November 9, 2015

CSR – the new USP

Competition on price is no longer enough for retailers, particularly grocery retailers.  We have seen enormous change in the last few months alone.  Yesterday (2 November 2015) Morrisons promised to give all unwanted edible food to charity – it is the first large supermarket to make that promise.  Aldi has said it is set to increase its minimum pay to £8.40 an hour which is well above the national living wage of £7.20 an hour.  Aldi’s announcement follows promises from Morrisons and Lidl to increase their pay to £8.20 an hour.  These are costly promises to make – Tesco said that if it paid its staff national living wage, it would cost its business £500m by 2020.

But the CSR does not stop there.  Morrisons has introduced “Milk for Farmers” in order to assist dairy farmers following the protests which took place earlier this year.  Tesco has said it will slash its payment terms to 14 days for small suppliers and it has promised, as part of Project Reset, to treat its suppliers more fairly.

All of these steps are unlikely to be driven by a greater sense of corporate responsibility, even if it qualifies as CSR.  Instead, these businesses are beginning to understand that when there is a race to the bottom on price, other factors will influence where consumers shop.  Nielsen (the market research specialists) claim 55% of global online consumers are willing to pay more for products and services if the company selling such products and services are committed to a  having a positive social and environmental impact.  That sense of social responsibility varies across the globe (Asia Pacific – 64%/Latin America – 63%/America – 42%/Europe – 50%).  But where ever you are, it does influence a consumer’s buying habits.

Consumer perspectives on businesses are changing. Lord Browne, the former CEO of BP, pointed out that “businesses aren’t governments, businesses aren’t people who should push others around”,businesses are there to co-operate, to work with society. Businesses have to be engaged very radically with everybody who is elected by them – and tell the truth”.  The recession highlighted the number of corporate conduct issues.  Banks’ conduct has been scrutinised and criticised, the amount of tax Starbucks or Amazon pay has become an issue, the way Tesco treats it suppliers was highlighted in a Panorama special, and the list goes on.

What is clear is that, in an attempt to sell more products, businesses (and in particular grocery retailers) are becoming more socially responsible and that can only be a good thing.

Being cheap is just not enough anymore; consumers need a bargain, good quality and to feel good about where they spend their money. The new age of CSR is here, and it’s driven by competition, not by the corporate conscience.

A summary version can be found in the latest edition of The Grocer, 7 November 2015, p. 25. (subscription required)

For more information, please contact our retail experts, Mark Jones on 0113 227 0297 or at mark.jones@gordonsllp.com or Andy Brian on 0113 227 0354 or at andy.brian@gordonsllp.com.