Lidl UK: How Corporate Social Responsibility Influences Customers?

This case study investigates the influence of Corporate Social Responsibility (CSR) on customer behavior, using Lidl UK as a case study. It explores the evolution and theories behind CSR, particularly Carroll's CSR pyramid, and examines how CSR policies affect consumer awareness, willingness to pay more for socially responsible products, and overall customer loyalty. The research questions address consumer awareness of CSR, its influence on consumer choices, and the premium consumers are willing to pay for products from socially responsible companies. The study highlights the increasing importance of CSR in business and its potential impact on a company's market share, particularly within the competitive UK grocery sector. It uses Carroll’s framework and concentrates on CSR activities that go beyond the company's primary duties. The study ultimately aims to understand how Lidl UK's CSR efforts affect customer perceptions and contribute to increased satisfaction and loyalty.

How Corporate social responsibility influence customer`s behaviour?
A study case of Lidl UK
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Abstract
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Contents
Abstract.....................................................................................................................................2
Chapter 1 - Introduction.........................................................................................................4
Research Questions...............................................................................................................4
Rationale for research............................................................................................................5
Background of research.........................................................................................................5
Chapter 2 – Literature Review...............................................................................................7
Awareness about the concept of corporate social responsibility.........................................13
Influence of the CSR policy of an organisation on Consumers..........................................14
Are consumers willing to pay more for a product if it`s sold by a socially responsible
company..............................................................................................................................15
CSR in Lidl..........................................................................................................................16
Chapter 3 – Research Methodology.....................................................................................19
Chapter 4 – Data Analysis.....................................................................................................21
Chapter 5 – Conclusions and Recommendations................................................................22
REFERENCES.......................................................................................................................23
Appendix.................................................................................................................................24
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Chapter 1 - Introduction
Corporate social responsibility (CSR) once required explanation, but is now included in
almost every mission statement and has become increasingly important in recent years. It is true,
to a considerable extent, that consumer knowledge and government regulations have reduced the
harm caused by the business world to the society. However, it has been seen that when a conflict
arises between profit and doing the responsible thing, profit prevails. In their 2019 Authenticity
Gap Report, Fleishman Hillard Fishburn have highlighted that 59% of consumers said they
expect companies to make a stand on climate and environmental issues. Thus, the results of a
survey conducted by Brother UK and Telegraph Spark in 2019 showed that only 16% of the
business had corporate social responsibility in their top 3 focus for the near future. So, how
exactly CSR influences customers and how far are companies willing to go to gain more market
share based on CSR application into their organisation?
This study will look at the notion of CSR in terms of many patterns, such as its definition
and evolution, advantages and disadvantages, relationship to financial success, and how it
influences the company's business environment. As a result, this study will examine various
perspectives on CSR in order to identify its impacts and to highlight how it influence customers,
as well as to assess the impact of social activities on consumer attitudes.
As a case study LIDL UK was chosen as it had recently been named the UK`s cheapest
supermarket and it will be interesting to see if CSR weights more in customer influence or is
simply the price of their products that help them sustain a profitable business in the United
Kingdom.
This research aims to reflect how corporate social responsibility influences customers, in
general, but more precisely how are Lidl customers influenced by the organisation`s CSR policy.
The objectives are to understand how one of the biggest supermarket of United Kingdom is
working to achieve the corporate social responsibility which influences the individuals to buy
from them and to show that incorporating CSR ideals into company strategy boosts consumer
perceived value, resulting in increased satisfaction and loyalty.
Research Questions
Before starting the research, a few questions were formulated:
1. Are consumers aware of the concept of “corporate social responsibility”?
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2. Are consumer influences by the CSR policy of an organisation? If yes, to what extent?
3. Are consumers willing to pay more for a product if it`s sold by a socially responsible
company?
Rationale for research
I have chosen this topic because even though there have been various researches in
regards to the impact CSR have on customer behaviour, none of them were focused on the UK
grocery sector- and LIDL in special. Competition in the grocery sector is at its highest levels
ever and supermarkets market share percentage in UK is keep changing among the most well
known chains. What is determining this change? Is CSR a factor that influences customers so
much that they manage to change the ranking of the supermarkets in term of their market share?
Various studies have shown that a favourable link exists between a company's CSR
efforts and consumers' opinions about the firm and its products/services (Brown & Dacin, 1997;
Creyer Ross, 1997; Ellen, Webb, & Mohr, 2000). The methodology utilised in this study is based
on Carroll`s framework and it focuses mostly on CSR activities that go beyond a company's
primary duties, such as charitable and ethical actions.
Background of research
Nowadays, customers are more concerned than ever before about environmental
concerns. Over the last 20 years, there has been a steady increase in public awareness (Ottman,
2011). From the perspective of individuals and businesses, there is a great deal of interest in
green concerns and how to contribute to a more sustainable world. Friedman's economic premise
that "the [sole] social duty of a corporation is to enhance its profits" (Friedmann, 1970 in
Backhaus-Maul, Biedermann, Nährlich, and Polterauer, 2008, p. 485) can no longer be applied to
firms' functions.
Stakeholders, particularly customers, want businesses to be more than profit-generating
machines that deliver things at a reasonable price, but also to be decent corporate citizens.
Consumers are becoming more aware of the importance of corporate social responsibility (CSR)
and environmental concerns in company (Rommelspacher, 2012; Maignan and Ferrell, 2004;
Sen and Bhattacharya, 2001). On one hand, research show that customers have a more
favourable perception of a firm that acts responsibly and are inclined to reward CSR efforts
while punishing unethical behaviour (Creyer and Ross, 1997; Mohr, Webb, and Harris, 2001).
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Furthermore, studies suggest that when customers are exposed to CSR activities, their
customer loyalty, purchasing intentions, views about a firm, and other consumer behaviour
characteristics increase (Pirsch, Gupta and Grau, 2007). In contrast, according to a poll
conducted by Carrigan and Attalla (2001), the majority of customers exhibit a desire to favour
morally defendable items, but only a small percentage actually purchase them. The supermarket
business is the one that has gotten the most attention when it comes to problems of corporate
social responsibility (Hughes, 1995).
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Chapter 2 – Literature Review
CSR Evolution
The concept of Corporate Social Responsibility (CSR) has been around since 1917, when
Henry Ford declared that in business we should do as much as possible for everyone involved,
provide jobs, protect environment and make money at the same time (Lee,2008) but it was not
widely applicable or mentioned
One of the first mentions about the concept happened in 1953 when Bowen published
"Social Responsibilities of the Businessman" where he defined CSR as the obligations that
require company leaders to make judgments and carry out actions that are desired and
appreciated by society. (Bowen, 1953). Bowen is known as the "Father of CSR" for his early and
seminal work which is regarded as noteworthy work of the period.
There was a huge increase in attempts to make greater sense of what CSR mean after the
1960s, and Davis' work is regarded the most famous work from this era.
In 1966, Davis and Blomstrom published "Business and its Environment." They defined
CSR as a person's responsibility to consider the consequences of his decisions and actions on the
entire social system. On the other hand, Johnson saw corporate social responsibility as a tool to
maximize long term profits (Johnson, 1971).
Fitch (1976) defined CSR in terms of resolving social issues. He underlined that
"corporate social responsibility" is a genuine endeavour to tackle societal issues that are fully or
partially created by the company. This was a significant addition to the idea of CSR, with the
goal of realising the accountabilities of every organisation and corporation towards people and
society.
Carroll developed his four-part CSR Model, commonly known as the CSR Pyramid, in
1980. In the history of CSR, Carroll's model is the most well-known. This model is frequently
referred to for the purposes of implementing CSR practises or beginning CSR activities. CSR
involves the operation of a business in such a way that it is economically viable, law compliant,
ethical, and socially helpful (Carroll, 1991). It means that a company should, first and foremost,
strive to earn a profit, secondly, follow the law, thirdly, be highly ethical, and last, be a decent
corporate citizen.
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Researchers and intellectuals throughout the twentieth century added more appealing
elements to the CSR idea, such as stakeholders and the environment. CSR is described by the
European Commission as a concept in which businesses incorporate social and environmental
issues into their business operations as well as their interactions with stakeholders. In 2002, Lea
discussed how businesses engage with their workers, suppliers, consumers, and the communities
in which they operate, as well as efforts to safeguard the environment.
In 2009, Fifka provided a more business-oriented definition of CSR. According to him
corporate social responsibility is the economic and legal responsibility as well as voluntary
commitments of corporations to engage in the social development of the communities it
serves, while remaining within the bounds of their "available resources and underlying business
strategies.”
As we can see, the concept of corporate social responsibility (CSR) has undergone a
transformation since its first mention in the speciality literature. The concept of CSR has
evolved throughout time and has been defined in numerous way- as it can be defined as a
business strategy by a businessperson, as 'greenwash' by an NGO activist, or as voluntary
regulation by a government official. (Sheehy,2015), but all definitions lead to the same goal: to
be socially responsible.
CSR Theories
Carroll`s pyramid of CSR
Carroll's CSR pyramid is arguably the most widely used framework for understanding the many
aspects of CSR. It outlines a business's four responsibilities: economic, legal, ethical, and
philanthropic. Carroll used pyramid proportions to represent the importance of each
responsibility. The goal of this model is to systematise the key elements that must be grasped in
order to fully comprehend the CSR idea. It can help managers comprehend that CSR is a
component of, not separate from, economic performance.
a) The economic responsibility of the company
It is a corporate organization's responsibility to make money. Because it is critical for a
company's existence, Carroll put economic responsibility at the bottom of the CSR Pyramid.
Assets are required for any business or organisation to flourish and maintain, even if it is a non-
profit or a charitable organisation. The first stage in adopting CSR, according to Carroll, is to
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enrol in company operations and make pledges. Carroll went on to say that profits are required to
compensates shareholders and owners. Furthermore, profits must be re-invested to keep the firm
growing. A company's economic responsibility is reflected by investments, marketing tactics,
company operations, and long-term financial plans with various stakeholders.
b) Legal responsibility.
Businesses must adhere to all legislation and regulations. Legal Responsibility is the second
level of the CSR Pyramid. A responsible corporation follows the law because it thinks that
ethical business practises benefit the economy and society as a whole. A responsible company is
one that follows the rules of a fair commercial game. It is irrational to consider a business
participating in CSR principles if it engages in tax fraud, money laundering, or even
manufactures a harmful product.
c) Ethical responsibility.
Corporations must act as responsible citizens in their communities. Such accountability
permits companies to make decisions that are beneficial to society even if the law does not
mandate it. The third level of the pyramid encompasses a corporation's fair behaviours that are
desired by society. Civil societies and organisations play a critical role in defining the ethical
standards that corporations must implement until these controls are codified into law.
d) Philanthropic responsibility
It's a completely voluntary activity motivated by the desire of the company to participate in
social activities that aren't specified or required by law. So philanthropic responsibility is entirely
charitable giving; it's an activity or initiative undertaken by a company and only focused on
meeting community expectations. Corporations participate in different types of philanthropy,
such as supporting sporting events such as an annual marathon or volunteering workers in
contribution drives, among other things, to fulfil their charitable responsibilities. The purpose of
philanthropic efforts is to promote the company's good citizenship image and improve its
reputation.
Carroll Pyramid's core concept is to incorporate CSR programmes within the order process.
Companies could practise social responsibility by first attaining economic goals and then
preserving sustainability and predictability. Only then they will be able to go to the next level,
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which is the commitment to respect regionally and globally recognised laws and duties. After
this they can go to the third level, which is a commitment to ethical norms and finally,
corporations get to contribute to the philanthropic duties imposed by society and the environment
at the highest level of the pyramid.
Fig.1 Carroll`s Pyramid
The Triple Bottom Line Theory
John Elkington introduced the Triple Bottom Line concept (TBL) in his book "Cannibals
with Forks: The Triple Bottom Line of 21st Century Business" . TBL is a CSR model that
combines three performance indicators: economic, social, and environmental. According to John
Elkington, the three dimensions of TBL must provide long-term effects. The TBL concept's
fundamental goal is sustainability. TBL must be used by businesses in order to generate
consistent profits and long-term social and environmental initiatives. The TBL sustainability
framework has been used by many companies and non-profit organisations to carry out CSR
projects.
Fig.2 The triple Bottom Line
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The Stakeholder Theory
Stakeholders are defined by Freeman and Reed as "any identifiable individuals or groups
who may impact or is affected by the fulfilment of an organization's objectives." According to
Freeman (1984), a company has stakeholders, or organisations and persons who profit from the
corporation's actions. As a result, stakeholder theory suggests that a corporation's goals can only
be met by safeguarding and balancing the interests of many stakeholders. To put it another way,
Milton Friedman and his supporters believe that a company's sole obligation is to its
shareholders. Companies are not obligated to engage in any social activity as this should be
government issues and lately NGO`s as well.
Jansson (2005) said that stakeholder theory is a model that stresses the interdependence of a
company's different stakeholders, such as shareholders, clients, workers, and suppliers, as
represented in the diagram below.
Fig.3: Stakeholder theory of CSR (Jansson, 2005)
As can be seen above, The Carroll Pyramid Theory and The Triple Bottom Line Theory
are both concerned with more than just the economic factor of the organisations. The
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Stakeholder Theory, on the other hand, places a premium on the economic duty, or stakeholders'
desire to maximise business earnings
ISO 26000
The ISO 26000 standards, published by the International Organization for
Standardization in 2010, lay out the concepts and rules for the notion of social responsibility.
These guidelines also provide information and recommendations for how different types of
companies may begin operating in a socially responsible manner. As a result, firms having this
accreditation are required to operate ethically, truthfully, and promote society's welfare.
ISO 26000 is linked with the European Union's definition of CSR from 2001, which is
why it is regarded a critical component of many businesses' CSR strategies.
ISO 26000, unlike several other well-known ISO standards, does not provide certification
and instead serves as a framework for contemplation and action. This implies that ISO 26000
gives direction to companies, teaching them how to define and behave in socially responsible
ways, but it does not specify particular goals to be reached.
According to Madrid (2012), ISO 26000 covers: Organizational governance, human
rights, labour standards, the environment, fair operating procedures, consumer concerns, and
community engagement and development.
Implementing ISO 26000 may lead to greater production and efficiency for an
organisation, as well as improved product safety and quality while reducing waste. These
advantages may result in cost savings for the company and, in some cases, for the customer. At
the same time, the standard's application may result in the loss of some of the organization's
creative features and can also require workers to modify the way the employees work, which can
lead to dissatisfaction and demotivation among staff, thus lowering productivity (Pedraza, 2014).
CSR is generally alluded as an “umbrella term under which sustainability is one aspect”
(Knowles, 2014). Others believe that the two concepts might appear interchangeable (Salt,
2012), and Herrmann (2004) agrees, adding that a well-implemented and rigorously enforced
CSR strategy is critical to long-term sustainability.
CSR and The UK grocery sector
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