ACC706 - Corporate Social Responsibility Analysis of Blackmores Report

This report, prepared for ACC706, analyzes the corporate social responsibility (CSR) issues of Blackmores, focusing on a controversial deal with pharmacists. It examines the issue through the lens of agency, stakeholder, and legitimacy theories, assessing the effectiveness and impact of Blackmores' CSR disclosures. The report investigates the company's actions, particularly the promotion of supplements alongside prescribed drugs, and its implications for stakeholders. It also evaluates Blackmores' sustainability goals and commitment to ethical practices. The report concludes with recommendations for improved CSR reporting and practices at both the corporate and regulatory levels. The analysis incorporates relevant news articles and sustainability reports to provide a comprehensive understanding of the issues.

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ACC706
Assessment 2
Group Assignment

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Executive Summary
The purpose of the report is to identify corporate social responsibility issues in
Blackmores. News article linked with Blackmore corporate social responsibility issues has been
reviewed and accounting theories linked to such issues will be used to explain the issue in detail.
The report will make use of accounting theories, motive, impact of company CSR disclosure and
effectiveness to address the issues found in the newspaper article. The news article is available
on ABC News and it is linked with one of the major deal that Blackmore has made with the
pharmacists to promote the company’s product in addition to the certain prescription drugs. It is
called as negative promotion with proper doctor’s prescription. In the eyes of Australian Medical
Association (AMA) the act of Blackmores appears to putting the commercial interest ahead of
patients needs and it is very serious offense on the part of corporate social responsibility.

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Contents
Introduction.................................................................................................................................................4
Analysis of CSR (Corporate Social Responsibility) Issue in Blackmores........................................................4
Examining the effectiveness and impact of the CSR firms’ disclosure in addressing the issue with the use
of accounting theories.................................................................................................................................6
Recommendations on CSR Reporting at the Corporation and Regulatory Level.........................................8
Conclusion...................................................................................................................................................8
References...................................................................................................................................................9

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Introduction
Blackmores has been founded by Naturopath Maurice Blackmores in year 1932 and this
company has become the pharmaceutical giant in Australia due to its decades of hard work and
research & development process taken up by the company. The main motive of Blackmore is to
combine traditional naturopathic knowledge with modern era scientific knowledge to produce
the medicines and supplements to help people to achieve the good health and wellbeing for long
term. Blackmore is committed to develop the innovative natural health product and services of
superior quality that serves to the society through providing best supplement needed daily to
fulfill basic body requirements. Blackmores has reached to more than 17 countries and it has
employed more than 1000 employees in Australia, Asia and New Zealand. Blackmore has also
received the award for Australia’s most trusted Vitamin and Supplement from the Reader’s
Digest in year 2016. Toward sustainability and social responsibility, Blackmores is committed
for long term relationship with their stakeholders and also aims to promote wealth maximization
instead of profit maximization (APCO, 2016).
The news article selected is related with social issue that has taken place due to the action
of Blackmores. The news article named “Doctors hit out at pharmacists' deal with Blackmores”
written by Barbara Miller in year 2011 and this article critically highlighted the impact of
Blackmores deal with pharmacists to promote and supply goods to customer alongside with
doctors prescribed medicines (Miller, 2011). When this practice has come under notice of
doctors, they have objected it and AMA has argued that Blackmores has put the commercial
interest in front of patient needs and their health.
The accounting theories that are relevant to the news story are agency theory as company
has chosen profit maximization instead of wealth maximization, stakeholder’s theory as
company has failed to keep the commitment given to the stakeholders and legitimacy theory as
company commitment towards the corporate social responsibility has been harmed through the
deal with pharmacists to supply products without proper prescription. It has been learned from
this story that even a small action of the company can give rise to major social issue and so it is
highly important that the company should take responsibility of each action they perform and

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plan accordingly. It is also required that companies should promote wealth maximization instead
of profit maximization.
Analysis of CSR (Corporate Social Responsibility) Issue in Blackmores
Blackmores is regarded to be one of the leading and most trusted brands within Australia
for providing health supplements such as vitamin, mineral and nutritional supplements. It is
publicly listed company traded on ASX and is headquartered within Australia. It has become a
leading health company within the country by providing quality products and services that
promotes the well-being of people by having a positive impact on their health (Blackmores:
About us, 2017). Blackmores as a health company places high importance on its social
responsibility and supporting the welfare of the communities in which it operates. As such, it
places special emphasis on promoting the well-being of its communities including employees
and customers. It is strongly committed to provide a flexible and diverse work culture to protect
the varying needs and interests of its employees. It regularly reviews and complies with the ASX
Diversity Recommendations. The employees are provided with mandatory training and learning
sessions and procedures as per the WHS (World Health Safety) code in relation to the anti-
corruption policies and protecting the interests of its communities.
It also places high emphasis on protecting the interests of its consumers through
following product and service compliance for ensuring that all its products are of high quality
and safe for its customers. It aims to protect the integrity of its products and implement the use of
adequate technologies and systems for ensuring the authenticity of its diverse range of its
products, The company is strongly committed to improve the public health through the use of
natural medicine and sneering that it is able to maximize the customers welfare and protect their
safety in each and every aspect (Blackmores: Sustainability Report, 2018). As such, the
sustainability goals of the company can be illustrated as below:

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(Source: http://www.blackmoressustainability.com.au/wp-content/uploads/2018/10/Blackmores-
Sustainability-Report-18.pdf)
However, on the basis of analysis of the selected news piece the company is facing
challenges for meeting its commitment to social responsibility. It has acted against its social
responsibility policies of protecting the interests of its consumers with the use of unethical
practices by promoting its supplements along with the prescribed drugs. The company has
developed an agreement with the Pharmacy Guild of Australia for promoting its products along
with the prescribed drugs for overcoming their side-effects. The Australian Medical Association
(AMA) has regarded this practice of the company as highly unethical as it is meant for
maximizing its commercial interest and protecting the interests of the patients (Miller, 2011).
The association has regarded this practice of the company as against the professional ethics of
clinical practice as it involves providing the medicines to the patients that are not based on
prescription and as such may not be required by them. There is little evidence of the
effectiveness of the supplements in treating the side effects of the prescribed medicines and
therefore this practice of the company is only regarded as a way for up selling and maximizing
its profits. The company as such is accused of placing its own interests over the welfare of its
customers and therefore has not properly met its social responsibility towards its customers. As
such, Blackmore’s is being accused by the AMA to be involved in unprofessional, unethical and
clinically unsound practices (Collett, 2011).

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Examining the effectiveness and impact of the CSR firms’ disclosure in
addressing the issue with the use of accounting theories
As per the agency theory it can be said that business managers of Blackmore has placed
importance on attaining wealth creation rather than emphasizing on creating long-term value for
its stakeholders. Therefore, the business managers of the company by the use of the practices for
up selling its health supplements along with prescribed drugs in the pharmacies for realizing
higher profits and has ignored its sustainable growth and development thus negatively impacting
the interest of its shareholders. The shareholders as per the theory of agency placed emphasis on
creating long-term value of a company for maximizing their returns and it is the responsibility of
business managers to create long-term value for its shareholders by promoting a company’s
sustainable growth and development (Russo and Perrini, 2010). However, the use of unethical
practices by the business manager’s of the company to realize short-term gains has resulted in
negatively impacting the long-term interests of the shareholders. As such, it has acted against its
CSR practices of the company that has emphasized on creating long-term value for its
shareholders by the use of ethical code and practices. The CSR disclosures of the company can
be regarded as largely effective in preventing the occurrence of such issues within the workplace.
The CSR disclosures provided by Blackmore have effectively stated its corporate
governance policies that it has implemented for preventing the occurrence of any unethical
practices with its workplace. It has been stated within the CSR disclosure provided by the firm
that its goals is to protect the integrity of its brand by the adoption of adequate policies for
maintaining internal control and reducing the occurrence of any type of unethical behavior. The
corporate governance policies of the company has emphasized on developing strong internal
control practices, processes and behavior for defining the ways in which it conduct its business
activities in an ethical manner. It has recognized in the corporate governance policy of the
company that unethical business practices has a negative impact on its sustainable social
development and therefore the business model of the company places importance on carrying all
its operations in an ethical manner. It has also developed and implemented a comprehensive risk
management framework for overcoming the impact of any type of internal or external risks that
can negatively impact the interests of its stakeholders. The company as such seeks to actively
interact with its employees for making them aware of any type of material risks identified that

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can have significant impact on its business operations. As such, it has also developed anti-
corruption measures for protecting its brands and ensuring that all its employees carry out their
work responsibilities as per the ethical standards and policies (Blackmores: Sustainability
Report, 2018).
The stakeholder theory as a theory of management has emphasized on the need of
implementing policies related to morals and ethics for protecting the diverse needs of the
stakeholder groups. The illegal practices of the company to sell its supplementary products in
addition with the prescription drugs have lead to negatively influencing its brand image in the
society. This is because as per the stakeholder theory it has not acted in the interests of its
community members and as such its deal with Pharmacy Guild of Australia has also been
withdrawn on the basis of community outrage (Deegan and Soltys, 2007) . The company’s deal
with pharmacists to upscale the sale of its health supplements along with the prescribed drugs
has negatively impacted its legitimacy in the mind of its stakeholder groups. Its unethical
practices can have a negative impact on its social responsibility image that can lead to lack of
support from the community members for the business activities of the company (Villiers and
Van Staden, 2006).
Therefore, as per both the theories society is an important stakeholder group for
Blackmore and it s highly essential for it to legitimize its business activities in the mind of its
community members to promote its sustainable growth and development. As such, the CSR
disclosures provided by the company has provided information in relation to the programs
undertaken by it for proving knowledge regarding its supplement products to the pharmacists so
that they advise best supplement to the patients as per their needs. The Complementary Medicine
Education Global Research Program (CMed) is developed to provide knowledge in relation to
the use of vitamins, minerals, and herbal medicines provided by the company to the pharmacists.
The learning program is mainly intended to achieve beneficial interaction between the patients
and pharmacists for managing their health in a better way. Such type of disclosures provided by
the company is mainly intended to ensure that the health supplements that are recommended by
the pharmacists to the patients is according to their needs and does not negatively impact the
interest of its consumers in any manner(Blackmores: Sustainability Report, 2018). Therefore, it
can be said that this type of CSR disclosure provided by the company would help in protecting

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its legitimacy in the mind of its community members against its damaged social image by selling
its health supplements along with the prescribed drugs. The disclosures provided by the company
would ensure to the consumers that the supplements provided to them is in according to their
needs and does not have any negative impact on their health. Thus, it can be said that the motive
of the CSR disclosures provided by the company is to legitimize its operational activities so that
its corporate image is not negatively impacted by the occurrence of any CSR issues. The CSR
disclosures are intended to maintain the trust of its stakeholders and gaining their support for
continuing the business operations in a sustainable manner (Archelr, 2009)
Recommendations on CSR Reporting at the Corporation and Regulatory
Level
The Corporate Social Responsibility (CSR) disclosures can be regarded as the initiatives
undertaken by the company for examining the level of compliance of its business activities as per
the acceptable norms and morals of the society. It has been examined by the CSR disclosures of
Blackmores that it conducts its operations as per the acceptable ethical standards to ensure
improving the well-being of its different stakeholder groups such as employees, customers and
other community members. However, the occurrence of illegal and unethical practices within the
company that has intended to maximizing the wealth and neglecting the welfare of its consumers
needs taking strong actions by the company towards improving its societal image. The CSR
disclosures of the company need to be improved at both the regulatory and corporate level to re-
build its social image and thus achieving the faith and trusts of its stakeholders (Gal, 2017).
The company needs to depict itself to be more focused on ensuring the protection of its
consumers by its varying business operations. It is recommended to adopt a proactive approach
for ensuring that the sustainable growth of the company is not negatively impacted by the
occurrence of any unethical practices. It should place emphasis on developing a robust internal
control management framework that proactively identify any such illegal practices so that active
measures can be undertaken in advance for eliminating its occurrence. It should also disclose the
compliance of its medicinal products as per the Therapeutic Good Regulation which ensures that
its non-prescription drugs are of high quality and relatively safe to be consumed by the patients
and does not have any side-effects (Hattingh and Forrester, 2013). It should also be ensured that

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the health supplements manufactured by Blackmores are able to overcome the side-effects of
prescribed drugs for legitimism its actions of selling them along with prescription drugs
(Freeman, 2010).
Conclusion
It can be concluded on the basis of examining the CSR practices of Blackmores that it has
provided adequate information regarding the actions that are undertaken by the company to
maximizing the interests of its various stakeholder groups. However, on the basis of agency,
stakeholder and legitimacy theoretical framework it has been identified that its CSR disclosures
are not adequate in meeting the devise needs of its stakeholders and ensuring accountability in its
operational activities. As such, the company is recommended to improve its CSR disclosures at
both corporation and regulatory level.

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References
APCO. 2016. Case Study: Blackmores Ltd — 2016 Signatory of the Year. [Online]. Available
at: https://www.packagingcovenant.org.au/documents/item/1087 [Accessed on: 01 May 2019].
Archelr, P. 2009. Social disclosure, legitimacy theory and the role of the state. Accounting,
Auditing & Accountability Journal, 22 (8), pp. 1284-1307.
Blackmores: About us. 2017. [Online]. Available at: https://www.blackmores.com.au/about-us
[Accessed on: 7 May 2019].
Blackmores: Sustainability Report. 2018. [Online]. Available at:
http://www.blackmoressustainability.com.au/wp-content/uploads/2018/10/Blackmores-
Sustainability-Report-18.pdf [Accessed on: 7 May 2019].
Collett, M. 2011. Controversial Blackmores pharmacy deal withdrawn. [Online]. Available at:
https://www.abc.net.au/news/2011-10-06/controversial-blackmores-pharmacy-deal-withdrawn/
3317960 [Accessed on: 7 May 2019].
Deegan, C. and Soltys, S. 2007. Social accounting research: An Australian perspective'.
Accounting Forum 31 (1), pp. 73-89.
Freeman, E. 2010. Strategic Management: A Stakeholder Approach. UK: Cambridge University
Press.
Gal, G. 2017. Sustainability and Social Responsibility: Regulation and Reporting. USA:
Springer.
Hattingh, H. and Forrester, K. 2013. Australian Pharmacy Law and Practice. Australia: Elsevier
Health Sciences.
Miller, B. 2011. Doctors hit out at pharmacists' deal with Blackmores. [Online]. Available at:
https://www.abc.net.au/news/2011-09-26/ama-accuses-guild-of-putting-commerical-interests-
first/2942126 [Accessed on: 01 May 2019].

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Russo, A. and Perrini, F. 2010. Investigating stakeholder theory and social capital: CSR in large
firms and SMEs'. Journal of Business Ethics, 91 (2), pp. 207-221.
Villiers, C. and Van Staden, C. J. 2006. Can less environmental disclosure have a legitimizing
effect? Evidence from Africa. Accounting, Organizations and Society, 31 (8), pp. 763-781.