MARK QUESTION

DANA'S HANDBAGS
Dana’s Handbags (DH ) is a small manufacturer of women’s handbags. DH sells directly
to large retail chains in Europe. The company is privately owned and has fteen
shareholders.

Table 1: Selected nancial data for DH for 2016 and 2017 ( gures in $000s)

Beginning in 2017, DH adopted a programme of corporate social responsibility (CSR)

by:

• donating money to charities

• encouraging employees to do three paid hours per week of community service

during work hours

• using only biodegradable materials in its handbags.

This programme was expensive.

DH’s management thought that a programme of corporate social responsibility (CSR)

would strengthen DH’s brand. During the rst year of the corporate social
responsibility (CSR) programme, employee morale improved and DH received
favorable media attention.

However, at the annual general meeting in January 2018, nancial results from 2017
revealed that sales growth had not improved. Several in uential shareholders
complained about the high cost of the corporate social responsibility (CSR)
programme. Other shareholders suggested that DH should develop consumer
awareness that it is a socially responsible company.

D I S CU S S D H’ S D E C I S I ON TO DE V ELOP A P OL ICY O F COR PO RAT E S OCI A L

RE S P ON SIBILI TY ( CSR ) .[ 10]
Corporate social responsibility is a concept where organizations consider the interest of
society and the planet and take responsibility for the impact of their activities on the world,
the community and the environment. In other worlds, they try to make the world a better
place.

Some advantages for a business of having CSR is that there is a better employee recruitment
and retention as there is a sense of value and purpose in the sta . There is also a boost in the
business image and reputation which leads to more sales (as we can see HD has increased It's
sales after implementing CSR) therefore more pro ts. However, there are also some
disadvantages such as the following. Money is invested in donating to charities, in
biodegradable materials, paying better salaries, etc. this means that there is less net pro t.
Also lower pro t might demotivate managers since they have to pay accordingly to
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 employees received lower salaries, this may lead to less e ciency causing an internal
diseconomy of scale.

Overall, the consequences for the company after implementing CSR were having more sales
revenue, assets and stock but having less net pro t and paying more for goods. From an
ethical perspective, I would advise to develop the policy of corporate social responsibility
since all the bene ts lead to higher pro t in a long term view. With time, the company might
get bigger as a result on higher demand (since their products are sustainable, more people will
want to buy them) and that would generate economies of scale. This means that the cost of
the products will decrease over time since bulk-buying will ensure signi cant discounts in raw
materials and products form suppliers, therefore reducing cost of goods and increasing the
overall pro t.
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