A study on corporating social responsibility (csr) in a multinational companies operating in vietnam a case study on unilever vietnam

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1 A STUDY ON CORPORATING SOCIAL RESPONSIBILITY (CSR) IN A MULTINATIONAL COMPANIES OPERATING IN VIETNAM A CASE STUDY ON UNILEVER VIETNAM BY NGUYEN THI VAN TRANG Graduation Project Submitted to the Department of Business Studies, HELP University College, in Partial Fulfillment of the Requirements for the Degree of Bachelor of Business (Accounting) Hons October 2011 2 Declaration of Originality and Word Count DECLARATION I declare that this graduation project is based on my original work except for quotations and citation which have been duly acknowledged. I also declare that it has not been previously or concurrently submitted for any other courses/degrees at HELP University College or other institutions. Word Count: 11,638 words. NGUYEN THI VAN TRANG Date 17/10/2011 3 Acknowledgements Many people have helped me to finish this project. I wish to take this opportunity to thank all the people who have helped, tough and guided me all the time.  Firstly, I want to express my deep gratitude to my supervisor, Dr Le Van Lien from International School at Vietnam National University, Hanoi. He helped me to gather and analyze information, guide and correct me when I'm wrong. I can learn so much from him such as his knowledge, inspiration and attitude of working.  Secondly, I also would like to express my thanks to Ms. Sumathi, Help University College, who initiated the project and give me so much instruction and support.  Lastly, I want to thank to all managers and employees at Unilever Vietnam, who are very friendly and cooperative. 4 Abstract A STUDY ON CORPORATING SOCIAL RESPONSIBILITY (CSR) IN A MULTINATIONAL COMPANIES OPERATING IN VIETNAM A CSE STUDY ON UNILEVER VIETNAM BY NGUYEN THI VAN TRANG October 2011 Supervisor: Dr. Le Van Lien Although there are many different interpretations, but more than a decade, the number of companies around the world recognizes the economic benefits of CSR policies are on the rise. CSR commitments beyond the desire to increase profits, and company was fully aware of their responsibility to employees, customers, communities and the environment. The main purpose of this project is to find out the level of awareness and the implementation of CSR of a multinational company operating in Vietnam - Unilever Vietnam. Both primary data and secondary data will be used to collect information in this project. After collecting the information, researcher will analyze the information and from that can give conclusion and recommend some suggestions. 5 TABLE CONTENTS Page Declaration of Originality and Word Count ii Acknowledgement Error! Bookmark not defined. Abstract iv Table of contents vi List of Figures and Tables vii List of Abbreviations viii CHAPTER 1 : INTRODUCTION .................................. Error! Bookmark not defined.2 1.1 Research Background...............................................................................................13 1.1.1 CSR in the world....................................................................................................13 1.1.2 CSR in Vietnam......................................................................................................14 1.1.3 CSR in multination company in Vietnam............................................................15 1.2 Problem Statement.................................................................................................. 16 1.3 Objectives and scope of the research ..................................................................... 18 1.3.1 Objectives of the research......................................................................................18 1.3.2 Scope of the research..............................................................................................19 1.4 Research Methods .................................................................................................... 19 CHAPTER 2 : LITERATURE REVIEW ................................................................... 20 2.1 Definition of CSR ..................................................................................................... 21 2.2 Caroll’s 1979 - 1991 concept ................................................................................... 23 6 2.3 Other concepts related to CSR ............................................................................... 25 2.3.1 Triple bottom line ................................................................................................. 25 2.3.2 Stakeholder theory ................................................................................................ 26 2.3.3 Business ethics and CSR....................................................................................... 27 2.3.4 Sustainable development ...................................................................................... 28 2.3.5 Social responsible investment................................................................................29 2.3.6 CSR reporting.........................................................................................................30 CHAPTER 3: RESEARCH METHODOLOGY ........................................................ 31 3.1 Research Objectives ................................................................................................. 32 3.2 Research methodology ............................................................................................. 32 3.3 Theoretical framework ............................................................................................ 32 3.3.1 Managers............................................................................................................ ... 33 3.3.2 Employees...............................................................................................................33 3.4 Data sources .............................................................................................................. 34 3.4.1 Primary data.......................................................................................................... 34 3.4.2 Secondary data ...................................................................................................... 35 3.5 Research method ...................................................................................................... 35 3.6 Research tool ............................................................................................................ 36 3.6.1 Questionnaires........................................................................................................36 3.6.2 Phone interview......................................................................................................36 3.6.3 Annual report.........................................................................................................37 3.7 Sampling ................................................................................................................... 37 3.7.1 Sample population..................................................................................................37 7 3.7.2 Sample frame..........................................................................................................37 3.7.3 Sample size...............................................................................................................37 3.8 Limitations.................................................................................................................38 3.9 Hypothesis..................................................................................................................38 3.9.1 Manager’s attitude toward CSR...........................................................................38 3.9.2 Employee’s attitude toward CSR..........................................................................39 CHAPTER 4 : ANALYSIS ........................................................................................... 40 4.1 Questionnaires collection and respond .................................................................. 41 4.2 Description of result ................................................................................................. 41 4.2.1 Age .......................................................................................................................... 42 4.2.2 Gender .................................................................................................................... 42 4.3 Managers....................................................................................................................43 4.3.1 Level of awareness..................................................................................................43 4.3.2 Implementation......................................................................................................46 4.4 Employees..................................................................................................................53 4.4.1 Level of awareness.................................................................................................53 4.4.2 Implementation......................................................................................................56 4.5 Overall evaluation.....................................................................................................59 CHAPTER 5: CONCLUSION AND RECOMMENDATION .................................. 61 5.1 Conclusion ................................................................................................................ 62 5.2 Recommendation...................................................................................................... 63 5.3 Limitation of Sutdy .................................................................................................. 64 8 5.4 Suggestion for Furture Research ............................................................................ 64 REFERENCES ( Harvard referencing system) .......................................................... 65 APPENDICES ................................................................................................................ 70 Appendix A: Questionnaire Sample ............................................................................. 70 9 LIST OF ABBREVIATIONS CSR Corporate Social Responsibility VND Viet Nam Dong TBL Triple Bottom Line MNCs Multinational Companies NGOs Non Government Organizations WCED World Commission and Environment and Development SRI Socially Responsible Investment UVF Unilever Vietnam Foundation CIEM Central Economic Management UVN Unilever Vietnam 10 CHAP 1: INTRODUCTION 1.1 Research background 1.1.1 CSR in the world 1.1.2 CSR in Vietnam 1.1.3 CSR in multinational company in Vietnam 1.2 Problem statement 1.3 Objectives and scope of the research 1.3.1 Objectives of the research 1.3.2 Scope of the research 1.4 Research methods 11 1.1 Research background 1.1.1 CSR in the world Globalization and the rapid advancement of technology offer opportunities for economic development and society. Simultaneously, it also brings serious challenges as the financial crisis, insecurity, poverty, exclusion and status inequalities among societies. That significant obstacle to the further integration and to participate fully in the global economy still exists in some developed countries. If the benefits of economic development, society can not be guaranteed, there still more and more countries and areas are marginality from the global economy. CSR in many countries has grown to the specific level of corporate responsibility in the code of conduct and internationally quality standards. The provisions of this standard have been adopted as the required conditions in business. CSR is the corporate commitment to business ethics and contribute to sustainable economic development, enhance quality of life for employees and their families, communities and the society in common (WBCSD). Social responsibility of business (Corporate Social Responsibility – CSR) is no stranger to the developed country. In the United States, there is “One Percent Club” where the members committed to use at least 1% of their profits into social work. In France, a series of cultural funds of enterprises such as RATP (subway company), France Télécom (France Telecom)…are sponsor for French contemporary art. CSR is considered an important factor as other traditional factors such as cost or quality in business. CSR is integrated into business strategy and become prerequisite for business survival and development. CSR became the main factor to consider the decision of responsible investment. Besides having good reputation, businesses also get other benefits such as labor relations are 12 improving, industrial accident and the rate of job quitting decrease, labor productivity increase and workers become increasingly have a strong attachment to the business. In countries with developing CSR activities, the majority of businesses do not consider CSR as charity; enterprise is just like a citizen – with rights and obligations in the society, therefore if the social is good, the business can be developed well. 1.1.2 CSR in Vietnam Vietnam is growing rapidly; the majority of businesses in small and medium – scale adoption and implementation of CSR has not been focused and interested. According many Vietnamese enterprises’ explanation, it is probable because the starting point of Vietnam’s economy is at a low level so the profitability criteria should always be in the top priority. Therefore, enterprises are rarely considered it as an important issue. Only after a series about Vedan polluted the Thi Vai River and the protein in powder is not qualified…everyone begins to think about CSR seriously. Vietnamese government has tried increased the awareness of businesses and stakeholders on CSR recently. The international development organizations in Vietnam have tried theirs’ utmost in promoting and implementing CSR. The programs and projects related to CSR focused on some important issues depending on the project’s objectives, resources and experience available. In other words, businesses should choose how to do CSR that suit their abilities the best. The development of a business always comes with CSR. It is integrated into the business strategy and become the conditions for enterprises to develop, improve and maintain competitive advantage. Prof. Dr. Miriam Meckel, the world’s leading experts in the field of Corporate Communication and CSR in his lecture on effective strategies to 13 improve business communications has shown that, CSR is still new in Vietnam, but particularly important for the sustainable development of Vietnamese enterprises. CSR does not depend on the extent to which it is located but in the perception of each business. However, there are some obstacles in the implementation of CSR in Vietnam such as the concept of CSR is still new to a lot of business in the business community in Vietnam, while the related parties do not have long-term plan and strategies to implement CSR programs; management capacity and expertise in implementing CSR is limited… To succeed in the application of CSR in Vietnam, business owners should implement CSR for their labor first as the observance of laws and policies on wages, social insurance and then building a relationship based on trust and sympathy between the employee and enterprise. To promote the implementation of social responsibility of business, it is best to have an association or organization to monitor and advise businesses. Besides, the Government should create policies to support enterprises in implementing CSR. 1.1.3 CSR in multinational company in Vietnam Vietnam is a developing country with strong growth in economy so Vietnam has been attracting many companies to invest in Vietnam in which there are many famous multinational companies (MNCs) in many different areas such as Samsung, Sony, Dutch Lady, Unilever, and Toyota… Although CSR in Vietnam has not developed strongly as in other countries but the government of Vietnam began to care about CSR and encourages enterprises to do their social responsibility. CSR was launched in Vietnam through a major multinational companies investing in Vietnam. These companies often develop codes of conduct and business cultural norms which are universal to be applied 14 in many different market areas. Therefore, the contents of CSR that multinational companies applied in Vietnam are effective and efficient. Some typical examples are: project “I love Vietnam” of Honda – Vietnam company, educational programs for personal hygiene of children in the mountainous province of Unilever, computer training program Topic64 of Microsoft, Qualcomm and HP… But not all companies investing in Vietnam are aware of their social responsibility. Only after melamine-tainted milk from China and Vedan discharging waste water into the Thi Vai River, people realized that a violation of business ethics, environmental harm severely of these companies and also realized the importance of CSR. After joining WTO, the competition with cheap goods and the quality is not enough in Vietnam, in addition, the other factors to make good business is CSR. This has great impact to reputation and brand products of the enterprises especially MNCs who do not have advantages like domestic companies. 1.2 Problem statement For enterprises in Vietnam, CSR is still new and has many difficulties to implement, first of all understands the concept of CSR, then how to put it into production and daily business. To do that, companies sometimes need to make changes in policies and salaries including the improvement of factory or workplace. The commitment of the leadership is the biggest hurdle for small and medium companies operating in Vietnam. In Vietnam, the implementation of CSR is not active, so some enterprises think that they are required to implement CSR, but not fully understand the nature of it. The most successful in the implementation of CSR is the business commitment to CSR initiative, turning it into a company’s culture. 15 Beside the company trying to do CSR, there are some companies still not fully aware of their responsibilities to society. In particular, some companies have serious violations of ethics in business, ignoring the environmental damage they can cause and do not care about the health of consumers – those who directly purchase and use their product. A typical example is the scandal that Vedan discharging untreated waste to the Thi Vai River. Vedan Vietnam active in many fields, which generate waste likely to cause environment pollution, such as production of MSG, starch, sugar, caustic soda (NaOH), acid… The total volume of water discharged into the Thi Vai River over 4,000m3/day. Moreover, Vedan has sold the waste two time to Taiwan (through the ship) with the total volume was 130,000 tons in the day 27/09 and 10/13/2008 (Vietnam Agriculture newspaper). After being uncovered, consumers refused to buy all the products produced by Vedan. A recent hot issue that is paid special attention from public is that the instant noodles contain trans-fat. Recently, the Service Center for analysis laboratory of the Department of Science and Technology has found that many products instant noodles sold in the market contain trans-fat up to 38%. Trans-fat is formed during food processing at high temperature through oil hydrogenation methods – help products to be fresh, preserved longer and more eye-catching. Therefore, it is also understandable when manufacturers always prefer to use oils containing trans-fat in their products. This type of fat metabolism can cause the coronary artery becomes blocked, causing angina, stroke. (Phunuonline) In Vietnam, there is still no rule in managing products related to trans-fat, but some instant noodle manufacturers pioneered the specified information that does not 16 contain trans-fat on their packing products. This is seen as a step in the awareness of businesses to protect consumer health. Vietnam is integrating into the global economy; investors and foreign companies are setting up operations or seek partners in Vietnam, so the problem of Vietnam’s business competitiveness in all aspects of the global markets is becoming increasingly important for businesses. Practice shows that awareness of CSR of the people and management is poor and legislation is not strong enough (as the fine is low). This has lead to business easily dodge the law, denied liability and business ethics or environmental pollution in severity in a long time without being sanctioned. 1.3 Objectives and scope of the research 1.3.1 Objectives of the research There are some main objectives to carry out this research: - Firstly is providing the concepts and definition of CSR. - Secondly is inspect the level of awareness of CSR in multinational company with specific target is Unilever company. - The third objective is to find out what benefits can CSR brings to the company and stakeholders. - The last objective is recommending a CSR framework for a multinational company operating in Vietnam. 17 1.3.2 Scope of the research The research is carried out in order to find out how Unilever applied CSR in Vietnam. Unilever is a multinational company established by England and Netherlands specializing in the production of consumer goods such as cosmetics, chemicals, detergent, toothpaste, shampoo and food… The headquarter is in London and Rotterdam but it has many subsidiaries all over the world such as Africa, Americas, Asia Pacific (including Vietnam), Europe and Middle East. Unilever employs about 180,000 workers and has sales of nearly 40 billion Euros or more than 62 billion Euros in 2005 (Unilever website). So the research conducting place at Unilever Vietnam at 156 Nguyen Luong Bang Avenue, Tan Phu Ward, Dist 7. 1.4 Research methods In order to do this research, the researcher will use the investigation and survey method. Questionnaires will be distributed to the manager and employees of Unilever Vietnam and also consumers in Hanoi city. Questionnaires are built based on previous researches and studies. After collecting the information, researcher will use Microsoft Excel to analyze the data and collect the result. 18 CHAP 2: LITERATURE REVIEW 2.1 Definition of CSR 2.2 Carroll's 1979-1991 concepts 2.3 Other concepts related to CSR 2.3.1 Triple bottom line 2.3.2 Stakeholder theory 2.3.3 Business ethics and CSR 2.3.4 Sustainable development 2.3.5 Socially responsible investment 2.3.6 CSR reporting 19 2.1 Definition of CSR CSR is considered an important factor as other traditional factors such as cost, quality and delivery in business. CSR is integrated into business strategy and become a prerequisite for business survival and development. Although CSR is now common but there are still many different views about the concept, content and scope of CSR. One famous quote about CSR is “the fundamental responsibility of any business in a free-enterprise system is to make a profit while conforming to the basic rules of society, both those embodied in the law and those embodied in ethical customs.” (Carroll, 1979). Some people believe that “There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engage in open and free competition, without deception or fraud.” (Friedman in Turner 2006, p. 7) And some people understand “In its broadest sense, corporate social responsibility represents a concern with the needs and goals of society which goes beyond the merely economic. Insofar as the business system as it exists today can only survive in an effectively functioning free society, the corporate social responsibility movement represents a broad concern with business’s role in supporting and improving the social order.” (Eells and Walton in Carroll 1999, p. 278). According to Aaronson “Business decision making linked to ethical values, compliance with legal requirements, and respect for people, communities, and the environment around the world”. And in the 1990s O'Rourke writes that “A trend also noteworthy in the late 1990s was that of shareholder activists linking their environmental or social issue to financial performance and/or risks faced by the company. By claiming that environmental and social issues have a direct effect on shareholder value, shareholder activists are moving the rhetoric of their activism out of the realm of “ethics” or good versus bad behavior, and into that of traditional issues of profitability, risk and shareholder value” (O'Rourke 2003, p. 230). 20
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