Responsibility Audit Report

The beauty and personal care industry in Japan is performing successfully. There are the big market and the high demand for the product. Sales of these products amounted to almost $15 billion. The Shiseido, Kanebo and Kose cosmetic companies are the three major players in the sector. Despite the high number of competitors, these firms have managed to overdo the rest and become market leaders in the market. Despite the success of the industry, major ethical and moral concerns have been raised on the actions of the companies.

The processes present in the cosmetic industry are prone to polluting the environment. The plastics that are used in packaging the products are usually strong so they are not affected by the contained chemicals. However, these packaging containers are rarely reused or recycled. As such, these plastics are disposed in the environment and given their strong nature, it will take years before they decompose. Additionally, the chemicals used to produce the cosmetics rarely undergo such a process. In fact, when released into the environment, they accumulate and cause a poisoning effect on the ecosystem. When these chemicals are leached into the water bodies, they contaminate it, thus harming humans and animals when the latter consume the water.

Moreover, cosmetics have been found to contain ingredients that are harmful. The rules governing the industry are not as stringent as they are supposed to be. There are no strict requirements from the relevant authorities concerning the ingredients used. Besides, the cosmetic industries can use ingredients, including those known as carcinogens, without approval. Others are considered to have the negative effect on the reproductive system. The cosmetic industry thus can openly make people sterile. For instance, there are chemicals present in personal care products that have been found to influence the normal development of reproductive organs in male infants. Products are supposed to be pretested before they are released into the market; hence such side effects should not be felt. Additionally, the use of animals to test the products has been opposed by many people.

Part A

Key CSR Issues Relating to the Cosmetics Industry

Corporate social responsibility enables business accountability to the people its processes affect, including investors, stakeholders, and shareholders. Considering corporate social responsibility, the key areas are the environmental protection and maintaining the welfare of the employees in the company, the community within which the company is located, and the society in general. In the process of running a company, some issues, which may cause problems, arise. These aspects are present in the beauty industry as well. The cosmetics business has been on the receiving end as a result of some of its unethical actions.

Corporate social responsibilities can be viewed from different perspectives by both shareholders and stakeholders. They share benefits from the practices, but there are instances when the former are at a disadvantage. Customer retention is one of the advantages. Consumers are more likely to choose companies that are socially responsible. They have their values, and when companies have the same, they attract such customers (Juščius & Snieška, 2008). For instance, a company that is committed to clean environment and cares about the community will attract people who also believe in such values. Additionally, socially responsible firms will sell their goods at the relevant price, and hence the buyers will be satisfied with their products and services (Martínez & del Bosque, 2013). Customer satisfaction is essential for customer retention. It also helps to create a loyal customer base.

Social responsibility also increases the company’s access to funding. Development and expansion plans require monetary support. Additionally, funding promotes organizational stability since it helps the company achieve its long-time strategies and growth objectives. When the enterprise needs such funds, the ethical and social standards that are manifested by an organization play a significant role in convincing the investors to commit their capital (Matten & Moon, 2008). It is, therefore, in the company’s interest that it has a good track record of social responsibility should it require funding in the future.

CSR, however, puts shareholders at a disadvantage. The actions that are taken to achieve social responsibility come at a cost, which is catered for by shareholder’s money. It has a negative effect on the profits of the company. Additionally, CSR activities are costly, but their measurable return is little (Barnea & Rubin, 2010). Besides, companies are forced to accept their mistakes when they accept such initiatives. It may tarnish the reputation of the firm. Accepting flaws in products may affect their sales. For instance, cosmetic industries must acknowledge that their goods contain chemicals that may affect the health of consumers as well as the environment. It may increase the awareness on the issue of chemicals and health and as such, these products may be boycotted by people (Bachmann & Ingenhoff, 2016). Consequently, their sales and profits will diminish. CSR initiatives may also demand strict regulations on the working conditions of employees as well as the products’ quality, which is time-consuming and increases production costs. The firm is put at a competitive disadvantage, especially if its competitors do not have CSR initiatives (Dubbink Graafland & Van Liedekerke, 2008). Customers appreciate companies that exhibit the socially responsible behavior. However, some fail to follow this principle, and hence their involvement in CSR initiatives reduces. It makes customers cynical about such companies’ initiatives and see them only as PR initiatives. As such, their customer base and loyalty may decrease.

The cosmetic industry has invested in several CSR initiatives in a bid to restore their image. For a long time, their non-environmental friendly and unethical business practices have been receiving constant criticism. The packaging caused serious environmental concerns. Cosmetic industries had thus to devise ways to reduce their ecological impact. Innovative approaches to reducing packaging have been invented, and biodegradable plastics are being developed (Hussain & Yamaguchi, 2008). Additionally, companies apply reusing and recycling processes to reduce the environmental impact. They are also treating their wastes and reducing their energy and water consumption and greenhouse gas emissions. Companies are also investing in the production of sustainable raw materials (Fliess, Lee, Dubreuil, & Agatiello, 2007). Besides, such firms engage in doing their best to achieve fair trading. They are responsibly sourcing ingredients to promote farmers in addition to using natural and organic ingredients to produce beauty products (Kizu & Nagasawa, 2012). Moreover, the companies are also publishing guides that assist users in selecting and using the products. Avoiding the utilization of chemicals is a major step in reducing carcinogenic components of cosmetic products. Furthermore, the reduced use of chemicals reduces pollution. As a result, water bodies are not polluted, and consuming water is safe.

PESTLE Analysis

a) Political

Cosmetic industries have benefitted from the decrease in trade barriers. However, these products still face customs and taxes. The health and environmental issues have prompted countries to implement such policies to minimize the effects. Additionally, these measures are important in protecting the domestic companies by slowing the market penetration (Umemura & Slater, 2017). As such, local products will be cheaper and preferred by consumers. It helps develop local industries.

b) Economy

The sale of the cosmetic products both locally and abroad develops the economy of the country. Such companies also present employment opportunities for citizens. Thus, people gain a source for living, improving their conditions. Additionally, the cosmetic industry is resilient. Even in economic slumps and crisis, there is still the demand for luxury items, though people may opt to purchase the essential needs rather than cosmetics during hard economic times. The industry is also a market for other similar products (Ansorge-Schumacher & Thum, 2013). Prestigious goods often attract counterfeits. It negatively impacts the revenue obtained. Additionally, they damage the brand image, especially in cases of causing side effects.

c) Society

Cosmetic companies have created job opportunities that have in turn increased the income of the population. Appearance matters in the society. Therefore, old people are turning to anti-aging products to improve their look. The society has also accepted men care. Values and perceptions are changing, and people understand that cosmetics are made for both men and women.

d) Technology

Product innovation is important in a competitive market. To meet customer satisfaction, many products are being launched. Online brand promotion has also been embraced as it is an easy way of reaching the customer base. Additionally, companies are using the Internet to check the feedback and update customers on new products.

e) Environment

The environmental awareness has increased. People thus tend to purchase eco-friendly products. Consequently, the companies have limited the use of chemicals to ensure that their products are bought. Additionally, they have invested in new production and packaging means that are environmentally friendly (Steger & Meima, 2016). Controversial polluting chemicals are no longer used to make cosmetics.

f) Legislation

Laws that prohibit the use of animals to test cosmetic products have been enacted. There is the increased government supervision on how the products are advertised and how their claimed effects are controlled. The authority has also forbidden the use of certain chemical ingredients due to their harmful effects. The expiry date of the products should be labeled on both the container and outer packaging (Lintner, 2009). The consumer should also be directed on how to store the product to prevent it from spoiling. The goods are also supposed to be labeled with a warning and precautional statements.

Part B

Best Practice

Farming and fair trade are considered to be the best practice in the industry. Companies are sourcing their ingredients responsibly. When purchasing those components, they are using fair trade partnerships. It ensures that the cosmetic firms do not exploit poor farmers. The beauty industry is a billion dollar business. However, for many years, farmers who produce their ingredients have languished in poverty (Elias & Saussey, 2013). It is revealed that there are people who are living as slaves and their labor is used in the production process of the components. Having traceable supply chain ensures that companies do not encourage slavery and is using quality products to produce the cosmetics. It is relevant to observe that companies are taking measures to guarantee that the farmers benefit from the sale of their products (Łopaciuk & Łoboda, 2013). Additionally, they are also supporting the use of biodynamic farming methods that help create a balanced farm ecosystem. As a result, the soil is better unlike in places where such approaches are not used (Duram, 2010). Companies are also advising producers against the overuse of pesticides and fertilizers as they cause pollution. Moreover, the minimum tillage is also being encouraged to prevent soil degradation (Sahota, 2014). Such actions have allowed cosmetic firms to contribute to the society. Apart from creating employment opportunities for the local people, it shows its commitment to achieving a better community.

The deontology theory explains these actions in the most proficient manner. It suggests that while making a decision, obligations and duties should be adhered to. The relationship between morality and duty in human actions is emphasized by this theory (Darwell, 2008). It argues that goodwill should be done by considering the moral law and the respect that the law should be accorded rather than the natural inclinations. As such, companies conduct CSR initiatives since it is moral. Firms are naturally inclined to reduce production costs and in turn, increase profits. However, when they decide to involve such initiatives, they resist their natural inclinations. They spend money on the community rather than using it to increase their profits.

In their development and production of beauty products, cosmetic industries have performed numerous wrong practices. Their failure to follow the proper guidelines, both morally and legally, has negatively impacted the society. The following theories highlight the consequences that these actions have bestowed on the community.

1. Utilitarian

This theory, developed by Mill, argues that right actions promote happiness while wrong ones promote displeasure or pain. It also suggests that pleasures in the higher faculties should be given more attention than basic pleasures. Additionally, the achievement of one’s goals and objectives is considered to be the happiness. Pleasure or displeasure can differ in quantity and quality (Secchi, 2007). The use of animals causes pain to those involved, which is named the animal cruelty. When cosmetic industries used non-traceable ingredients, they helped supplies to take advantage of farmers. The latter were thus paid poorly for their products. It hampered the achievement of their goals. Therefore, the actions of the companies led to their displeasure. The firms should have been moral and responsible, which would help such people achieve happiness and also alleviate the animals’ suffering.

2. Kantian

This theory opposes the utilitarianism theory. Kant argued that the value of actions depends on the profit that they solicit. There are activities that cause happiness, but they are ultimately not good. Kant considers goodwill and how it conforms itself to the moral law. In following this theory, people should freely choose to do the right things morally (Renouard, 2011). Cosmetic industries have failed to follow it in the production of beauty products. They are supposed to ensure that their products do not contain carcinogens. The immediate use of the goods may make the consumer happy, but the side effects of the chemicals may adversely affect their health. Harmful substances have had consequences such as male infants’ reproductive parts failing to develop normally.

3. Relativism

Ethical relativism defines morality by the norms of one’s culture. As such, an action may be wrong in one culture but acceptable in another. It implies that no standard moral conducts exist (Frederiksen, 2010). Cosmetic industries have taken advantage of this theory to use animals for the product testing. There are societies that accept the cruel treatment of animals. It, however, has caused the uproar from societies that are against the animal cruelty.

Part C

Recommendations

The beauty companies need to change several things if they are to be socially responsible. The industry has to establish measures that will help tackle the faced sustainability challenges. It is important that the firms can answer any question regarding their products. As such, they should ensure that the traceability and the transparency of the ingredients are maintained. The demand for such goods has increased, which has, in turn, enhanced the supply routes. With the supply process becoming global, the tracing of elements has become increasingly difficult. There have been incidences where natural ingredients have been mislabeled and adulterated. It has an adverse economic effect on the legitimate producers. Additionally, such products may be harmful. It is, therefore, critical to have access to the information about the ingredients’ origins (Dayan & Kromidas, 2011). With this knowledge, the companies can be sure that the ingredients that they are using are safe and were properly cultivated. This will increase the customers’ trust, and the company will be more responsible.

The effects of climate are being felt in the world. There is the need to avert all processes that can aggravate the situation. As such, companies should take the initiative to embrace measures that reduce the greenhouse effect. They should measure their carbon emissions and take steps to reduce them. The companies should also advise their producers to embrace farming techniques that limit the release of gases such as ammonia that cause global warming (Cline, 2007). Industries have to take the responsibility to reduce the greenhouse effect in the next ten years.

The companies should enhance the methods that they are using to prevent pollution. Packaging is a major concern for the sustainability of the industry. Though firms are trying to utilize biodegradable containers, it is not enough; the reuse and the recycling of the non-biodegradable containers should be promoted as well.

The industries should also concentrate on social impact rather than environmental one only. They have to establish the charity kits that will assist the members of the society. It is vital to create the social value for the communities where the industries are located (Green & Peloza, 2011). These companies use the significant amount of water and emit much waste. They should implement measures to ensure that the water that the community consumes is clean. Since they are responsible for the pollution, they can organize social projects where each homestead will have access to clean tapped water.

The issue of using green formulations for the production of beauty products is substantial. Most of them are supposed to contact with the skin. Using more green ingredients instead of chemicals is, therefore, advisable (Chuarienthong, Lourith & Leelapornpisid, 2010). To ensure that the well-being of the customers is maintained, companies should embrace safe ingredients. To guarantee the survival of the industry, renewable sources for raw materials should be sought.

Conclusion

In conclusion, the importance of the cosmetic industry cannot be understated. However, while running their operations, the companies have made some mistakes that require being atoned for. They have performed some actions that are morally and ethically questionable. Firms have accepted the corporate social responsibility to help the communities within which they are located. Besides, companies have taken measures aimed at protecting the environment. There were concerns that the beauty industry was using chemicals that harmed the consumers. To rectify it, companies have turned to the use of more natural ingredients in the production of the products. Moreover, they have stopped using animals in testing the goods since it implies the animal cruelty. These measures, however, are insufficient. The companies should enhance their CSR initiatives so that their efforts of being more responsible will be more successful in ten years’ time. Consequently, the environment, consumers, and the company will experience better conditions.