ANALYSIS OF CSR PRINCIPLES AND BUSINESS ETHICS: LEGO GROUP
Analysis of CSR Principles and Business Ethics: LEGO Group
Introduction
Background of the Organization
LEGO Group is one of the most well-known and successful companies in the market of children’s toys. It was founded in 1932 by Ole Kirk Kristiansen who based his business on the iconic LEGO brick. The company’s revenues are constantly boosting; since 2003 to 2014 the profits increased from €0.9 to €3.84 billion (LEGO Group, 2015). The growth of revenue in 2014 was 14% that was higher than in the previous year (LEGO Group, 2015). The company employs 12,582 workers (LEGO Group, 2015). Nowadays, the organization has the main offices in a lot of countries across the globe, including the U.S., UK, Singapore, and China with the headquarters in Denmark. LEGO Group is also known for its innovative strategies in business, remarkable corporate governance, and excellent execution of ethical standards. For instance, it was the first company that signed the United Nations Global Compact, which was dictated by the organization’s support of human rights, labor ethics, anti-corruption policies, and environmental awareness (LEGO Group, 2015). The popularity of the company continues to grow among consumers due to the innovative and engaging product, high-quality customer service, effective corporate governance, and the company’s commitment to the ideas of social responsibility.
For very long time, corporate social responsibility has been the topic of heated discussion in the business environment. The main reason for such attention is the changed experienced in the last several years. Ongoing globalization and technological advancement managed to widen the range of opportunities for the businesses as well as to alter the rules of the corporate world. It became vital for the companies to be flexible, adaptable, and sustainable, executing excellent internal governance and increasing environmental awareness. The organizations were forced to embrace a new paradigm of business making that includes their responsibility before society. With the changes, it became clear that the old framework will not work in the conditions of globalized economy and customization of products. Business, in its turn, gained a great variety of new opportunities and possibilities to grow, expand, and to enter new markets more effectively. Harsh competition in almost all areas increased the requirements for business ventures even more.
The main objective of this research is to evaluate the relevance of the principles of corporate social responsibility and their fulfillment by the major corporation. As business ethics became particularly important in the modern business environment, its main principles and implications have to be assessed as well. In this case, LEGO Group was selected as the target for the investigation due to its recognition, popularity, and awareness of the company about the principles of corporate social responsibility (CSR) and business ethics. It is important to reveal if the company’s success is linked to its high standards in CSR. Also, the research aims to determine if LEGO Group follows ethical principles in business and how it affects the organizational goals.
Corporate Social Responsibility
Analysis of Organization Practices in Promoting CSR
In the center of CSR principles is a self-regulated form of corporate governance that monitors itself for the compliance with the legislation, ethical principles, and international standards (Bowie, 2012). Overall, CSR is the process that requires commitment from the company, fair and lawful treatment of its stakeholders, high norms in business ethics, and employment of sustainable practices.
Evaluation of the LEGO Group of their fulfillment of CSR principles produced positive results. First of all, in order to promote CSR values, the company uses innovations for improving children’s experience, encouraging their creativity, and creating a safe environment for their youngest clients. Specifically, LEGO Group maintains high standards in product safety and responsibility for kids’ health. The organization launched LEGO Education and LEGO Foundation strategies that promote children’s learning and creativity. One of the examples of their activity was the design of prosthetics for children that can be customized with LEGO original pieces (Rhodes, 2015). The company has invented the robotic construction kit for kids to promote their interest in science and engineering (Resnick, 2015). In this way, the company demonstrates its particular devotion to its clients as well as to the future of the society.
Also, LEGO Group fosters appropriate treatment of its employees by implementing motivation programs, high-quality management, safe environment, and community engagement (LEGO Group, 2014). The organization applies culturally-wise corporate governance strategy that let LEGO Group to enter successfully the foreign markets and motivate workers in all regions where the venture operates. For example, the company introduced a new framework for community engagement by launching LEGO volunteers program that involved people into the charity work in the children’s hospitals, creation of the camps for disadvantaged kids, and development of the playful learning intervention for the children from low-income households (LEGO Group, 2014).
Audit of the company’s financial and legal activities gave positive results and revealed that LEGO Group operates on the basis of high ethical business standards and demonstrates transparency in its actions (LEGO Group, 2014). One of the examples of the promotion of CSR principles was the refusal to cooperate with the Royal Dutch Shell, as its commitment to the environmental sustainability (Vaughan, 2014). However, it has to be noted that such actions were taken only after the campaign launched by Greenpeace that encouraged LEGO Group to save the Arctic (Vaughan, 2014). Overall, the company began to improve its attention concerning CSR principles regarding the environmental sustainability. In 2013, the company joined WWF Climate Savers Program in order to foster the performance in its impact on the environment as well as to force the firm’s suppliers to implement the same principles (WWF Global, 2013). At this point, it is possible to see that LEGO Group tries to execute high standards in the promotion of the CSR principles.
Rewards of CSR Promotion
Fostering the CSR principles yielded significant results for the organization. According to the findings made by LEGO Group (2014), the employees of the company reported the increase in their motivation and satisfaction that boosted their productivity and creativity. It was noticed that the workers are committed to the organizational goals and due to the decrease in injury frequency the LEGO Group employees claimed they are thrilled to work for the company (LEGO Group, 2014). By training its managers in business ethics, the organization made sure that their actions remained legally and ethically transparent.
Application of higher standards in Supplier Code of Conduct improved the relationship between the company and its partners making the collaboration more effective for all parties. For example, it was claimed that all non-conformities between the suppliers and the company were resolved in a timely and effective manner (LEGO Group, 2014). By signing the agreements with the UN and WWF, LEGO Group increased its reputation among the environmentally conscious clients; and several programs for the children’s learning improved the attitude of the customers to the company. However, the major reward for the promotion of the CSR principles became the increased revenues of the company as well as its enlarged market share (Ringen, 2015). In the modern business environment, it is impossible to succeed without a sound strategy based on the CSR principles, as the severe competition in the market and technological advancement made the businesses to pay attention to their stakeholders rather than focusing on the increase of revenues.
Business Ethics
Discussion of Business Ethics Theories
For a long time, it was considered that the main aim and of any business venture is a generation of profits. The businesspeople believed that the central aim of any company was the satisfaction of its shareholders, where clients, workers, and suppliers were perceived as the means of enrichment. The similar conception was developed by Martin Friedman, who insisted that corporate structure does not have any moral obligations and social responsibilities to the stakeholders (Danielson, Heck, & Shaffer, 2008). According to his point of view, the private organizations exist only to maximize financial gains (Tangpong & Pesek, 2007). On the one hand, the businesses have to increase profits and expand in order to survive and succeed. Every company strives for enlargement of financial assets and, if possible, enhancement of its market share. Especially it is relevant for the big multinationals that operate in several countries and tend to grow with the help of mergers and acquisitions.
At the same time, such companies have a huge impact on the daily life of citizens, environment, culture, and society in general. For example, organizations operating in the field of oil production affect the environment negatively; ventures specializing in financial services may trigger the economic downturn as it was in the case with the events of 2008. Finally, the society realized that the large, as well as the small companies, have to comply with the rules of high ethical standards in order to preserve the trust of the consumers and their employees (Mitchell & Cohen, 2006). The approach to business changed when the system of legislation was improved and the approach to labor altered dramatically.
The paradigm shifted when in 1984 Edward Freeman managed to change the main perspective shifting the attention from shareholders to stakeholders (Zink, 2005). His theory made the corporate world alter the view towards business and put the main focus on parties it has a significant impact, like clients, employees, suppliers, and society in general (Freeman, Velamuri & Moriarty, 2006). In the result, Freeman implied that the main aim of the company is to meet the requirements of all stakeholders involved in the business (Freeman, Velamuri & Moriarty, 2006). Stakeholder theory created a new approach to the inner governance of the organizations encapsulated in the principles of corporate social responsibility (CSR). This theory became an absolute opposite of the shareholder framework, where the business was concentrated only on the financial profits.
Analysis of the Organization’s Practices in Business Ethics
In order to follow CSR principles and execute exemplary business ethics, LEGO Group tries to commit to all of its stakeholders including employees, clients, suppliers, and society. The company emphasizes the need to motivate their workers as well as to satisfy their needs in order to operate effectively. According to the statement of the organization, top management is concerned with the level of satisfaction of their staff and the communication practices employed in the company (LEGO Group, 2014). It was admitted that as the company operates in different sites, the motivation scores and satisfaction of the employees vary from country to country. Thus, the organization managed to implement a monitoring practice that surveys these indicators among the employees across the globe, and the results obtained during this research would formulate the future resolutions of the main issues (LEGO Group, 2014). For instance, it was detected that the staff members working in Denmark retail stores do not demonstrate a high level of motivation, which made the local HR team of LEGO Group engages the management of the shops in the training interventions (LEGO Group, 2014). Additionally, it is mandatory for the managers of all levels to undergo training interventions in business ethics every six months (LEGO Group, 2014).
LEGO Group believes that ethical standards apply in their work with the clients. First of all, the organization releases their ethical conduct report annually to ensure their customers that the business is maintained on the basis of transparency and honesty. Secondly, the company ensures that the product is made of safe materials and complied with the clients’ expectations. LEGO Group uses the services of independent external auditors to ensure that the ethical standards are followed by every employee despite his/her rank (Trangbæk, 2014). Ethical treatment of the consumers is embodied in the practices used by the personnel, where the main principles require the staff members to be attentive to the clients, engage conflict-resolution practices, and create the atmosphere of trust (LEGO Group, 2014).
As to the suppliers, the company persuaded the suppliers and business partners to sign the LEGO Group’s Code of Conduct in order to ensure that all parties will execute high ethical standards (LEGO Group, 2014). 85 percent of all suppliers working with LEGO Group are closely monitored by the company, especially those who operate in the countries with higher risks to demonstrate lower ethical standards. All audits are performed by the third parties consisted of independent monitoring companies (LEGO Group, 2014). Each year, the code of conduct of the suppliers is reviewed by the company and, if there is a need, LEGO Group renegotiates the contract and the collaboration practices with each partner.
LEGO Group believes that its ethical responsibilities include the entire society where it is essential for the company to make sure that it serves right principles. Therefore, the organization launched several charities and learning centers for the disadvantaged and terminally ill children (LEGO Group, 2014). The company tries to engage into charity interventions and increase the awareness about the environment as well as the importance of going “green” (LEGO Group, 2014).
Sustainability of Business Ethics
The concept of sustainability ethics roots in the notion of careful and thoughtful operation of the business with an understanding of socio-economic responsibilities. It was widely recognized by the scholars that the pressures of maintaining effective business ethic program increased after the economic recession. After this event, the people realized that a lot of financial companies do not have strong business values conducting business only for the sake of high profits. In general, the studies indicated that for the last several years the ethical conduct of the companies declined disproportionally. Institute of Business Ethics revealed strong evidence suggesting that the companies experience negative tendencies within the field of ethics (IBE, 2012). It was detected that 18% of women complained to sexual harassment at work; 37% of newly graduated tend not to receive appropriate compensation for their work; around 20% of employees claimed they cannot speak up about the issues that have to be addressed in the company (IBE, 2012). Therefore, it is essential for the modern companies to execute high standards of business ethics and to engage the principles of sustainability within it.
Conclusion
The analysis revealed that CSR principles, as well as business ethics, are essential for the success of the business venture regarding its reputation, relationship with the stakeholders, and its place in the society. LEGO Group proved that a large multinational could employ high ethical standards at all levels and to boost its profits and popularity among the customers. It can be implied that the CSR principles and ethical conduct are the keys to financial success for the contemporary business ventures, as in the conditions of globalization the corporate structure have more power to affect the lives of people. The conduct of companies has to be regulated and monitored to ensure that the striving for profits will not overpower the social responsibility.
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