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Chapter 1: Introduction
In this chapter, background information of the importance of CSR, especially for the cosmetics industry is revealed. In addition, the purpose and the scope of this paper are to be described too. Lastly, an overview of this paper structure is shown.
1.1 Background of the study
Nowadays, CSR has become the basis on what organization do well in the rapidly changing global world. Cosmetic companies have been seen as unethical and non-environmentally friendly business practices because of unsustainable sources of products, testing on animals and chemical pollution and so on.
In recent years, CSR is usually implemented into cosmetic companies’ policies and practices so that the CSR activities can bring them positive social, legal, environment and economic impact (Organic Monitor, 2010). Those cosmetic companies try to lower the environmental impact of their cosmetic products by using greener formulations, such as using natural and organic ingredients (Article 13, 2002). It is because the cosmetic products will bring direct impact to the users.
Therefore, cosmetics are closely linked with people who are more careful to choose and concern about the skincare that they are purchasing.
Health-conscious consumers grow more aware of the implication of what they apply on their skin. Therefore, cosmetic companies intend to become more responsible about the products that they are producing, supplying and selling. It is important that the production of each product of every company comply with the law and specific health requirements. Cosmetic companies not only implement CSR to meet the legal requirement, but also consider it as a way to achieve extra growth and increase profitability of business.
However, because of the industry’s fast growing nature, it is important for cosmetic companies to differentiate from the competitors in order to be successful to achieve growth and profit. Cosmetic companies regard CSR as a
strategy to create competitive advantage and as an innovative way so that they can be seen as unique in the market. ‘Natural ingredients’ has now become a great mass fervor in cosmetic industry to attract customers. However, a brand of shampoo that applies herbal essences to give customers healthy life style has recently been found containing carcinogenic ingredients (Serinah, 2010). According to Paul E. (2011), 26 cosmetic companies faced a lawsuit that was filed by an environmental group. The products from such companies such as shampoo, facial washes and soaps labeled as organic but in fact it seemed not the truth. Cosmetic users criticize that products labeled as organic or natural which only a tiny percentage of their ingredients were certifiably organic, sometime mixed with ingredients seen by some as potentially carcinogenic. Consumers do not know and uncertain what companies have done to satisfy their anticipation for social responsibility of cosmetic companies.
1.1.1 Target Reader
The target readers of this study are those cosmetic users in Hong Kong who are health- conscious consumers. They are longing to know whether cosmetic companies have done their best to implement and practice CSR truly. They can be benefited from this study by knowing more about the control environment in cosmetic industry and CSR policies of selected companies. Thus, they can assess those companies’ CSR policy whether the policy is sufficient to satisfy their expectation of CSR.
1.2 Overall Research Aim
To examine whether the CSR policy of the cosmetic industry is sufficient to meet customers’ expectation in Hong Kong.
1.3 Research Objectives
1. To study the concept of CSR.
2. To study the cosmetic industry current control environment in Hong Kong and other countries such as USA, the U.K and Japan. 3. To gather and analyze responses on CSR done by cosmetic companies from public especially cosmetic users through questionnaires. 4. To examine the CSR strategies and policies applied by the selected cosmetic companies in Hong Kong such as
Crabtree & Evenlyn, L’OCCITANE and Origins. 5. To give conclusions and recommendations based on the above analysis.
1.4 Research Methods: Justification and Descriptions
This study uses both quantitative and qualitative approach. As for quantitative approach, data involved in this study is primary data collected through close-ended questions questionnaires from cosmetic users. This is done by self-administered style questionnaire, which is distributed via in hand and through internet. The population of this study is cosmetic users in Hong Kong. Convenience sampling is chosen so as to obtain a greater number of completed questionnaires quickly and economically due to time and cost constraints. For this research, at least 50 set of questionnaires will be distributed to cosmetic users located in Hong Kong who use products from selected companies.
This study will also involve secondary data collection using qualitative approach. It includes assessing government’s policy of controlling in cosmetic industry and the policy of CSR in the selected companies and other relevant. This is done through researching the CSR policy or report from websites and catalogue. For this study, three companies’ policy of CSR is selected to give a general comparison.
1.5 Limitations of the study
The sample size and the number of data collected from questionnaires would be in small amount. It is because this paper is focusing just among cosmetic users in Hong Kong and the cosmetic users of other countries cannot be accessed easily. Therefore, the results of this study cannot be generalized to user in other countries.
Future work can overcome limitations of the present study in terms of number of respondents and focusing in more cosmetic companies in Hong Kong that it will help in generalizing the findings of the study.
1.6 Dissertation Structure
This dissertation is divided into six chapters.
Chapter 1 is introduction. This chapter contains the background of the study with aims and research objectives. Target reader, research methods, limitations and dissertation structure are also included to give a brief overview of this paper.
Chapter 2 is literature reviews. This is an account of sources that have been published on CSR by scholars and professors to identify the knowledge that this study has and gaps between them. It will be also about reviewing the differences of the policy of selected companies.
Chapter 3 is research methods. This chapter outlines the methods used to meet the aims of the research. Different methods dealing with primary and secondary data collection would be explained.
Chapter 4 is analysis, results and findings. The research procedure which is the analysis techniques will be explained and the result of the research will be reviewed in detail.
Chapter 5 is conclusion and recommendations which is to summarize all the thoughts and ideas in this study.
2.1 Concept of CSR
Over the years, many scholars and practitioners have defined, redefined and extended CSR concept. There are many different CSR definitions exist in literature, which come from researchers, economists, governmental bodies and other organization which concern the society.
Over the years, CSR has become a popular topic in the media where free publicity is given to a company’s commitment or lack of commitment to CSR. Also, mass media is able to provide consumers with new information regarding social attributes and methods of production. It enhances consumer awareness and therefore influences demand for CSR (McWilliams et al., 2001).
CSR has become prominent over the world (Papasolomou-Doukakis, 2005). Besides
having significant impact on economic and financial performance, it is also vital to organizations to establish a trustworthy and sustainable relationship with the community (Luo & bhattacharya, 2008). There is a great rise of awareness on the fact that organizations must participate in society in an ethically and mutually beneficial way. Corporate must take society’s existence and the growing demand for ethically responsible business practices from public into account (Joyner and Payne, 2002). They should address the concerns of the public. According to Donaldson (2003), organizations are now investing more resources in CSR progressively to demonstrate their commitment, ethical outlook and responsible behavior in this area. Moreover, businesses are expected to bear obligation to the society, employees and customers rather than just concerning their shareholders. (Sen & Bhattacharya, 2001)
CSR has been defined as “the economic, legal, ethical, and discretionary expectancies that society has of organizations at a given point in time” (Carroll, 1979). CSR differs in terms of its underlying meanings and have been developed throughout the years. The definition which is used generally of CSR derived from the Commission of the European Communities (2001) and the World Business Council for Sustainable Development (1999). They define CSR as a continuing commitment by business to integrate not only economic concerns, but also environment and social concerns in their business activities with their stakeholders. They should behave ethically to better the quality of life of the community and society at large on a voluntary basis.
Therefore, there are relationships between corporations and other interests, for example, the social, cultural, environmental and economic systems. It is because those interests in our society may be affected by business activities. A strong economic dimension may be given by these relationships; however, a primary focus on environment concerns may also be given by them.
2.2 Implementation of CSR
Companies should take actions to protect and improve the welfare of society as well as that of their businesses. According to Smith (2003), there are
different forms and levels of social responsibility that corporations can take. The importance of CSR is not only related to better social welfare but also to companies’ motivation to take CSR actions.
The possible motivations for organizations seek to engage in socially responsible behaviors are long-term financial strategy (e.g. saving on raw materials and energy by efficient technologies), eco-efficiencies (e.g. reduction in green tax as a result of savings achieved through pollution reduction), competitive advantage, pressure from stakeholders, brand and image enhancement (Lynes and Andrachuk, 2008) in order to meet enlightened-self-interest considerations. They want to meet external obligations (i.e. regulatory compliance and stakeholder demands) and to avoid or delay regulatory actions too (Waddock& Smith, 2000). Although this may be one of the motivations for them to implement CSR, it may not be a sustainable motivation as it does not provide an incentive to improve the relationships with stakeholder or encourage efficiency of resource (Welford, 2003).
Epstein (2009) identifies three dimensions of CSR which an organization should accomplish so that to establish a good corporate citizen image.
The fundamental responsibility of corporate is economic performance which is to gain financial profit. The call for steady and sustainable increases in company value and to earn a fair return on capital to satisfy shareholder economic interests is imperative. Beyond individual investors and owners, companies should provide significant economic benefit by producing taxable income and providing employment (Lantos, 2001). Also, value should be delivered to the customers by improvement to add value of the product and services.
Governments increasingly focused on environmental issues related to industrial operations. Besides, globalization trends have served to raise public concern over issues concerning about the society. Topics of social
concern that have evolved are the protection of natural resources, ecology-oriented innovation, reduction of the impact of business activity on the environment and so on.
In addition to a growing environmental consciousness, the social aspect of CR has become an increasingly important concern for companies to act ethically and be fair, respect people’s rights, avoid harm and social injury (Lantos, 2001). With the advent of these interests, it is becoming critical that companies effectively balance potentially conflicting stakeholder interests with social and environmental responsibilities. Some strategic focuses of social dimension are humanist management, education and people’s skill development, health and safety management and so on.
This report focuses primarily on the stakeholder group “consumers” and whether the CSR activities of cosmetics companies can satisfy consumers’ expectation. Consumers have several preferences and views to influence a company’s CSR activities. As mentioned by McWilliams and Siegel (2001), there is strong evidence that many consumers value CSR attributes.
CSR in Hong Kong
Social and environmental concerns are always ignored by companies in Hong Kong in formulating corporate strategies. According to Friedman (1963), company sole goal is to gain financial profit. Therefore, companies do not have any responsibility to deal with the problem concerning the society, environment and also the world (Reinhardt, 2000) and CSR is just the voluntary barrier to maximize profit (Andrews, 1989).
Hong Kong companies adopted code of ethics in their policy as a result of the encouragement of the Independent Commission Against Corruption (ICAC) (Preble and Hoffman, 1999). It is just focus on internal aspects of companies’ ethics and the behavior of individual employees (Snell et al, 1999), but not the external aspects of business ethics. The environmental and social management and reporting is insufficient in Hong Kong that only small number of companies express their CSR policy by issuing CS report
(Copeland-Chiu et al, 2002).
2.3 CSR in Cosmetics Industry
In recent, there are many business scandals and they raise the disagreement of general public and arouse the concern of CSR. Therefore, recent researches have highlight business ethics and CSR in order to address the problem. For example, the scandals in cosmetic industry such as cosmetic products were discovered that containing concentrations of mercury or carcinogenic ingredients, public concern on the health and safety standards of cosmetic products is rising. Consumers may purchase cosmetic goods that they perceive to have a relatively low level of negative environment/social impact to competing cosmetic products.
Also, there is a growing trend of worldwide for the cosmetic market. The products in cosmetic industry seem to have shorter life cycles than products in other industries. Innovation is vital for the cosmetic companies to be survived in the competitive environment. Therefore, cosmetic companies tend to incorporate CSR in their businesses in order to longer their products life cycle. Industrial sectors, i.e. the cosmetic industry, have high real or perceived socio-environment impact and are in the public eye are likely to be constituted by corporate that CSR must be implemented in some issues.
In cosmetic industry, the hottest topic of CSR activities is the ingredients used in skincare and cosmetic. The prevalent and recent trend for cosmetic goods is the application of natural and organic resources as natural ingredients. Health-conscious cosmetic users think that it is important and essential to know the ingredients used in the products. For instance, they want to know whether the ingredients are natural and organic ingredients that do not have harmful effects when people apply. Moreover, cosmetic users want to know whether ingredients are come from organic farm and whether the companies participate in fair trade.
2.3.2 Animal Testing
Cosmetic product tested on animal is the other major issue in the cosmetic
sector (Salman & Madoka, 2008). Cosmetic companies report whether their products are tested on animals in order to show the care for the ecosystem.
One of the main environmental impacts of cosmetic industry is packaging waste generation (Salman & Madoka, 2008). The presentational impact of packaging is a key product attribute in cosmetics that the beauty sector should reduce packaging waste due to consumer pressure and legislation (William, 1996). Cosmetic companies may report on their control on the volume and weight of packaging that trying to minimize the packaging waste. Some may emphasize the use of recycled materials, such as Shiseido which collects the empty cosmetic bottles for recycling.
2.4 Cosmetic Industry Control Environment
The EU, Japan and the US are the major cosmetic market over the world which account for a huge portion of total consumption (OECD, 2007). In this section, the control environment concerning the cosmetic industry of these countries and also Hong Kong will be told.
2.4.1 Cosmetic Regulation in Hong Kong
Almost all of the cosmetic products are imported from other countries and only handfuls are manufactured in Hong Kong (ICE HK, 2005). As for the regulations concerning cosmetics sector in Hong Kong, it seems that the control environment is not being quite as good as other countries. There is insufficient regulation for cosmetic sector, let alone enforceable CSR policy in the cosmetic sector. CSR of cosmetic products highly depends on the self regulation of cosmetic companies.
In Hong Kong, the Consumer Council acts as an important role to provide view on the subject on regulation and safety of cosmetic products over the years. It also provides testing on cosmetic products such as acid cream, color cosmetics and skincare goods (The Consumer Council, 2011). It also introduces some regulatory measures in order to improve the safety standard. Besides, there are some non-government organizations, for instance, the Cosmetic & Perfumery Association of Hong Kong Ltd and Hong Kong Cosmetic
Technical Resources Centre (HKCTR). However, only a small number of them offer cosmetic testing and assessment on management and certification to prevent quality problems (HKCTR, 2008).
Cosmetic products are not food or medicine which should be regulated under separate legislation. Consumer goods which include cosmetic products must be acted in accordance with the General Safety Requirement under The Consumer Goods Safety Ordinance (CGSO) Section 4. Also, the Secretary for Economic Services may approve by regulation to a safety standard applicable to the consumer goods (CGSO, 1994). However, there is lack of specific government’s enforcement safety standards of ingredients used in cosmetics products. The safety limits and a list of certain substances used as ingredients in cosmetic products is not laid down by the CGSO. Specific regulation to control products which are named ‘natural’ or ‘organic’ is not laid down by the CGSO too. No mandatory labeling system in cosmetic industry to enable public to make informed decision is set up in Hong Kong. Cosmetic companies are not legally bound to disclose any necessary information of their products.
2.4.2 Cosmetic Regulation in the European Union
The cosmetic industry in Europe is seen as a world leader and dominant cosmetics exporter over the world. The European Union strictly requires that cosmetic products must be safe to be use, they must not ‘cause damage to people health when under normal or reasonable foreseeable conditions of use’ (Council Directive, 1976). European Cosmetics Directive regulates the safety of cosmetic products in the EU. A Directive impacts all Member States. Member States which have health authorities need to transpose the Directive into their national law and then regulate cosmetic products within their respective national boundaries according to the law to fulfill all requirements.
Council Directive 76/768 is the current main regulatory framework on the cosmetic industry relating to cosmetic products in EU and it has been adopted since 1976. It aims to assure the safety of cosmetic products. The European legislators, which are the European Parliament and the Council of
the European Union, amended the Council Directive several times in order to better the regulations of cosmetic products in EU. It regulates the following aspect:
The safety limits and a list of certain substances used as ingredients in cosmetic products only under the restrictions and conditions are laid down in Council Directive.
Cosmetic companies are legally bound to disclose any necessary information of their products. The products’ information must be labeled clearly on the container or the package in the national or official language or languages of the respective Member State. A list of ingredients must be contained in the label.
Animal testing is prohibited under the Council Directive while it is not under strict regulation in Hong Kong. Testing ban does not allow testing finished cosmetic products and ingredients on animals. Also, there is marketing ban that cosmetic companies cannot promote their products which have been tested on animals.
Furthermore, cosmetic product safety must be assessed before selling in the market. It requires cosmetic companies should issue the Cosmetic Safety Reports for the Member States to access (Norman, 2000). All of the special and active cosmetic ingredients are reviewed by the EU Scientific Committee on Consumer Safety in order to assess condition of cosmetic products whether they are safe to use. It also publishes the results of assessment on its website for public to view (The EU Scientific Committee, 2011).
2.4.3 Cosmetic Regulation in the U.S.
In the U.S., Food and Drug Administration (FDA) requires cosmetic companies to comply with strict regulations of the federal Food, Drug, and Cosmetic Act (FD&C Act). All cosmetic products and their ingredients must be
substantiated for safety before selling in the market and the ingredients of the products must be allowed and not prohibited (FD&C Act., 2010). The labels of the products must be truthful and not misleading. FDA exercises some authority over assessing whether these products should be on the market (Bryan A. Liang & Kurt M. Hartman, 1999). Cosmetic companies should comply with any restrictions that are established for cosmetic ingredients and products. Any potential risk from a product is assessed as part of its safety evaluation.
Over the years, cosmetic companies in U.S. have gone beyond the requirements of the law to make available additional safety information and technical resources. There are also some industry programs established to support the FDA’s regulatory work for example, the Cosmetic Ingredient Review(CIR) and the Cosmetics Industry Consumer Commitment Code. They review of ingredients as a part of the cosmetic safety process, with the results published in the International Journal of Toxicology and on the website (CIR, 2008)
Cosmetic companies invest substantial resources in scientific research and safety processes to ensure the safety of their products. Companies work with and employ thousands of chemists, toxicologists, biologists, environmental scientists and other experts to evaluate the safety of cosmetic products before they go to market.
Some people may argue that cosmetics are more strictly regulated in the EU (Karl, 2009). There are approximately 1,300 banned ingredients under the Annex II of Council Directive (2011) which a large number of those ingredients are not used and never have been used in cosmetics in the U.S. or Europe. Another difference between the EU and U.S. systems of regulating cosmetics is that the EU does not allows animal testing on cosmetic product while the U.S. does not specified regulation in this aspect. Although the U.S. and EU have slightly different ways of regulating the cosmetic industry, but both systems provide consumers with a high degree of safety.
2.4.3 Cosmetic Regulation in Japan
Cosmetics regulation in Japan is based on different laws and ministerial
ordinances consisting mainly of the Ministry of Health, Labor and Welfare according to Article 2-3 of the Pharmaceutical Affairs Law which states the standard for cosmetics. Japan has adopted a list of prohibited ingredients, a list of restricted ingredients, a positive list of UV filters and a positive list of preservatives. A special committee is responsible for reviewing the substance and the Ministry of Health issues a safety assessment to the cosmetics company. Japan has an additional category, ‘Quasi Drug’, which shall have mild effects on the human body, standing between pharmaceuticals and cosmetics. It requires pre-marketing approval and registration of ingredients and means that specific products may be categorized as cosmetics in the EU and as quasi-drugs in Japan.
Japan has eased the standards for cosmetics and has deregulated the cosmetics industry, so the old system of obtaining prior approval and licenses for products has been abolished in principle (Giovanni, 2009). The burden of ensuring product safety has been shifted to cosmetic manufacturers. As such, any ingredient that can be shown to be safe may be used in a cosmetic product. Until recently, a manufacturer or importer of cosmetics was required to obtain a pre-market approval and license from the Ministry of Health, Labor and Welfare. Since 2001, however, Japanese cosmetics companies are required only to provide notification of the product’s brand prior to manufacturing or importing.
Article 61 of the Pharmaceutical Affairs Law (2005) describes in details the labeling requirements of the product as well as the three basic principles of Advertising (clear intention to attract customers; brand names of specific medical drugs clearly provided; advertisement can be easily recognized). Article 66 regulates advertising (exaggerated advertisement, etc.).
Japan is an excellent example of a nation where costly pre-market registration procedures were replaced with manufacturer responsibility for product safety and with post-market surveillance (similar to the systems in the U.S. and EU) without compromising consumer safety.
Chapter 3: Research Methodology
3.1 Research Approach
Quantitative and qualitative research methods are both chosen so as to achieve the research aim of this study.
3.1.1 Quantitative Research
Primary data is collected through predominantly standardized closed-ended and forced-choice questions questionnaires with a goal to describe public perception and opinions of CSR and cosmetic companies. This is done through self-administered style questionnaire, which are distributed via in hand and on the internet through online survey questionnaire research. The research participants which are the cosmetic users in Hong Kong are selected randomly from the population in an unbiased manner. In this connection, every sample has the same chance to be selected. It involves a convenience sample that data can be collected and analyzed fairly quickly and a large group of people can be reached. Therefore, the results from the sample can be generalized to the entire population with quantifiable, reliable data (Bryman & Bell, 2007).
3.1.2 Qualitative Research
Qualitative method is used to collect secondary data. It will result in more thorough information and deeper knowledge about the control environment of few foreign dominant cosmetic markets (i.e. Europe, the U.S. and Japan) and also Hong Kong cosmetic industry and three selected companies who have implemented CSR in their policy (Bryman & Bell 2007). In this connection, based on the purpose of this research, company interpretations and attitudes towards environmental awareness and voluntary actions in terms of societal and environmental issues of cosmetics companies are the focuses, which needed to be discovered by conducting qualitative research which can provide detailed information but not general information. It gives the opportunity and it is flexibility to the researcher of learning government policy controlling the cosmetic sector and companies’ CSR policy expectations and current elaborations within their own words rather than just focusing on numbers gathered by quantitative surveys.
3.2 Research Design
As for primary data collection, participants are asked 26 questions concerning CSR policy in cosmetic industry and their expectations of companies regarding CSR issues. The questionnaire is included in appendix 1.
The questionnaires consisted of 4 Sections. Section A of the questionnaire is to collect demographic data in order to check whether the result can generalize to most of the people. Section B is about respondents’ awareness of CSR in order to know whether respondents have sufficient knowledge about CSR and that they can answer the questions without guess. Section C is about environmental and social aspect of CSR and aims to find out whether cosmetic companies do well in these aspects to meet public expectation. Section D asks question about impacts for CSR implementation to find out whether cosmetic companies implement CSR in their policy can bring them benefits. For Section B, questions are multiple choices and Yes/no questions. For Section C and D, respondents were requested to rate their opinions according to a five point Likerttype scale ranging from 1 to 5 and from strongly disagree to strongly agree.
As for secondary data collection, literature review is sourced from journal articles, books and government publications. CSR policy is found on the web site of some cosmetic companies in order to find out what have they done for the society and environment. It is adequate to identify the main idea of CSR and to apply the aim of this study.
3.3 Research Sampling
As quantitative and qualitative researches are both conducted, there are primary and secondary date collections.
3.3.1 Primary Data Sampling
For this study, at least 50 sets of questionnaires will be distributed to public in Hong Kong during October and November in 2011. The targeted respondents are the cosmetic users which are important stakeholder of cosmetic companies. Half of the questionnaires will be distributed via in
hand outside cosmetic shops and the others will be distributed through internet. Simple random sampling is used. In this study, the author’s ask persons who are in her control environment to be interviewed. Moreover, not all respondents are the friends or family members of the author so that the bias on the choices of respondents that have similar mindsets can be reduced. There is no restriction of gender, age or social status of the targeted population. Therefore, it is appropriate that the research have diversify sampling, males and females, people at work or student, so as to obtain opinions for cosmetic users in a wider scope.
3.3.2 Secondary Data Sampling
Government’s policy of control in cosmetic industry is accessed through websites to find out the information of different laws, standards and regulations. In fact, almost all of the cosmetic companies are foreign companies, cosmetic products are mainly imported from other countries and manufacturing of cosmetic product is difficult to find. Therefore, companies are selected randomly based on whether they have CSR report to show their effort on CSR in Hong Kong. Many cosmetic companies declare their CSR policy on their web sites and also on other media such as advertisement to show their corporate responsible activities and image. In fact, not all cosmetic companies use CSR to position and market their products. Therefore, this research samples cosmetic companies which have well known CSR and in terms of their representative of cosmetic and also market shares. The data will be obtained from companies’ websites and catalogues which are checked in order to establish if they have CSR policy publicly available on the Internet. For those who disclosed their policy on the Internet or their leaflets, their CSR actions are evaluated based on content.
3.4 Data Analysis
There will involve descriptive statistics to analyze data collected from survey. The responses from the questionnaires will be rated in percentages. Descriptive analysis is presented in table or charts.
Secondary data is to be analyzed using content analysis. Content analysis can make comparisons of the policy of CSR between the selected companies and
examine trends of the government’s policy of controlling in cosmetic industry.
3.5 Limitation of the Study
In this study, there are some limitations that cannot avoid. Most of the respondents do not have much knowledge about cosmetic and therefore they may not give opinions that really reflect the CSR policy in the cosmetic industry. Also, not every participants familiars to the topic CSR and then they may confuse about the question in the survey and answer them with guess.
According to limited cost and time, this research uses a convenience sample. The disadvantage of this sampling method is that it may be a method which is subjective and arbitrary (non-random) (Blumberg, 2008). Besides, the location of the author is limited as the survey is conducted only in Hong Kong. The sample group includes people in Hong Kong mainly. Cosmetic users of other countries cannot be accessed easily. Therefore, the results of this study cannot be generalized to user in other countries.
3.6 Research Criteria
Primary data are come from survey which the questionnaires are distributed on hand and through internet equally. The author can really reach the respondents and the information collect are not create by the researcher. Information, theories and knowledge used in this study comes from literature review which is based on journal articles and books. Besides, there is a substantial amount of information about control environment of cosmetic industry and also companies such as government publications and CSR report. This information is controlled by government and also some assurance organization. Therefore, the validity of this research is considered to be high.
Information generated is reliable because the author follows previous researchers’ methodologies that have been used for so many times. Repeated measurements can result in information consistency and therefore the result
is reliable (Carmines & Zeller, 1979).
Generalizability refers to the process of applying research result from a study to a larger population. This study would like to generalize the result to the cosmetic users in Hong Kong. There are at least 50 cosmetic users in Hong Kong that are invited to do the questionnaires. The participants in different ages and different sexes are selected randomly either outside some cosmetic shops or through internet. The result from the sampled participant can be generalized to Hong Kong cosmetic users as they are the representative of Hong Kong cosmetic users. Three selected companies seem to have significant representative of cosmetic and market shares. Therefore, the result can be applied to the whole population of cosmetic industry.
Chapter 4: Data Description
4.1 Survey Response Rate
In this study, there are 197 set of questionnaires are distributed to public outside cosmetic shops in Hong Kong via in hand and on the internet through online survey questionnaire research. The survey was conducted during the period from mid October to early November. There are 61 questionnaires are returned back and the overall response rate is 30.96%.
4.2 Section A: Personal Information
| |No. of respondents |Percentage of total respondents (%) | |Sex | | Male |26 |42.6 | | Female |35 |57.3 | |Age | |Under 21 |0 |0 | |21 – 30 |33 |54.1 | |31 – 40 |19 |31.1
| |41 – 50 |7 |11.5 | |Above 50 |2 |3.3 | |Occupation | |Student |13 |21.4* | |Retired |1 |1.6 | |Unemployed |1 |1.6 | |Employee |46 |75.4 | |Total |61 |100 |
Table 1: Demographic Data
The sample consisted of 35 females and 26 males which were 57.3% and 42.6% of the respondents respectively. There were 33 respondents in the age group in 21 – 30 and 19 respondents in 31 – 40. It took 54.1% and 31.1% of total respondents respectively. The majority of the respondents were 46 employees of 75.4%, followed by 13 students of 21.4%.
4.3 Section B: Awareness of Corporate Social Responsibility
There were 52 respondents (85.2%) have heard CSR before and the remaining 9 respondents of 14.8% have not heard CSR before.
The vast majority, 54 respondents of 88.5% thought CSR is important for company while 7 respondents of 11.5% thought that it is not important.
Respondents who though CSR is important were required to answer this question with a maximum of three choices. Therefore, the sum of responses were 161 in total which is more than the total number of respondent. There were 41 respondents of 25.5% chose option E, followed by Option B (29 respondents of 18%) and A (28 respondents of 17%).
Respondents were required to answer this question with a maximum of three choices. Therefore, the sum of responses were 155 in total which is more than the total number of respondent.The majority of respondents chose social factor which consisted of 49 respondents of 31.6%. There were 43 respondents of 27.7% chose ethical factor, followed by environmental factor which consisted of 39 respondents of 25.2%.
4.4 Section C: Environmental and Social Aspect of CSR
4.4.1 Environmental Aspect
There were 24 respondents of 39.3% agreed that cosmetic companies are environmentally responsible if the ingredients used in cosmetic products are natural or organic, followed by 22 respondents of 36.1% strongly agreed.
The majority of the respondents which consisted of 35 respondents of 57.4% strongly agreed that cosmetic companies are environmentally responsible if they have done well on minimizing the waste of packaging, followed by 14 respondents of 22.9% agreed.
There were 27 respondents of 44.3% agreed that cosmetic companies are environmentally responsible if there is sustainable use of biodiversity for
ingredients, followed by 16 respondents of 26.2% answered neutral.
There were 26 respondents of 43.6% agreed that companies are environmentally responsible if they use renewable energy on their production. Fewer respondents strongly agreed about that (17 respondents of 27.9%), followed by answering neutral (16 respondents of 26.2%).
Question 12 aims as finding whether it is important that the company which purchasing of skincare and cosmetic products from is environmentally responsible. The 21 agreeing respondents made up 34.4% of the sample and the 20 answering neutral respondents made up 32.8%.
There were 24 respondents of 39.4% answered neutral in Question 13 asking whether cosmetic companies are environmentally responsible in general. Respondents who agreed were nearly equal with who disagreed, which were 14 respondents of 22.9% and 15 respondents of 24.6% respectively.
4.4.2 Social Aspect
There were 18 respondents of 29.5% and 13 respondents of 21.3% strongly agreed and agreed that cosmetic companies are socially responsible if there is no product testing on animal. Also, there were 17 respondents of 27.9% answerd neutral.
In Question 15, 22 respondents of 36.1% and 14 respondents of 22.9% strongly agreed and agreed that cosmetic companies are socially responsible if they engage in community trade by paying fair prices and fair wages. There were 17 respondents of 27.9% answerd neutral.
Half of the respondents (31 of 50.8%) agreed that cosmetic companies are
socially responsible if they make it a point to report on how they organize to make sure CSR issues are taken into consideration, followed by 19 respondents of 31.1% answered neutral.
There were 25 respondents agreed that cosmetic companies are socially responsible if they partner with non-governmental organizations such as WWF and World Vision on different issues. Also, there were 11 respondents of 18.0% strongly agreed.
The number of respondents who agreed and who answered neutral are the same in Question 18 asking whether it is important that the company which purchasing of skincare and cosmetic products from is socially responsible. Both consisted of 25 respondents of 41.0%.
More than half of the respondents (34 of 55.7%) answered neutral in Question 19 asking whether cosmetic companies are socially responsible in general. There are 15 respondents of 24.6% agreed.
4.5 Impacts for Corporate Social Responsibility implementation [pic]
There were 26 respondents of 42.6% agreed that it is acceptable to pay more on the cosmetic product if the cosmetic company implements CSR in its policy, followed by 18 respondents answered neutral.
In Question 21, more than half of the respondents (33 of 54.1%) agreed that cosmetic products are more preferable if they have a relatively low level of negative environment/social impact to competing cosmetic products. Also, there were respondents of 32.8% answered neutral.
The majority of respondent which consisted of 39 respondents of 63.9 agreed that cosmetic companies are trustworthy if they implement CSR in their policy, followed by 15 respondents of 24.6 answered neutral.
There were 22 respondents of 36.1% strongly agreed and 27 respondents of 44.2% agreed that brand and image of cosmetic companies can be enhanced by adopting CSR policy.
There were 37 respondents of 60.7% agreed that CSR can be instrumental in helping to increase the value of the company and safeguard its sustainable development, followed by 15 respondents of 24.6% answered neutral.
There were 29 respondents of 47.6% agreed that cosmetic companies should submit CSR report periodically, followed by 21 respondents of 34.4% answered neutral.
More than half (33 of 54.1%) of the respondents agreed that cosmetic companies communicate and disclose their CSR policy to the public well. There were 18 respondents of 29.5% answered neutral.
Chapter 5: Data Analysis
5.1 Selected Companies
Shiseido Co. Ltd. was the first Western-style pharmacy in Japan and stepped into cosmetic world when releasing Eudermine which is toner-like lightweight lotion in 1897. It was created because Japanese used cosmetic with a chemical called white lead causing lead poisoning. It aims to provide safety and quality to its customers.
Shiseido is selected in this study because it is one of the world’s leading
cosmetics companies and its worldwide network. In 2010, it has net profit of USD$361.9 millions. Shiseido has its CSR report declared on web site about its CSR information and activities. Shiseido has strong CSR and it is using CSR as a tool in marketing (Shiseido, 2011)
5.1.2 Origins Natural Resources
Origins Natural Resources (Origins) is a U.S. cosmetic company established in 1990 which owned by Estee Lander Company (ELC). The objective of Origins is to provide high quality natural cosmetic products which are using resources from nature and using scientific way to prove its products. It commits and keeps trying to protect the planet, and also the valuable resources. Besides, Origins respects animal’s right and takes part in animal friendly activities.
In the U.S., Origins ranks at top five in the Estee Lauder group and it is expected to reach more than $300 million revenue globally. Origins has its own CSR policy published on web site and Estee Lauder has the whole group CSR report declared on web site. Both of them provide detailed information about their CSR policy. (Origins, Estee Lauder, 2011)
5.1.3 L’Occitane en Provence
L’Occitane en Provence (L’Occitane) is a cosmetic company that established in France in 1976. The founder exercised his enthusiasm for nature’s most precious treasures and created a cosmetic company based on essential oils and natural ingredients. All of its skincare and cosmetic products are designed, manufactured and marketed based on natural and organic ingredients.
In the year ended 31 March 2010, L’Occitane generated net profit of €84.6 million. Although it has no CSR report on its web site, there is CSR policy regarding environmental and social sustainability aspects.
5.2 Data Analysis
5.2.1 Demography Information (Question 1 – 3)
In Table 1 in Chapter 4, 42.6% respondents were male while 57.3% were female. This gender disproportion was expected by the author as women have more
concern about cosmetic products or issue about cosmetic. In fact, these percentages roughly met the gender split within Hong Kong (approximately 47% of male and 53% of female) and the sample was a good representation of the population.
Most respondents were in the age group between 21 – 30 and 31 – 40. This correlates well with the age of cosmetic companies target customers who are more likely to spend on cosmetic products.
As for occupation, 75.4% of respondents were employees. The information seems logical because people who are in working group are available to afford spending on cosmetic products. As unemployed and retired people will not spend much on cosmetic, thus they may not visit cosmetic shops frequently.
5.2.2 Awareness of Corporate Social Responsibility (Question 4 – 7) In Figure 1 in Chapter 4, 85.2% respondents have heard CSR before. It is consistent with McWilliams (2001) that more and more people aware of CSR nowadays.
In Figure 2, the vast majority (88.5%) thought CSR is important for company. This implied that CSR is considered to be important by the majority of the population. It is consistent with Papasolomou-Doukakis (2005) that CSR has become important for companies and it is prominent over the world.
In Table 2, there were 25.5% respondents thought that CSR is important because cosmetic companies are expected to bear obligation to the society, employees and customers rather than just concerning their shareholders. Also, 18% respondents thought that it is vital to companies to establish a trustworthy and sustainable relationship with the community. There were 17% respondents thought CSR is important because business activities may affect public interest. These are consistent with Sen & Bhattacharya (2001) and Luo & Bhattacharya (2008) that companies consider CSR in their policy because of these reasons.
The majority of respondents (31.6%) chose social factor as the most important factor of CSR, followed by 27.7% respondents chose ethical factor and 25.2%
respondents choose environmental factor. The result was a bit different from Epstein (2009) identifies three dimensions of CSR which are economic, environmental and social that an organization should accomplish so that to establish a good corporate citizen image. However, only social and environmental factor are discussed in this study.
5.3 Comparison of Three Selected Companies
5.3.1 Environmental Aspect (Question 8 – 13)
Cosmetic companies always use natural ingredients in their products to show that they are environmentally responsible. This is consistent with the result in Table 3 in Chapter 4 that the vast majority (75.4%) agreed about that. However, most of the ingredients used on Shiseido’s products are not natural or organic. Only a small amount of natural ingredient is added into the products. As for Origins, it uses 100% natural essential oils and certified organic ingredients used in its products. As for L’Occitane, there are approximately 150 plants used in the formulas and it creates 100% certified-organic products which sources from organic farmers. Origins and L’Occitane do better that Shiseido in this aspect.
The result also showed that most of the people (80.3%) agreeing minimizing the waste of packaging is one of the way to be environmentally responsible. This is consistent with Salman & Madoka (2008) that packaging waste is one of the main environmental impacts of cosmetic industry. Shiseido launched many replaceable refill products such as the MAQuillAGE Set Eye Shadow. It also reduces and recycles plastic and glass of some of its products. As for Origins, it encourages customers to bring their empty unrecyclable cosmetic bottles to it and send to be recycled or used for energy recovery. As for L’Occitane, it used an eco-design approach to reduce product packaging such as using materials that are renewable and can be recycled. Three selected companies have done well in this aspect.
Biodiversity for Ingredients
As for sustainable use of biodiversity for ingredients, only 44.3%
respondents agreed that. Nevertheless, Shiseido has taken place in many research projects concerning biodiversity. It joined the Roundtable on Sustainable Palm Oil and the Japan Business Initiative for Biodiversity to examine potential solutions to biodiversity-related issues. Also, Origins tries to use purchasing power to enhance livelihoods and protect biodiversity. It partners with government and NGOs to identify sustainable sources. It buys certified sustainable palm oil and it has begun to engage with others to find ways to increase the availability of sustainable palm oil. However, on the website of L’Occitane CSR policy, there is no information show that L’Occitane has done its best to ensure ingredient biodiversity.
There were 71.5% respondents strongly agreed and agreed that using renewable energy on production is environmentally responsible. All selected companies are correspondent with the result that they have used renewable energy, all using solar energy. Some Shiseido’s factory has installed solar-powered system to product light and electricity to reduce emissions of CO2. Origins also uses solar energy to generate electricity in some of its factories and purchases renewable energy to offset the energy used in retail stores. L’Occitane has installed solar panels to generate power for the water heater.
|Environmental Aspect |Shiseido |Origins |L’Occitane | |Natural ingredients |( |( |( | |Packaging minimizing |( |( |( | |Biodiversity for ingredients |( |( |( | |Renewable energy |( |( |( |
What companies have done on environmental aspect was summarized in Table 10.
Origins has done the best among three companies. However, Table 4 in Chapter 4 shown that only 54.1% respondents thought it is important that the company which purchasing of skincare and cosmetic products is environmentally responsible. Company being environmentally responsible may not be a reason for consumer to choose its product.
In Table 4, although most of the people answered neutral that cosmetic companies are environmentally responsible in general, respondents who disagreed are more than who agreed. This is distinct with the qualitative research that the selected companies have done a lot in environmental aspect. The result implies that the companies cannot meet consumer’s expectation on environmental issue sufficiently. 5.3.2 Social Aspect (Question 14 – 19)
In Table 5 in Chapter 4, more than half of the respondents (50.8%) strongly agreed and agreed that companies avoid animal testing are socially responsible. This is correspondent with Salman & Madoka (2008) that cosmetic product tested on animal is the other major issue in the cosmetic sector. Origins tests its products by clinical tests on volunteer panel instead of animal testing. Besides, L’Occitane has chosen not to do animal testing on its products and it has never used products of animal origin. As said in Shiseido’s CSR report, it hopes to eliminate animal testing by 2013. However, it conducts animal testing on cosmetic ingredients. This may due to the reason that animal testing has not been prohibited in Japan but in U.S. and Europe.
Table 5 shows that, 59% respondents thought companies are socially responsible if they engage in community trade. As for Shiseido, some of the products are formulated with materials procured from fair trade sources. It also established the Shiseido Group Supplier Code of Conduct that is relevant to fair commercial transactions. Origins work with suppliers and others to identify and develop ethical sources of raw materials that protect workers’ human rights. The suppliers of it have guarantee fair pay for
worker and reduce children work. As for L’Occitane, it engages in community trade that it ensure the women of Burkina Faso to receive full benefits of their work and also paid fair price to them. Three selected companies have done well in this aspect to meet consumer expectation.
Report on CSR
Half of respondents (50.8%) agreed that companies are socially responsible if CSR issues are taken into consideration. All selected companies have reported their CSR in order to be socially responsible. CSR policy of Shiseido is published on its website. Different areas have been addressed by Shiseido, for instance, Environment, Labour Practices and Human Rights. Also, there is a CSR committee in Shiseido in order to decide CSR policy and to help in designing and promoting CSR activities. ELC has CSR report published on its website. Origins has it own CSR policy published on Origins website regarding different aspect such as ingredient and packaging. Although there is no CSR report of L’Occitane, it provides its CSR policy and information on its website under sustainability. Its CSR policy covers its products, factory, transportation, employees and shops.
Partner with NGOs
The result showed that 59% respondents strongly agreed and agreed that companies are socially responsible if they partner with NGOs. Only Shiseido can meet the respondents’ expectation. It partnered with United Nations High Commissioner for Refugees (UNHCR) to promote deeper knowledge of refugee issues. Also, it provides support for World Wide Fund for Nature (WWF) conservation activities. Some brands of ELC have been committed to community care such as M.A.C AIDs Fund and the group Breast Cancer Awareness Campaign. However, Origins itself does not partner with NGOs on different issues. There is no sufficient evidence to prove L’Occitane has partnered with NGOs with different issues. Therefore, Shiseido has done the best in this aspect.
|Social Aspect |Shiseido |Origins |L’Occitane | |Avoid animal testing |( |( |( | |Community trade
|( |( |( | |Report on CSR |( |( |( | |Partner with NGOs |( |( |( |
What companies have done on social aspect was summarized in Table 11. Three companies have done well but there is room for improvement. However, Table 6 in Chapter 4 shown that less than half of the respondents (49.1%) thought it is important that the company which purchasing of skincare and cosmetic products from is socially responsible. Company being socially responsible may not be a reason for consumer to choose its product.
In Table 4 in Chapter 4, only 24.6% respondents agreed cosmetic companies are socially responsible in general and more than half of the respondents (55.7%) answered neutral. This is distinct with the qualitative research that the selected companies have done a lot in social aspect. The result implies that the companies cannot meet consumer’s expectation on social issue sufficiently.
5.4 Impacts for Corporate Social Responsibility Implementation In Table 7, there were 54.1% respondents agreeing that it is acceptable to pay more on the cosmetic product if the cosmetic company implements CSR in its policy.
There were 63.9% respondents strongly agreed and agreed that cosmetic products are more preferable if they have a relatively low level of negative environment/social impact to competing cosmetic products. This is correspondent with Lynes and Andrachuk (2008) that CSR implementation can help enhance competitive advantage of the company.
In Table 8, there were 70.5% respondents agreed that cosmetic companies are trustworthy if they implement CSR in their policy. This is consistent with McWilliams and Siegel (2001) that there is strong evidence that many
consumers value CSR attributes as a way to establish trustworthy relationship with them.
The vast majority, 80.3% respondents thought that brand and image of cosmetic companies can be enhanced by adopting CSR policy.
The agreeing 73.8% respondents thought CSR can be instrumental in helping to increase the value of the company and safeguard its sustainable development.
In Table 9, there were 60.7% respondents supported that CSR report should be submitted periodically.
There were 60.7% respondents thought that cosmetic companies communicate and disclose their CSR policy to the public well.
Chapter 6: Conclusion
This research aims to examine whether the CSR policy of the cosmetic industry is sufficient to meet customers’ expectation in Hong Kong. This research studies the concept and control environment of CSR among Hong Kong and three other countries. Responses on CSR from public were gathered and analyzed and comparison of CSR policy from three selected companies was made. Furthermore, conclusion and recommendation are to be made in this chapter.
This research was done by using both quantitative and qualitative approach in order to collect primary data and secondary data. Public responses were collected through questionnaires and secondary data was collected through CSR reports and policy. The research approaches are important that they can help in meeting the objectives of this study. They can also help in reducing uncertainty and increasing reliability, validity and generalizability of this study. All objectives of this study have been fully met.
6.2 Finding and Implication
The author found that most of the people have heard CSR and it has become
prevalent in Hong Kong. General public not only concern the financial performance of corporations, but also their contribution to the environment, social, community and so on.
All selected companies have done well in packaging minimizing such as recycling and reusing the used package and using environmental friendly material. The technology for packaging is mature to help reduce negative environmental impact. However, the technology for production lags behind that renewable energy only used in indirect production. It is the fact that direct production is the main cause of waste such as water waste and CO2 emission of factory.
Animal testing is being eliminated in cosmetic industry in order to respect animal right and avoid cruelty. It has been prohibited in Europe and other countries are going to follow the EU regulation. The raising of animal protection organization may be the fact that influences cosmetic industry to help against animal testing. Nevertheless, cosmetic industry holds a passive attitude toward other social issues. They seldom partner with NGOs on different issues to help improve the society and living standard.
Law and Regulations
Control environment of cosmetic industry in Hong Kong is not that mature at all. There is no specific law or regulation to help monitor the cosmetic industry in Hong Kong. Hong Kong Government only follows the regulation in the U.K. regarding the cosmetic product safety. It may because cosmetic products in Hong Kong are mainly imported from countries like Japan, U.S.A and the U.K. Furthermore, the governments do not consider other factors that do not harm the earth and people, such as biodiversity of ingredient, packaging waste, community trade and so on.
Impacts of CSR
The general public agrees CSR plays an important role in cosmetic industry in general. They may think that cosmetic companies can change the negative
image of the industry if they implement CSR in their policy. Also, company which implement CSR has more competitive advantages than others that do not consider CSR. However, CSR is not the sole and main influence of buying decision. Consumer may also consider the marketing strategy. Besides, CSR in Hong Kong is just an initial stage, people may have remote attitude towards it.
Time and Cost Limitation
In this thesis, there are some limitations that should be addressed. A significant limitation is the limited time and cost. The respondents were restricted of consumers in Hong Kong. Also, it was difficult to find participants for the questionnaire. It was because the fact that not all of the people interested in cosmetic and people may thought the questionnaire was ended with promoting sales or persuading money donation. For this reason, the response rate was only 30.96%.
Validity of Questionnaire Results
As some of the questionnaires were distributed via internet and by hand, some of the answers were not really valid or not taken into consideration and causes the other limitation. Although most of the respondents have heard of CSR, they did not have in-depth knowledge of it or the cosmetic industry. The author cannot explain to the respondent of some question wording and meanings. Therefore, they may answer the question with guess.
Furthermore, CSR statistic of selected companies was hard to gather. CSR policies of those companies are published openly. However, none of them provide figures such as budget for CSR activities. The author has sent e-mail to those companies to ask for information but they were not willing to give the sensitive statistic documents or even have not replied yet. This made difficult to measure the actual impact of CSR on consumer. In this connection, the analyses only focused on the information collected from the questionnaires and the web site of those companies.
New Government Legislation
CSR implementation is just initial stage in Hong Kong. Government is now promoting CSR on TV but CSR implementation is not compulsory in Hong Kong. Also, the format of CSR report is not under provision. In order to wider the prevalence of CSR, the author recommends government to make laws for compulsory CSR adoption and regulation of CSR reporting for the format, addressing different aspects and professional auditing of the report.
Advances in Technology
As for cosmetic sector, companies and the industry should inject capital to improve the technology, especially in the production of cosmetic. At present, only parts of the production, mainly indirect production such as heating and lighting, is using renewable energy in the cosmetic industry, no matter in Hong Kong or other places. More researches and developments should be made so as to use renewable energy in other direct production processes. In addition, a variety of renewable energy, i.e. wind power, water power and geothermal energy should be developed instead of just using solar energy.
6.5 Future Research
Only environmental and social aspects were examined in this study. According to the result of the questionnaire in Chapter 4, 43 respondents out of 61 also thought that ethical factor is an important aspect. Therefore, future research can also cover ethical issue, for instance, ethical trade and human rights, in order to address the need of the general public.
Quantified CSR Impact
Impacts of CSR implementation were discussed in this study. Another interesting topic can be done in future research is how to measure the impacts of CSR implementation in cosmetic industry to create differential. This can be done by analyzed the CSR statistics, for example, collecting sales data after implementing CSR to measure the impact of CSR on consumer purchases.
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