Analyzing CSR and Financial Performance: Marks and Spencer Case Study

This case study explores the relationship between Corporate Social Responsibility (CSR) and financial performance, focusing on Marks and Spencer (M&S) within the UK retail industry. It investigates the generalized effects of CSR in the retail sector, analyzes its specific impact on M&S's financial outcomes, and evaluates how CSR values influence the company's decision-making processes. The study also considers both the positive and negative consequences of CSR policies and strategies on the organization. Through secondary research, the report discusses the impact of CSR on the retail industry, reasons for retail brands to invest in CSR, and recent trends in CSR within the retail sector. It concludes with findings and recommendations for M&S to improve financial performance through CSR activities.

Corporate Social Responsibility
and it’s Effects on Financial
Performance: A case study on
Marks and Spencer

ABSTRACT
This report is based on the relationship between the Corporate Social Responsibility and
the financial performance of the retail industry within the UK. This will discuss about what are
the various effects of CSR that are generalised within the retailing industry of UK. Present report
will also include the various effects of CSR on the financial performance of the retail company
and how its affect the decision-making process of the company. Report will also evaluate the
values of CSR that have an effect on the decision-making process of MS&S and what are the
positive and negative consequence which a CRS policies and strategies have can have on the
organisation. This report will also provide proper findings from the secondary research which
will based on the proper discussion and analysis from the secondary data collected. It will
provide a proper conclusion based on the findings and will also provide a proper
recommendations for the company to improve their financial performance with the help of CSR
activities.

TABLE OF CONTENTS
CHAPTER 1- INTRODUCTION....................................................................................................1
1. 1 Background......................................................................................................................1
1.2 Company Overview .........................................................................................................2
1.3 Aim and objectives...........................................................................................................3
1.4 Research Questions..........................................................................................................3
1.5 Rationale...........................................................................................................................4
1.6 Scope of the study............................................................................................................4
CHAPTER 2- LITERATURE REVIEW.........................................................................................4
2.1 CSR and its role within the organisation..........................................................................4
2.2 Impact of CSR on the financial performance of organisation..........................................5
2.3 CSR values affecting decision-making process of company...........................................7
2.4 Benefits and negative consequences of CSR on the organisation....................................8
2.5 Challenges in implementing CSR practices and policies...............................................10
CHAPTER 3-RESEARCH METHODOLOGY............................................................................11
3.0 Overview........................................................................................................................11
3.1 Research Design.............................................................................................................11
3.2 Research Type................................................................................................................12
3.3 Data collection................................................................................................................12
3.4 Data analysis...................................................................................................................12
3.5 Ethical Considerations....................................................................................................13
3.6 Research Limitations......................................................................................................13
CHAPTER 4-DISCUSSION, ANALYSIS AND FINDINGS........................................................1
4.1 Impact of CSR on retail industry......................................................................................1
4.2 Reason for retail brands to invest in CSR........................................................................2
4.3 Impact of CSR on the financial performance...................................................................3
4.4 CSR and Financial performance negative association....................................................4
4.5 CSR values and practices affecting decision-making process in retail industry..............6
4.6 Assessing the impacts of CSR on retailing business........................................................7
4.7 Recent trends in CSR within retail industry....................................................................9

CHAPTER-5 CONCLUSION AND RECOMMENDATIONS....................................................10
5.1 Conclusion......................................................................................................................10
5.2 Recommendations..........................................................................................................13
REFERENCES..............................................................................................................................15

CHAPTER 1- INTRODUCTION
1. 1 Background
Corporate social responsibility or CSR can be referred as self regulation model which can
help an organisation to accountable for itself, public and their stakeholders. Practising a CSR by
any organisation is also called corporate citizenship and it is important for a company to be
cautious towards any kind of impact which they have on the society and environment as well
(Frynas and Yamahaki, 2016). Company's engagement in CSR means that within the normal
course of business, company is operating in such a way that it is playing an important role in
enhancing environment and society in opposite contributing negatively towards them. In order to
be socially responsible first it is important to be responsible towards itself and towards its
shareholders. Now companies are adopting CSR programs in order to grow their business by
returning to the society and environment that they have taken from.
Corporate social responsibility helps in the integration of various social beneficial
programs as well as practices within the organisation's business culture and model. There are
various strategies which can be incorporated by the company in order to achieve the long term
profits for both types of businesses such as offline and online businesses. CSR also acts as a tool
of making the business more efficient as well as more attractive for the customer which plays a
vital role in increasing the financial performance of the organisation. Both brick-and-motor and
e-commerce business has been standing to gain benefit from the implementation of various
strategies of CSR and there are number of activities which fall under the corporate social
responsibility umbrella. With the help of CSR practices companies can achieve higher financial
performance in various ways like it can prevent financial ramifications by preventing fine from
the national and international law. It also puts the business less on the radar of regulatory screens
as well as less legal expenses. Over the period of time importance of social responsibility have
recognised by the different organisations of the world and now they got indulged with the
activities of CSR. It is equally important for the companies across the world to recognise how
socially responsible efforts are important for their stakeholders, employees, customers, etc and
they can focus on these efforts accordingly.
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1.2 Company Overview
Marks and Spencer is a retailing company of UK which have never step back from taking
responsibilities to its employees, customers, shareholder, suppliers, partners as well as local
communities seriously. Company has been operating its business in a responsible way which
underpins their values such high quality products and services, trust and innovation. M&S is a
multinational brand of UK which has been taking care of each and every important issues of the
society whether it be climatic change charity, waste management, ethical trading, sustainable raw
materials or health of its customers (Jamali, Karam and Blowfield, 2017). Operating a
sustainable business have come under the spotlight as there has been rise in awareness of
economic aspects and environmental aspects towards the resource management of the
organisation. CSR has changed the structure of doing business and now companies have to
develop the strategies with respect to CSR in order to gain a competitive edge over its rivals.
M&S is a company which has been always strong in their values and with a paternalistic
approach of operating their business (Glavas, 2016). M&S have launched various initiatives like
introducing ISO 26000 to their biggest suppliers and it has made their suppliers more
environmentally and socially responsible. So, M&S is a company which has always been
responsible towards society and towards the environment. Company is still facing challenges in
keeping their social responsible practices on track and it has also recognised the need for keeping
their business working systematic way in order to keep their business more sustainable. Also,
M&S have made 1000 commitments related to various social and environmental issues for
making their business more sustainable by focusing on selling of products which may also
increase the financial performance of the organisation.
Various research has shown that majority of companies are turning to CSR in order to
improve their financial performance of their business. It has also been analysed by the researches
that by practising CSR practices can have a strong impact on the financial performance of the
organisation (Rao and Tilt, 2016). It is not only the financial performance that increase but can
also result in increase of reputation, demand of products, competitive advantage and can also
help in reducing the legal issues of the company. This can also result in increase the sales
performance of the company and also increases the investment if shareholder. So, it can be said
that by practising CSR, it can have a strong impact the stock performance as well as financial
performance of the company. It is a concept which has always gained public attention and has
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become a new means of becoming a global economy (Wickert, Scherer and Spence, 2016). As
the interest of social responsibility is growing across the world, this has put a pressure on
various organisations of the world to adopt the practices of corporate social responsibility in
order to survive. So, this has put forward various challenges to the firm and result in change in
the structure of the company as per CSR strategies and policies (Corporate Social Responsibility,
2019). If the pressure of social responsibility is ignored from the stakeholders and various
motives which are behind engagement and it has got various benefits for the organisation's
financial performance in major factor among them. Also, research have entailed that social
activities can provide the financial benefits but is also entailed to various risks such as rise in
costs, risk of failure of CSR strategies, etc which may lead to the failure of business or may
damage the company's performance (Flammer, 2015). So, it is vital for the organisation to be
cautious with their social responsibility strategies and policies as well.
1.3 Aim and objectives
Aim: To identify the relationship between Corporate Social Responsibility (CSR) on the
financial performance in the UK retail industry- A study on Marks and Spencer.
Objectives:
 To identify the effects if CSR that are generalised amongst companies in the retail
industry.
 To analyse the affect of CSR on the financial performance of M&S.
 To evaluate the values that effect the decision-making process of M&S.
 To analyse the positive and negative consequences of CSR on the organisation.
1.4 Research Questions
 What are the effects of CSR general to the industry or do they differ to each
company?
 Does Corporate socially responsible affect the financial performance of M&S?
 What are the values that affect the decision-making process for the selected
company?
 Are there any negatives and positives to CSR?
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1.5 Rationale
One of major reasons of conducting research is that the concept of CSR is becoming
more popular across the world and it can have a strong impact on the financial performance of
the organisation. Also, this research has been conduct to know the impact of CSR on the retailing
industry and why it has become important for the retailing companies. Another reason for this
research is that analyse the various challenges that are faced by retailer by implementing or
adopting CSR strategies in organisation. Also, researcher wants to know how corporate social
responsibility can affect the decision-making process of the organisation and what are the factors
that have an impact on the decision-making process related to CSR.
1.6 Scope of the study
Scope of this research is broad and can be used in various fields of business in order to
gain information related to CSR and its impact on the financial performance of the company.
This research can be used by investors who want to make investment in corporate social
responsibility within the retailing industry. This research can be used as a secondary data in order
to gather information in order to take various decisions related to CSR and investment in it. This
research can be used in various academic fields as it can provide the insights to them about the
corporate social responsibility it benefits and consequences.
CHAPTER 2- LITERATURE REVIEW
2.1 CSR and its role within the organisation
As per the views of Story and Neves, (2015) CSR is a strategy through which companies
or enterprises conduct their business in the way of being ethical, social friendly as well as
beneficial to society and environment as well. The issue of CSR is being debated from the 1950
and it has been analysed that it has changed the practices of conducting business. By taking up
the concept and strategies of social responsibility can have a strong impact on the investors,
customer, employees, suppliers and shareholders of the organisation. It involves the range of
activities such as working in collaboration with national and international communities,
development of relationship with stakeholders and their families and also involves the various
actions of environmental sustainability and conservation. Corporate social responsibility has
become one of the most prominent part in the 21st century of business world. Expectations of
people rose in recent years which has changed the ideology regarding the environmental and
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social standards. It also encompasses that organisations can not only have to deal with profits but
also how companies can make profits and in this process CSR plays an important role. This
factor can not be ignored by any company in order to improve its financial performance.
As illustrated by Hahn and et.al., (2018) CSR plays an important role within the
organisation in present business world. Corporate social responsibility can play an important role
in boosting the financial performance of the company and can help in building a brand image.
Company being socially responsible can enhance the confidence of shareholders and various
stakeholders. Also, by being active with the society, company's employees get engaged with the
potential customers which can act as a marketing tool for a company by adopting the concept of
CSR. Also, M&S's corporate social responsibility policy can have a strong impact on the busying
behaviour or buying decisions of potential customers. For example some customers are willing to
pay extra for a product if they identify that profit is going for the social cause. Company by
following the social responsibility practices help in retaining the talented employees of the
organisation as employees feel that they are the part of something big and noble. Employees
being a part of something good can boost up their morale which can improve the profitability of
the organisation to higher levels. Also, CSR practices can help M&S to with stand competition
and can achieve the competitive advantage over others in the retailing industry. So, social
responsibility plays an important role in the success of the organisation and can provide various
benefits to the company in present and in future as well.
2.2 Impact of CSR on the financial performance of organisation
As elucidated by Jain, Vyas and Chalasani, (2016) corporate social responsibility can
have a string impact on the then financial performance of company as the popularity of the CSR
has increase in the 21st century and it has given the retail companies like M&S an opportunity to
improve their financial performance. M&S can provide healthy environment to their workforce
and in return they will be successful in attracting new skilled employees and also help in
enhancing commitment of existing employees of the company and this can result in high
performance of the company. Positive involvement of CSR has increased the probability of the
organisation to advance the business and the society as well and interest of corporate social
responsibility is increasing due to potential of persuading performance of the company. Return to
Assets (ROA) and Return on Equity (ROE) can be used to measure the financial performance of
the organisation which can be influenced by activities of CSR. Operations and strategies of M&S
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within the markets as well as non-market can have an impact on their performance on the
business.
As per the views of Rhou, Singal and Koh, (2016) there are various empirical studies
which contain two type of relationship between the financial performance and CSR activities.
Also, corporate social responsibility have given important correlation in order to measure the
financial performance measures of the company. Two measures which can help in evaluating the
financial performance as well as CSR in which first is accounting measure and second one is
market measure which can be used by M&S, when it is engaged in the corporate social
responsible activities in the short-run. CSR activities of the company enhances the reputation of
the company to higher levels by creating a positive image and positive perception within the
minds of customers, employees, suppliers, etc. Also, stakeholders of M&S will think and pursue
that if company is ready to fulfil needs of society and environment as well, then how it is
possible that they will step back by not supporting the company. This will also enhance trust and
brand loyalty which is really important for the financial performance of the company and for the
profitability and success of the company. Thus, it can be concluded that CSR have a positive
impact on the financial performance of the company in the long-run.
As per the views of Al-Samman and Al-Nashmi, (2016) if M&S will not pay any
attention towards the activities of CSR it will not benefit the financial performance of the
company as compared to those of its rival within the industry. It can also be analysed on the
other hand that company's profitability can get reduced which can be due to the high costs
incurred due to performing the activities of CSR. It can also be analysed on the other hand that
company can play vital role for the purpose of welfare of the society by avoiding the cost which
may arise from the claims of safety. If company will sternly ignore social and environmental
responsibility it can create bad image on the customer and various other stakeholders of the
company which may result in decrease in the sales and financial performance of the company.
Various social responsible activities like activities of social welfare, donations, etc can prove
costly to the company but such activities has the potential to bring higher returns to the company
in a short period of time. By making a contributions in CSR activities M&S can set positive
relationship between the financial performance and CSR. Company which can play a vital role
for the society, public health, country's atmosphere, etc can improve the financial performance of
the company and can get more benefits than the costs which company bears in the CSR
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activities. So, it can be concluded that M&S can have very strong financial performance and also
it will increase ability of the company to make more investments in CSR and it will have a long-
term strategic impact on the financial performance. Strategic impact may include the offering
service to the society and the environment which in return will attract large numbers of investors
as well as skilled employees of the organisation which will surely increase the financial
performance of the company.
2.3 CSR values affecting decision-making process of company
As illustrated by Wang and et.al, (2015) company's social concerns and decision-making
process is never ending debate and it has stuck between the profitability and social
responsibility. CSR activities of M&S diverts the company from the main goal which is the
profit maximisation which can be a useless and harmful decision of the company. On the other
hand second opposite streamed context is that company's decision to incorporate CSR values can
result in both wealth maximisation and profit maximisation as it can put positive impact on the
company's stakeholders like government and non-government organisations, customers, media,
employees, etc. Company's decision to become socially responsible is not free but it can cost
money, time as well as resources to the company and also it is equally important for the
company's decision-making process can benefit or will damage the society and the environment.
If M&S initiates corporate social responsibility it can give its employees an opportunity by
involving them in to the decision-making process of the company.
As per the views of Diddi and Niehm, (2017) decision-making process may include
choosing a cause employees care about and creating an internal team in order to spearhead the
efforts of the organisation. Contribution of the employee towards they are passionate about can
result in the increase in their engagement and success as well. If company makes a decision
related to CSR values within the closed doors this will tie the strings of the company and people
in it. So, corporate social responsibility can have a strong impact on the decision-making of the
organisation and type of decision taken can result in the success and failure of the organisation.
Company's decision of becoming socially responsible can be simple but there are various things
which can effect the process. It is analysed that M&S should totally avoid participations in the
charitable functions which is totally irrelevant to their core business or to their ethical standards.
Instead of spending money blindly in irrelevant donation and the CSR activities, company should
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try find non-profit in which company believes in or project a community that a company wants
to serve in.
As opined by Șerban, (2015) CSR values help in choosing the activities and the
operations which are to be performed by the organisation without harming the society in large.
Also, in most of the cases some organisation change their goals and objectives with respect to
CSR activities which values the company, if not it may add these values within the objectives of
the company. In order to sustainability approach in larger, it can result change in the business
model of the company. M&S is huge company which has got huge experience in the CSR, so
company's decision has changed to build on the principle of rationality and serving the various
purposes of community. When CSR values are considered by the organisation, it can result in the
change in the business strategy of the organisation and even has to change the policies of the
organisation which are irrelevant to CSR activities. Social responsibility values does not only
affect the decision-making process of company but also effects the decision-making process of
consumers as well. M&S being a retailing company, so its social responsibilities decision can
influence the customers in large and can impact their decision-making process. So, based on this
CSR values can affect the decision-making process of company in relation to its products and
services which are offered by M&S, it organisational structure, its goals and objectives and
vision, its performance, corporate strategies, etc. So, it can be concluded that CSR values can
have a strong impact on the decision-making process of the organisation to higher extent in
current scenario.
2.4 Benefits and negative consequences of CSR on the organisation
As illustrated by Donia and Sirsly, (2016) by adopting the practices of CSR, it can bring a
huge benefit to the organisation on a large scale. One of the major benefits that corporate social
responsibility can result in is that its practices can result in building a reputation of the business
as company will be termed as responsible business and can also lead to the competitive
advantage to the company. Once a company is indulged in the CSR activities it is able to attract
various suppliers, customer, investors and others which can be in favour of the company that can
result in increase in the financial performance of the company. When an organisation is involved
in the CSR activities, some customers prefer the company over others and also insists other to
buy products and services from the same company. This can result in the increasing the brand
loyalty of the customers to M&S can result in increasing the financial performance of the
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