very similar frameworks. The Model is about improvement. We have selected this model because of its practical and rational approach based on identification of enablers and results or cause and effect methodology (Medhurst D and Richards, D)
(Iwaarden Jos Van & Wiele, Ton van der, 2007) very rightly pointed out that the model makes it possible to take strategic aspects and characteristics of the business environment into account when assessing an organization‘s quality management systems. This is an indicative of strategic nature of this model and its practical use in research.
The Model has the following premise:
People Results, Customer Results and Society Results are achieved through Leadership driving Strategy & Policy, Partnerships and Resources, People leading ultimately leading to excellence in Key Performance Results.
There are 9 ―big ideas‖ in the Model which cover all the aspects of the organization‘s activities. These nine criterions are categorized into ―Enablers‖ and ―Results‖.
The Enablers determine how the organization conducts itself, how it plans its strategies, how it manages its resources and staff, how strategies are planned, and how key processes are monitored and reviewed. These are:
1. Leadership
2. People
3. Policy and strategy
4. Partnerships and resources
5. Processes
The Results of an organization are what it achieves. This involves the satisfaction level among the employees and the customers, its impact on community and key performance indicators. These are:
6. People results
7. Customer results
8. Society results
9. Key performance results

Empirical Studies

What are all about Starbucks?

History and Company Profile

Starbucks Corporation has grown from a single store to become the leading retailer, roaster and brand of specialty coffee in the world with more than 15,000 company-operated and licensed locations in North America, Latin America, Europe, the Middle East, Africa and Asia Pacific (CSR annual report 2007). The first retail store was founded in
Seattle‘s Pike Place Market in United States in 1971 as a local coffee bean roaster and retailer. Starbucks‘ cultures as you see in nowadays inspired after a business trip to Italy in 1983 by Howard Schultz –it‘s today chairman, president and chief executive officer–. There are 200,000 coffee bars in Italy, and more than 1500 places only in Milan. He had visited Milan‘s espresso bars and impressed with their popularity and culture (store should be place to meet and visit, etc.) He noticed that coffee is integrated with Italian culture, and then he got a new coffee idea, « Why not create community gathering places like the great coffee house of Italy in the United States? » Could the Old World meet the New World? (George Garza)4 Going to Starbucks should be an experience, Re-creating the Italian coffee-bar culture in the United States and that could be Starbucks’ differentiating factor.5 After that he tried to make his idea happen in United States and from then espresso drinks started becoming an essential element of Schultz‘s vision and success to change, which is what Starbucks is all about at present.
Starbucks Corporation has two business units corresponding to company‘s operations; one for the US and another unit for other regions, i.e. North American and International. In 1995, Starbucks Coffee International was set up for taking care of Starbucks business outside North America including licensed and joint-venture retail stores worldwide.

Company Profile

In 1971, three academics -Jerry Baldwin, ZevSiegal, and Gordon Bowker- opened a store called Starbucks Coffee, Tea, and Spice in the touristy Pikes Place Market in Seattle selling whole bean coffee. In 1982, Howard Schultz joins Starbucks as director of retail operation and marketing and Scultz believed that Americans would pay good money for premium cup of coffee and stylish place as romance Italy atmosphere so he introduced his idea for three Starbucks‘ Owners but they‘re not ready for restaurant business.
The owner of Starbucks agreed to sell the firm and Schultz became an owner of Starbucks in 1987 after he had proved the successful idea about a national chain of cafe styled on the Italian coffee bar. In fiscal 2007, Starbucks has grown from 17 coffee shops in 1987 to 15,011 retail stores spread in 43 countries and have 172,000 partners (employees) working worldwide by using strategy go to geographic market and try to completely dominate it before setting its sights on further expansion.

Table of contents :

1. Introduction and Purpose
1.1 Conceptual framework of CSR
1.2 Introduction to context of CSR code of conduct of the three cases studies
1.3 Aims Statements
1.4 Purpose
2. Research Design and Methodologies
2.1 Qualitative research methodology
2.2 Qualitative Comparison Research
2.3 Empirical data collection and literature study
Case Study
Data collection method
2.4 Limitations of Research
3. Theoretical Analyses
3.1 Sustainability & Sustainable Development
3.2 The Phenomena of CSR
3.3 CSR Theories
3.4 Misinterpretation of CSR definition
3.5 Service Quality
3.6 Integration of the EFQM Excellence Model with CSR
4. Empirical Studies
What are all about Starbucks?
1. History and Company Profile
2. The Starbucks Model
2.1 Mission Statement and Guiding Principles
2.2 Environmental Mission Statement
2.3 Global compact
2.4 Material Matrix
2.5 Starbucks Code of Conduct for Sustainable
3. Starbucks and Corporate Social Responsibility
Is Starbucks responsible?
Corporate Social Responsibility Governance
4. Starbucks with EFQM Excellence model
EFQM CSR Frameworks
Business Case: Starbucks Corporation
4.1 ―Enablers‖ criteria
Leadership.
People.
Policy and Strategy.
Partnerships & Resources
Processes
4.2 ―Results‖ criteria
People Results
Customer Results
What are all about H&M?
1. History and Company Profile
2. H&M‘s Model
2.1 Code of conduct
3. H&M‘s Strategy
3.1 Innovation drivers
3.2 Efficient Management
 Planning and Buying
 Production
 Logistics and distribution to stores
4. H&M and CSR
4.1 H&M CSR Organization
4.2 What is H&M‟s new CSR strategy?
5. H&M with EFQM Excellence Model
EFQM CSR Frameworks Business Case: H&M
EFQM Framework for CSR- Criteria 1 & 9 (Leadership & Key Performance)
EFQM Framework for CSR- Criteria 2&6 (People management & People Satisfaction)
EFQM Framework for CSR- Criteria 3 & 7 (Policy and Strategy & customer satisfaction)
EFQM Framework for CSR- Criteria 4, 5 & 8 (Resources, Processes & Society Results)
IKEA
1. History and Company Profile
1.1 IKEA Timeline
1.2 The Ikea Group
2. IKEA‘S BUSINESS PHILOSOPHY
3. IKEA and CSR
3.1 The IKEA Concept
3.2 Ikea‟s CSR Commitments
4. IKEA‘s CSR strategies in light of the EFQM model
Social Responsibility:
IKEA with EFQM CSR Frameworks
1. LEADERSHIP IN ENVIRONMENTAL RESPONSIBILITY
2. POLICY & STRATEGY
Ikea‟s Environmental Strategies
1. RESOURCES
2. PEOPLE RESULTS
3. CUSTOMER RESULTS
4. SOCIETY RESULTS
5. Analysis
Corporate social responsibility
Starbucks Challenges with CSR
H&M Challenges with CSR
IKEA Challenges with CSR
6. Conclusion
Comparison of how CSR is perceived by Starbucks, H&M and IKEA
Comparison of corporation‘s responsibility according to EFQM Excellence Model
Leadership
People
Policy & Strategy
Partnerships & Resources
Processes
People Results
Customer Results
Society Results
Key Performance Results
7. References

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