Effect on Corporate Social Responsibility Sample Assignment

Effect on Corporate Social Responsibility of British Airlines after 2008 Financial Crisis

Introduction

In the present world, it is of immense importance for the international and national companies to care for the masses rather than concentrating solely on their self-interest. If the companies do not consider the needs and requirements of the mass of people, then the companies can face issues related to the customer retention as well as attraction of new customer. In addition, the companies should also focus on additional activities along with its traditional line of work to assure that most of the people are getting benefit by the working of the company. The companies should acknowledge the need for different socially responsible acts in order to maintain their position and image amongst the customers. According to the research of Balmer, Stuart and Greyser(2009), Corporate Social Responsibility (CSR) is defined as the international self-regulation policy for the private business organization through which the companies do something ethical and for the greater social good. This activity is done by the company in addition to the normal work that it does in order to enhance the brand image of the company and also to assure that most of the people are benefitted by the goals of the company. The main aim for the CSR is to make significant efforts to make the world better other than the business dealings for their own benefit (Cheng, Ioannou and Serafeim, 2014). The different types of CSR include activities like donating a sum of money to non-profit organizationsand making policies which are environment as well as society-friendly in the workplace (Cowper-Smith and de Grosbois, 2011). The social accountability of the firm has a huge impact on the stakeholders, the employees as well as the public in general (Carroll and Shabana, 2010). The following essay deals with the CSR of British Airlines, analyzing the effect of 2008-09 global recession impact on the company. The following paragraphs assess the comparison between the reports of 2007 and 2009-10 financial reports in order to compare the difference between the CSR policies of the two fiscal years.

Discussion

British Airlines is the flag carrier and the largest airline company of the United Kingdom. The company holds top position when it comes to fleet size as well as the second-largest when it comes to passenger carrying capacity (Du, Bhattacharya and Sen, 2010). The Waterside-based airline was established on 31 March 1974 and is presently under the parent company - International Airlines Group, a registered company of Madrid, Spain (Madar, 2015). The present chairman and CEO of the company is Alex Cruz followed by the CFO and director - Stephen Willian and Lawrence Gunning. In the fiscal year 2016, the company generated a revenue of 11,443 million Euros out of which the net income of the brand was 1473 million Euros in the year 2016 (Guardian, 2019b). British Airlines is listed on the London Stock Exchange and in the FTSE 100 Index (Guardian, 2019b). British Airlines has a fleet size of 273 airlines and flies to 183 destinations round the world with the slogan To Fly; To Serve (Guardian, 2019b). The company is one of the founding members of Oneworld Airline Alliance (the third-largest alliance) with the other airline giants like American Airlines, Cathay Pacific, Qantas and Canadian Airlines (Madar, 2015).

Corporate Social Responsibility of British Airways

British Airlines focuses on the CSR policies on three core action areas namely the action on climate, the noise and air quality of the planet as well as the resource management of the organization (Elkington, 2013). Most of the airlines in the world faces these three problems in relation to the climatic changes, issues related to noise and air and even the issues related to the proper allocation of resources. The CSR team of the British Airlines is headed by the non-executive director and it deals with the issue of sustainability as well as the environmental performance of the institution (Worcester, 2009). The CSR activities of the British Airlines uses the framework by Elkington named as the Triple Bottom Line to give a clear idea on the aspects of sustainability in terms of business ethics (Elkington, 2013). According to the Triple Bottom Line, an organization should invest in providing environmental and social value instead of only economic value to the society. If the organization only gives economic value to the society, there is a possibility that the social order will be benefited in the initial stage, however, at the end of the analysis, the benefit will not be sustainable. If the organization wants to provide sustainable benefit to the organization, then environmental and social benefit should also be provided. According to the research of Gaggero and Piga(2010), British Airlines, following the Triple Bottom Line has made responsible additions in the department of CSR catering to economic, social as well as environmental aspects.

In the economic responsibilities of British Airlines, the cost-effectiveness role has been played with the help of instruments including carbon trading, Clean Development Mechanism (CDM) and even the Reducing Emissions from Deforestation and Forest Degradation (REDD) (British Airways, 2019a). British Airlines is also associated with International Air Transport Association (IATA) and Association of European Airlines (AEA) to make proactive solutions for post-Kyoto aviation policy (Breitbarth, Harris and Insch, 2010).

British Airlines also devotes ample amount of money to the environmental projects in developing nations of the world which helps them to differentiate their responsibilities in the countries. The developing nations do not have the required amount of technical knowledge and understanding in order to initiate an environmental project, for which the help of the British airlines in such a matter comes as a great rescue for the country. Mostly, British Airlines operates in the belt of African and Asian underdeveloped and developing nations which has potential for the future. Beck, Campbell and Shrives (2010) opines that British Airlines was the first airline brand which reported to the environmental performance parameter which helped to minimize the cost of travelling using the latest technological innovations like airframes, engines and alternative fuels. British Airlines also contributes to the elimination of tremendous climate change by the year 2050 (Guardian, 2019a). The airline has achieved a considerable reduction of 15% on noise pollution from 2008 to 2018 (Guardian, 2019a). This has enabled the airlines to have one of the less noise emitted airline service on the global platform in the modern times. Reduction of noise pollution as well as the improvement of air quality in all the airports that it serves are on their list of CSR activities. The company has made sure to reduce the energy usage by 20% from 2013-2020 (British Airways, 2019a). Moreover, the company has achieved 60% recycling of all materials in 2015 at its base camp of Heathrow and Gatwick. This amount of recycled materials has helped the company to reduce wastage to a great amount which also has enabled the company to make better investment plans. This has again helped the company to gain growth propensities and even development in the concerned period. The company is also making sure to reduce Greenhouse gas emission from 18.6 million tonnes in the year 2014 (British Airways, 2019a). Greenhouse gas is one of the most harmful gases in the world which consists of carbon monoxide and methane. Therefore, the reduction of the amount of such a gas by the British airways has significantly impacted the corporate social responsibility that the firm has undertaken.

The social responsibilities of British Airlines include the support of the local communities as well as the empowerment of the workers. The company has made sure to include a Community Learning Centre in which they have welcomed more than 100,000 people since its opening in the year 1999 (Guardian, 2019a). The community learning centre has helped the local people gather knowledge about the type of work that is done in the British airlines. The local community learning centre has also helped the employees know better about the brand and also make sure that their responsibility towards the environment and society is done in a proper manner. Moreover, the airline provides its suppliers with a questionnaire regarding the CSR which makes sure that the labours are working as per the standards laid down by International Labour Organisation. The labour supplier who ar working with the airlines is to be made sure that there is no use of any unethical means to source the labour. Moreover, the kind of labour which is sourced is also considered in the British airways. No child labour or any other form of labour is to be used in any part of the company or any process related to it. The company provide ample facilities for the Employee Health and Safety functions (Guardian, 2019a). This facility which is being provided to the employees makes the employees feel that their health and safety measures are being considered by the brand. This feature of the British airlines also helps the company to have more score on the corporate social responsibility of the firm in terms of employee benefits.

Effect of 2008-09 Financial Recession on British Airways

During the global financial recession in the fiscal year 2008-09, British Airlines, like most other high-profile companies suffered a major financial loss which made it induce in the policy of cost-cutting (Carroll and Shabana, 2010). The company suffered a loss pre-tax loss of 292 million Euros in the September-quarter of 2008-2009 which is said to be the most profitable period for any airline industry (British Airways, 2019c). The airline is also said to loss 1.6 million Euros each day for which the revenues fell by 13.7% to 4.1 billion Euros in the fiscal year 2007-2008 (British Airways, 2019b). According to the data by International Air Transport Association (IATA), British Airlines majorly makes profit through its business class fares for which it lost passengers as well as a revenue of 11 billion Euros (British Airways, 2019c). The company has reduced the customer size from 469 million to 17.7 million due to the impact of recession (British Airways, 2019c).

In addition, according to the research inBritish Airways (2019b), the British Airlines went through major job-cut as it terminated over 3000 employees in six months including 1700 cabin crews. It even made sure to cut the number of crews on long flights from 15 to 14 which resulted in disputes among the workers Union. The 410 million Euros loss of the airline resulting in 6.6% fall in the share price to 152p made the company to include cost-cutting measures to keep their services running (British Airways, 2019b). The company in the list of cost-cutting measures made sure to include the CSR activities for which it was hugely respected.

The CSR activities of British Airlines reduced significantly as the shareholders after the loses in global recession period was not interested to invest in any form of activities that is not related to profit (Baron, 2009). For this reason, the British Airlines reduced its number of CSR activities in the various parts of the world. According to the Traditional Conflict Model for Corporate Social Responsibility, the shareholders have always an issue with the social values and benefits of the company for which they have to invest (Lu, 2009). According to the research by Anttila and Kretzschmar (2010), the shareholders view these kinds of costs as the added costs which the corporations opt for and which can be reduced or eliminated if required. The financial recession of 2007-08 resulted in tremendous monetary loss which forced the shareholders to refrain from any form of additional costs. Therefore, this resulted in the reduction in the CSR activities like carbon emission as well as the employee retention (Banister and Button, 2015). Employees being the second biggest spending for British Airlines, the shareholders forced the authorities to cut down on jobs to reduce spending. However, it has been argued by Anttila and Kretzschmar (2010) that economic and moral values go simultaneously in a business which inevitably makes an organization have responsibilities for the society. This lack of spending in CSR after the financial recession resulted in the decrease of status of the company for the customers.

However, the Stakeholder Theory which deals with the organizational management and business ethics addresses the morals and values of British Airlines. According to the concepts ofWagner and Perrini(2010), the stakeholders of the company incurred loss during the period of recession which made the stakeholders find lesser interest in the overall CSR activities (Wagner Mainardes, Alves and Raposo, 2011). The resource-based and market-based views of the British Airlines made sure that the organization needed to involve in cost-cutting ways to be stable in the market (Parmar, et al., 2010).

The Corporate Social Performance of British Airlines also decreased by leaps due to the lack of interest in the stakeholders as well as lack of revenue through business (Luo and Bhattacharya, 2009). The relationship which the company had with the people through the means of principles, practices and outcomes suffered a lot during the time of recession. During the time of recession in 2007-08, British Airlines suffered a lot and its success on CSR activities has been minimum (Callan and Thomas, 2009). The evaluation of the CSR activities made sure that the social responsiveness has been considerably less (Wood, 2010). This made the effect of recession on the CSR of British Airlines one of the most negative in the business scenario (Callan and Thomas, 2009).

Comparison of 2007 and 2009-10 reports on CSR of British Airways

British Airways group revenue in the year 2007 was 8992 million Euros which decreased to 7994 million Euros in the financial year 2009-10 after the global financial recession (British Airways, 2019e). Moreover, the network ready to go performance increased to 59% from 53% in the previous fiscal year (British Airways, 2019d). The group operating loss also significantly increased to 231 million Euros in the year 2009-10 from 220 million Euros in 2007-2008 (British Airways, 2019d). The loss before tax had increased from 401 million Euros in 2007-08 to 531 million Euros in 2009-10 post the recession period (British Airways, 2019e). All these data made it very clear that post the recession period in British Airways, the overall CSR activities came to a standstill as the losses mounted up while the profits inevitably declined. However, the company tried to keep some of the activities in the CSR policies active like using less of fossil fuels as well as reducing the air traffic emissions during the time of the flight (Beck, Campbell and Shrives, 2010). The percentage of air travelling passengers has tremendously increased in EU which accounted for over 20% of the tourisms conducted in the year. However, this percentage has resulted in more than 75% of all the GHG emissions in the EU transport system (British Airways, 2019e). Therefore, British Airlines is trying its best to commit to the CSR activity related to lesser air pollution. It is also trying to reduce the noise pollution issue in flights which can affect sustainability as well as sustainable developments (Lu, 2009). The airline company uses optimum amount of environmental resources which is one of the key aspects in the development of tourism as well as the maintenance of the ecological balance.

However, due to the high amount of job cuts and salary decrease as a result of the global recession period, the social responsibilities of British Airlines have not been fulfilled (Grundy and Moxon, 2013). The airlines could not offer job security in the phase of recessions which therefore hampered their policy of employee safety and job security. Moreover, the stakeholders faced a huge amount of loss which made their association with British Airlines negatively impacted (Hildebrand, Sen and Bhattacharya, 2011). This affected their social responsiveness of British Airlines which is one of the parts of their CSR policies.

In order to eradicate the effect of the 2007 Financial recession from British Airlines, the airline brand should invest in the industries in which the negative effect of recession was low (Mills, 2017). Moreover, the British Airline brand should make sure to have ample offers as well as discounts for the customer which can attract the customers in taking more flights. According to the opinions of Auerbach and Gorodnichenko (2012), economic recession is not a permanent affair and is generally a matter of a few months. After the end of the recession period, the industries as well as the brands can delve back to their original works which includes the CSR policies of the brand (Eaton, et al., 2016). The effect of CSR on British Airlines has been negative as they have not been able to keep up with their original flow of work. There have been instances when the British Airways have not been able to complete the work which has been provided to the brand by international organizations. However, it can surely splurge up its customer satisfaction rate after the recession period as it can implement a number of lucrative offers for its customers.

The other ways that the airline industry can significantly reduce its effects of recession are by ensuring that that the load factor of the airline industry is high with the comfort being low. According to the news published in ABC News (2019), the airline partners should make sure that the efficiency of the managers in the airline company is higher with the increased load factor. In this regard, it can be estimated that the load factor for the USA in 2000 was 72.9% whereas in 2009, after the span of recession, the load factor soared to 79.1% (ABC News, 2019). The company can also make sure to increase recruitment post-recession period and even call back their terminated employees (BBC News, 2019). The problem of Unions can also be solved which can act as one of the ways to deal with post-recession effect. In addition, British Airlines can also erase the challenges that are posed in terms of the legal matters when it announced the two year pay freeze on the employees in order to cope with the aftermath of recession (BBC News, 2019). The pension policy can also be retrieved, which in turn can affect the reputation of the British Airlines and its future industrial implications. The schemes as well as the future objectives need to be adjusted in accordance to the needs of the employees as well as the customers which can make sure that the company regainsits reputation after the period of recession (BBC News, 2019).

Conclusion

At the end of the analysis, it can be concluded that British Airlines faced a number of issues when the global recession occurred in the year 2007-2008. Like all other airline brands, British Airlines not only faced huge monetary loss but had to compromise on their high reputation. Job cuts as well as lack of CSR policies are some of the other major implications that resulted due to the effect of inflation on the British Airlines. The company has been known for its high CSR policies which included all the three aspects namely economic, social and environmental. However, after the emergence of recession, all the three aspects of the CSR declined to a major extent due to the lack of interest of shareholders to invest in the period of loss. This lack of interest in the policies of CSR, therefore, affected the reputation of the firm. The aforementioned paragraphs analyzed in details the recession effect on the British Airlines as well as the after effects of the policy of recession. Moreover, CSR policies and the decline of the same has been mentioned in details in the paragraphs with a comparison between the 2007-08 and 2009-10 financial as well as CSR analysis of the British Airlines. At the end of the analysis, the ways in which thematter can be improved have been stated to eradicate the ill-effects of global economic recession from British Airlines.

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