Bachelor thesis Successful actions to a sustainable future depend on the strategy -An exploratory study of MNEs Corporate Social Responsibility in the Fast Fashion Industry Author: Amanda Pfante & Victoria Rosso Supervisor: Selcen Öztükcan Examiner: Helén Anderson Term: VT20 Subject: International Business Level: Degree of Bachelor Course code: 2FE51E Abstract Corporate social responsibility is a well-discussed phenomenon where existing researchers within the field of MNEs have found an increased interest in the CSR topic. Existing research between the two topics is still at an early stage where the main reason is the complexity of defining the CSR concept, as well as the MNEs cross-border operations in multiple contexts. Further, the fast fashion industry is generally characterized by frequent production and squeezed margins to maximize profit. CSR is significantly important for MNEs operating in the fast fashion industry due to their environmental and social impact, where they have to reconsider the impact of their actions. This thesis will examine two MNEs originated from Sweden and Spain to understand the differences and similarities of the selected MNEs strategic CSR focus and actions. Further, a qualitative research method has been conducted in order to fulfill the purpose of this thesis, where the empirical data has been conducted through secondary data. The common findings of this thesis indicate that both MNEs engage in multiple CSR activities, where the strategy mainly focus on environmental and social aspects. Further, the findings illustrated a clear connection to Carroll’s Pyramid of CSR where all responsibilities were included in the strategies. The outcome of the thesis indicates that both MNEs strategies involves actions to take responsibility for global and local issues. Key words Strategy, Focus, Actions, Corporate Social Responsibility (CSR), Fast fashion industry, Multinational Enterprises (MNEs), Sustainability Acknowledgments We would like to express our gratitude to our supervisor Selcen Öztürkcan for the guidance and inspiration throughout the entire process of this thesis. We would also like to thank our examiner Helen Anderson and the opponents for providing their valuable point of view which has encourage us to further improve our thesis. Kalmar, May 27th, 2020 ____________________ ____________________ Amanda Pfante Victoria Rosso Table of contents 1 Introduction 1 1.1 Background 1 1.2 Problem discussion 3 1.3 Research question 4 1.4 Purpose 5 1.5 Delimitations 5 2 Literature review 6 2.1 Fast fashion industry 6 2.2 Multinational enterprises 6 2.3 CSR 7 2.4 Carroll’s pyramid of CSR 8 2.4.1 Economical responsibility 9 2.4.2 Legal responsibility 10 2.4.3 Ethical responsibility 10 2.4.4 Philanthropic responsibility 10 2.5 The CSR positioning grid 11 2.6 Triple Bottom line 12 2.7 Stakeholder theory 13 2.8 Theoretical framework 15 3 Methodology 16 3.1 Research characteristics 16 3.2 Qualitative research 16 3.3 Selection of companies 17 3.4 Data collection 17 3.5 Data analysis 18 3.6 Research quality 19 3.6.1 Trustworthiness 19 3.6.2 Ethics 20 3.6.3 Methodology critics 21 3.7 Division of work 21 4 Empirical findings 22 4.1 Case 1 - H&M group 22 4.2 Case 2 - Inditex 22 4.3 Strategy 23 4.3.1 Ambitions 23 4.3.2 Achievements 28 4.4 Actions 33 4.4.1 H&M group 33 4.4.2 Inditex 33 5 Analysis 38 5.1 Carroll’s pyramid of CSR 38 5.1.1 H&M group 38 5.1.2 Inditex 40 5.2 The CSR positioning grid 42 5.2.1 H&M group 42 5.2.2 Inditex 43 5.3 Triple Bottom line 43 5.3.1 H&M group 43 5.3.2 Inditex 44 5.4 Stakeholder theory 45 5.4.1 H&M group 45 5.4.2 Inditex 46 5.5 Reflection of analysis 49 6 Conclusion 51 6.1 Theoretical implications 53 6.2 Managerial implications 55 6.3 Social and environmental implications 56 6.4 Limitations and future research 56 References 57 1 Introduction This chapter provides an introduction of the topic Corporate social responsibilities along with other relevant topics. Further, the problem discussion will be presented in order to identify the relevance of the thesis. Finally, the purpose, research question and delimitation of the thesis will be presented. 1.1 Background Corporate social responsibility (CSR) is a growing phenomenon that has received increased attention among corporations, along with the customers increased pressure regarding company’s impact on environmental and social aspects. Jhunjhunwala (2014) describes the importance of integrating CSR into the companies’ strategy in order to achieve long-term success. Studies from the European Commission have presented a changing attitude of customer interest in socially responsible manufactured products (European Commission, 2001). This pressure the corporations to become more transparent, honest, and consider their environmental footprint. Organizations have a large impact on the society and it is of great importance that they perform their activities to minimize the negative aspects that affects the environment, some organizations implement CSR because it is the right thing to do and not as a strategic choice (McAlister & Ferrell, 2002). During the twenty-first century it became more frequent for companies to produce a sustainable development report. In today’s society companies that do not include a framework of sustainable development could face consequences (Idowu & Lounche, 2011). On the other hand, some businesses implement actions to appear as responsible, however, these actions are only temporary and presents the company incorrectly (Lewis, 1999). The phenomenon CSR has a broad meaning with various definitions in literature and Carroll (1999, p. 289) defines CSR as ”the conduct of a business so that it is economically profitable, law-abiding, ethical and socially supportive”, CSR also includes environmental responsibilities. Further, Carroll was the first researcher who expressed the importance of the CSR concept where the most important aspect of social responsibility was the economic category (Carroll 1979). Today firms use these CSR actions to create social and organizational benefits and the CSR activities create a competitive advantage and are therefore a tool for strategic branding (Morsing, 2006). It is important to combine the organizational benefits with the actions to be socially responsible (Carroll, 1999). 1(66) During the period 1995 to 1998 the numbers of business leaders expressed increased interest to develop the businesses’ social responsibility (Lewis, 1999). The importance of CSR as a core component of brands have increased from the previous focus on product features such as quality and design, and the brand personality (Werther & Chandler, 2005). Companies’ CSR activities are becoming more important in today’s society since 35% of the firm’s brand image is influenced by CSR related activities (Idowu & Louche, 2011). Therefore, are the implementation of CSR activities important in brand management and it is according to Frankental (2001) not just a PR or marketing hype. Organization’s voluntary CSR activities includes further responsibilities towards the society beyond rules and policies which has become a part of the company’s brand position (Joshi & Yadav, 2013). Positioning strategy is a way for companies to differentiate from its competitors, where the strategy is a concept based on how the company will be perceived by the consumers, in comparison to the competitors. By implementing CSR in the positioning strategy, the company can build a socially responsible brand image, which can enhance the brand's value in the eyes of the customers (Joshi & Yadav, 2013). Previous theory explains that Multinational enterprises (MNEs) implementing CSR actions involve managing the supply chain in a responsible manner while including the social and economic impact (Lam, 2009). Concerning the international trade activities, it has strengthened the ties worldwide, resulting in benefits for home- and host countries, which emerges when MNEs offers a competitive and attractive product or service. It is also important that MNEs exploit their resources in a fair-minded and efficient way. On the contrary, supply chains with an unequal implementation of CSR activities can lead to imbalance. Events that illustrate the imbalance of CSR are Nike’s outsourcing to Asia, where child labor existed, and the H&M scandal which revealed that they burned tons of unsold products (Napier & Sanguineti, 2018). Issues regarding CSR actions are common for MNEs operating cross borders (Husted & Allen, 2006). MNEs CSR strategies are defined in two different ways, either by implementing global CSR strategies where the CSR activities must be adjusted to all markets MNE are operating in. The global strategy involves proactive CSR activities, however, this entails a lack of legitimacy and ownership at a local level (Muller, 2006). The other approach is the local CSR strategy, where CSR activities need to be adjusted in line with local standards of the community (Husted & Allen, 2006) and is more responsive. Hence, a risk with a more decentralized local CSR 2(66) strategy, that is in line with the host-country's lower standards, is that it will differ from the higher standard, expected in the home country (Muller, 2006). 1.2 Problem discussion Globalization is an ongoing trend where consumers have the option to choose between local and foreign brands, resulting in increased competition among companies (Hsieh, 2002). For this reason, it is important for businesses to obtain a competitive advantage. Researchers that study MNEs have found an increased interest in the CSR topic (Rodriguez, Siegel, Hillman & Eden, 2006). However, Cruz and Boehe (2010) agrees that the research between the two topics is at an early stage. The complexity of defining the CSR concept is the main reason for the lack of research along with the MNEs cross border operations in multiple contexts (Rodriguez et al., 2006) where Jamali (2010) observed the same complexities in the fields.