Description UNFORMATTED ATTACHMENT PREVIEW FACULTY OF BUSINESS & LAW MSC INTERNATIONAL BUSINESS AND ...
Description UNFORMATTED ATTACHMENT PREVIEW FACULTY OF BUSINESS & LAW MSC INTERNATIONAL BUSINESS AND MANAGEMENT CSR DISCLOSURE AND COMPANY PERFORMANCE IN THE UK SUPERMARKET INDUSTRY Module Name and Code: Independent Study Project: Strategy, Marketing and Innovation (M33561) Student Name: Apple Mahmud Supervisor Name: Gerhard Bezuidenhout Student number: 2299958 Date of Submission: 0 Abstract This paper analyses the quality of the CSR and ESG disclosure between four large UK-based supermarkets (Tesco, ASDA, Morrisons, and Sainsbury’s) in 2022-2024. Through content analysis of 298 disclosure statements, it was found that there was an industry-wide quality enhancement of 21.4% between 2022 and 2023, with environmental reporting showing the best results (3.7 average) and governance the worst (2.9 average). Sainsbury had leadership (3.4 to 3.9) whilst Tesco had transformational improvement (2.4 to 3.6). The qualitative analysis reveals that retailers incorporated ESG into the executive compensation (25 percent of the Performance Share Plans) and components of steering groups. Financial health facilitated the ability to invest in sustainability by saving £1.2-1.3 billion through cost reduction and investing in the ESG initiatives and £150-500 million in the workforce in times of economic strains. There are also major weaknesses in terms of transparency: measures of the environment are always measured in a meticulous sense of carbon tracking, but governance indicators are not very standardized in terms of linking executive compensation and board representation. The measures of the social aspect differ significantly, where community investments are entirely reported, but the indicators of employee diversity are not yet fully reported. The next competitive frontier is governance transparency and complex stakeholder disclosure, which has become an industry standard after environmental reporting. Stakeholder trust has now been pegged into detailed and quantified reporting on the entire ESG spectrum. Keywords: CSR disclosure, ESG reporting, UK supermarkets, Sustainability, Transparency, Corporate Governance 1 Table of Contents 1. 2. 3. 4. Introduction ........................................................................................................................... 5 1.1 Research Questions ......................................................................................................... 6 1.2 Research Aim .................................................................................................................. 6 Literature Review ................................................................................................................. 7 2.1 Theoretical Foundations of CSR Disclosure................................................................... 7 2.2 CSR Communication Strategies ..................................................................................... 8 2.3 Contemporary Research on Disclosure Quality .............................................................. 8 2.4 Sector-Specific Applications and Challenges ................................................................. 9 2.5 Research Gaps and Implications ..................................................................................... 9 Methodology .........................................................................................................................11 3.1 Prepare the Data .............................................................................................................11 3.2 Define the Unit of Analysis............................................................................................11 3.3 Develop Categories and Coding Scheme ...................................................................... 13 3.4 Ethical Considerations .................................................................................................. 14 Analysis ................................................................................................................................ 15 4.1 Preliminary Quantitative Overview .............................................................................. 15 4.2 Analytical Framework Validation ................................................................................. 15 4.3 Overall CSR Performance............................................................................................. 17 4.4 CSR Performance by Category (2022-2024 Average) .................................................. 18 2 4.5 Time-Based Analysis .................................................................................................... 19 4.6 Qualitative Content Analysis of CSR Disclosures ........................................................ 20 4.7 Financial Review .......................................................................................................... 23 5. Results and Discussion........................................................................................................ 24 6. Conclusion ........................................................................................................................... 27 7. References ............................................................................................................................ 29 8.0 Appendices ............................................................................................................................. 33 Appendix 1 Profiling Table of Literature Review .................................................................... 33 Appendix 2 Synthesis Table ..................................................................................................... 34 Appendix 3: Raw Data From annual Reports ........................................................................... 37 Appendix 4: Ethics Form .......................................................................................................... 99 List of Tables Table 1: Unit Categorization Framework ..................................................................................... 12 Table 2: Quality Assessment Scale and Dimensions.................................................................... 13 Table 3: Coding Scheme Validation - Tesco Sample Extract ....................................................... 15 Table 4: Reliability and Scale Statistics ....................................................................................... 16 Table 5: Item Analysis and Correlations ..................................................................................... 17 Table 6: CSR Performance by Company and Year ...................................................................... 17 3 Table 7: CSR Performance by Category (2022-2024 Average) ................................................... 18 Table 8: Time-Based Analysis (Companies with Multi-Year Data) ............................................. 19 Table 9: Comparative Analysis of CSR, ESG Governance, and Strategic Priorities ................... 20 4 1. Introduction Corporate Social Responsibility (CSR) refers to the voluntary initiatives that businesses undertake to address social, environmental, and ethical concerns alongside their economic goals (Wirba, 2024). The concept gained prominence in the mid-20th century when scholars and practitioners began recognizing that firms hold responsibilities beyond profit maximization. Carroll’s (1991) Pyramid of CSR, which highlights economic, legal, ethical, and philanthropic responsibilities, remains one of the most influential frameworks in defining its scope. Over time, globalization, environmental challenges, and corporate scandals intensified the call for greater accountability, leading to the evolution of CSR as a central element of corporate governance and stakeholder management (tKusyk, 2021). In today’s business environment, CSR is closely linked to Environmental, Social, and Governance (ESG) frameworks, which provide measurable benchmarks for disclosure and performance evaluation (Alsayegh et al., 2020). Consumers, investors, and regulators increasingly expect companies to demonstrate transparency, sustainability, and social impact, making CSR not just a reputational tool but also a strategic necessity. In industries with complex supply chains, such as the UK supermarket sector, CSR has become particularly significant, as companies are under pressure to address issues like fair trade, carbon emissions, plastic reduction, and community support. Thus, CSR has transformed from a philanthropic add-on into an integral part of corporate strategy that directly influences long-term competitiveness and financial performance. Corporate social responsibility (CSR) and the environment have become a critical tool for firms to pursue their ethical behaviour, build stakeholders' trust, and improve long-term competitiveness (Li et al., 2020). Transparency and visibility are crucial given the high profile of the sector in an industry with complex supply chains and where the consumer is demanding more. FMCGB companies like Tesco, Sainsbury’s, Morrisons, and ASDA have developed exhaustive sustainability programs and ESG Disclosure policies to live up to their growing stakeholder's expectations and their appetite for regulation in this domain. 5 Supermarkets are now more and more pressured to reduce their environmental impact and to undertake corporate social responsibility, and to do so in such a way that it is honest and convincing with regard to investors, regulatory agencies and customers (Megale, 2020). While the literature has widely investigated CSR and ESG, and its impact on firm performance, very few studies have focused on the effects of such disclosures on the performance of UK supermarket companies. Differences in the quality and strategy of the disclosure have called into question the way they actually influence the economic and financial aspects, the operational risk, customers' loyalty, and the brand image. The motivation for this study lies in the growing significance of CSR and ESG disclosures in driving firm performance. In the UK supermarket industry, where competition and consumer expectations are high, companies such as Tesco, ASDA, Morrisons, and Sainsbury’s are increasingly judged on their sustainability practices. Understanding how CSR reporting influences brand image, customer loyalty, and long-term competitiveness is essential. This study is therefore motivated by the need to provide practical insights on how supermarkets can strategically use sustainability disclosures to build trust and create lasting value. 1.1 Research Questions • What is the extent and quality of CSR and ESG disclosure of selected companies in the UK supermarket industry?” • How consistent are the CSR and ESG disclosure practices across Tesco, ASDA, Morrisons, and Sainsbury’s?” 1.2 Research Aim • To evaluate the extent and quality of CSR and ESG disclosures of Tesco, ASDA, Morrisons, and Sainsbury’s. • To compare and analyze the differences and consistencies in CSR and ESG reporting practices among the selected UK supermarkets. • To assess how CSR and ESG disclosures contribute to stakeholder trust, brand image, and overall firm performance. 6 2. Literature Review This literature review explores the theoretical basis and up-to-date research addressing the CSR disclosure practices. This chapter starts with the pyramid of CSR and integration of the institutional-stakeholder theory as proposed by Carroll, where organizations strike a balance between conflicting duties and stresses. Then it examines the communication strategy that drives the degree of stakeholder engagement, beginning with one-way information delivery and ending with collaborative stakeholder engagement. 2.1 Theoretical Foundations of CSR Disclosure The emergence of CSR disclosure by corporations has transformed what was initially an optional practice of charity reporting into a systematic process, which implies building a strong theoretical base to understand the underlying causes as well as the differences in the actual practice of CSR reporting. The pyramidal structure of CSR, as described by Carroll (1991), helps us to establish the necessary framework in which corporations can attain the highest level of responsibility to their stakeholders. This paradigm concludes that economic profitability has to be the baseline, although businesses increasingly have to take care of legal aspects, ethical issues, and philanthropic endeavors. The model has been used worldwide regardless of economic context, but its hierarchical nature simplifies the interrelationship dynamics of the responsibility dimensions in the modern business world. Herold (2018) builds on the work conducted by Carroll and provides a theoretical explanation of the differences in sustainability reporting practices by incorporating institutional theory and stakeholder theory over the traditional explanations offered by institutional theory. Institutional theory helps to explain why firms in an industry will tend to gravitate towards a common disclosure form and, indeed, institutionalize it in their reporting standards and formats, as a form of field-level isomorphism. Stakeholder theory also holds that managers consider the salience of various audiences in the design of the disclosure planning and the powerful focus of management content. Herold critically identifies that the theories work at different levels of analysis, such that institutional forces cause convergence at the sector levels, whereas stakeholder considerations cause differentiation at firm levels in terms of the depth and focus of disclosures. 7 2.2 CSR Communication Strategies The strategic aspect of CSR disclosure is related to the effectiveness of communication and engagement strategies with stakeholders. Morsing and Schultz (2006) offer a theoretical basis that defines three different CSR communication approaches that permit a growing depth of stakeholder participation. The stakeholder information strategy is one way companies communicate their level of achievement and actions without consulting stakeholders. The twoway communications feature of stakeholder response strategy is managed by the companies, which solicit stakeholder opinions on the company's CSR performance and priorities. The most advanced approach, one of the stakeholder involvement strategies, emphasizes the joint development of a CSR initiative through continuous dialogue and partnership building. Such communication efforts have significant consequences for credibility and trust-building, especially at a time when stakeholder expectations regarding authentic engagement have been increasing. The option of information sharing, consultative dialogue, and participatory engagement will indicate the maturity of the organizations in integrating CSR and their commitment to a more profound sense of relationships with stakeholders, instead of compliance reporting. 2.3 Contemporary Research on Disclosure Quality Literature overview of recent studies indicates more systematic trends on factors explaining the quality of CSR disclosures in various situations. In one study, Abdul Latif et al. (2023) examine plantation companies in Malaysia, finding that factors associated with internal governance also have a significant role in the determination of disclosure sophistication. Their study finds board composition and specifically gender diversity, as well as the presence of a sustainability committee, to be key factors in reporting quality. The analysis finds a positive relationship between family ownership and disclosure, and that concentrated ownership of CEOs hinders disclosure. The results indicate that the governance structure is more important than external compliance requirements after the basis reporting standards are set in place. In Dincer and Dincer (2024), a systematic review of 242 publications on the topic of qualitative sustainability reporting was conducted, and an in-depth examination of the theoretical 8 perspectives underlying these studies was undertaken. They found that legitimacy theory and stakeholder theory are already the most common modes of inquiry in academic circles, neglecting moral legitimacy and critical orientations. Eco-friendly issues are often given undue emphasis in studies at the expense of social aspects, such as employee relations, product responsibility, and community engagement. Such a trend shows a difference in measurement standardization, with environmental measures having more commonly agreed-on frameworks, whereas social measures have no consensus. 2.4 Sector-Specific Applications and Challenges The retail industry poses distinct issues of CSR disclosure in terms of a complicated supply chain and consumer contact. Pimentel et al. (2022) analyze disclosure practices in the context of food waste reduction among retailers and find 44 factors affecting how disclosure is approached. Their study shows that the pattern of disclosures on a macro-scale is shaped by the pressure of the regulator, the integration of new technologies, and the work with the customers in educating them, whereas collaboration with suppliers and the flexibility of their contracts shape the level of disclosures on an operational level. This piece of work demonstrates that sector-related risks and stakeholders' requirements determine disclosure agendas, whereby the existence of disclosure gaps regarding operational enactment is always present. These retail results can supplement theoretical models by demonstrating the nature of the complex interaction (of institutional pressures such as regulation and technology standards, with stakeholder demands such as customer education and supplier relationships) which leads to the development of alternative disclosure strategies. Firms will deal with the various requirements posed by the audience on the one hand and the sector-related challenges, which in some instances may be inconsistent with the reporting frameworks. 2.5 Research Gaps and Implications This literature identifies various key gaps that need to be filled with additional research. First, there is a relative lack of studies that establish the connection between disclosure quality and operational performance, with few longitudinal investigations to show continuity between reported commitments and practices on the ground. Second, the institutional and stakeholder 9 theories can be helpful, but their combination in explaining firm-level variation needs more advanced development of theory. Third, sector-specific variables that can be identified in a retail food waste study show that comprehensive frameworks might not provide an adequate measure of industry-specific CSR issues and challenges. The theoretical abstractions that correspond to the pyramid of CSR that was proposed by Carroll, with additions by Herold because of the institutional-stakeholder integration and subsequent developments, with the currently seen in the practices of CSR disclosures through the lenses of the communication strategies that Morsing and Schultz advance are essential in providing the necessary grounding within which the current CSR disclosure processes in today are occurring. Nevertheless, the evidence provided by the governance studies conducted by Abdul Latif et al. and the theoretical analysis provided by Dincer and Dincer shows that the disclosure quality is predetermined by the interactions between the internal organizational factors, external institutional forces, and the specific stakeholders' requirements that are applicable to the particular sector. Future research should therefore come up with more refined theoretical explanations that can capture these multi-level interactions in addressing the continued gap that exists between disclosure content and the operational reality. The sectoral study by Flores Pimentel et al emphasizes the need to investigate the sectors separately since stakeholder configuration and regulations may vary across sectors and lead to different findings. Further, research studies comparing the sectors can help to come up with a theoretical explanation of CSR disclosure effectiveness and its authenticity. 10 3. Methodology 3.1 Prepare the Data Data Collection Process Data Collection Process is the systematic method of gathering relevant information from various sources to ensure accurate and reliable analysis (Taherdoost, 2021). Data collection methods and tools for research; a step-by-step guide to choose data collection technique for academic and business research projects. The report on Sustainability was systematically gathered in four major supermarkets of the UK, namely: Tesco, ASDA, Morrisons, and Sainsbury's. The data contains the reports of the period 2022-2024, including a total of ten documents over the duration of the study. All the reports were retrieved on official corporate web pages, making sure that the source materials are authentic and complete. Data Format and Organization Data Format and Organization is the structured arrangement of data into clear, consistent categories or formats, ensuring easy access, analysis, and reliable interpretation (Kim, 2020). All the reports were available in PDF format or had been converted to a searchable format for systematic study. All documents were marked with the name of a company, year of reporting, and the type of documents to ensure they were followed throughout the coding procedure. A master database was developed which relates each report to that report's associated metadata, such as publication date, number of pages, and compliance to reporting framework (GRI, TCFD, SASB). Efficient retrieval and cross-references could be released to use this structure of organization in the analytical process. 3.2 Define the Unit of Analysis Primary Unit of Analysis The unit of analysis was illustrated as a particular CSR disclosure statement in each report and was a specific claim, measure, or commitment of sustainability performance. All the disclosure reports are coherent pieces of information that address a particular social responsibility issue in 11 the corporations. The units were constrained by topic coherence and consistency between the thematic contents of reporting sections, such that there were well-founded analytical delimitations. Unit boundaries and scope Minimum unit size was determined by a single complete sentence making a substantive claim of CSR. In contrast, a larger maximum size consisted of contiguous paragraphs of a single topic of CSR without crossing thematic boundaries. The redundancy of statements in different parts was coded as different units in order to reflect the emphases and communication patterns. This reduced the amount of information that was covered and enabled analytical clarity without false chopping up of sense. Unit Categorization Framework Units were initially categorized into six major domains based on established CSR frameworks. Based on the coded dataset, the distribution shows: Table 1: Unit Categorization Framework Category Environmental (ENV) Description Climate, resources, sustainability People, community, stakeholders Leadership, oversight, compliance Subcategories ENV-1 to ENV7 Performance (PERF) Metrics, progress, benchmarking PERF-1 to PERF-6 Communication (COMM) Reporting, messaging, integration COMM-1 to COMM-4 Social (SOC) Governance (GOV) SOC-1 to SOC6 GOV-1 to GOV-6 12 Sample Coverage Carbon emissions, Energy, Waste, Sourcing, Water, Packaging, Supply chain Employees, Health & safety, Community, Customer health, Human rights, Local sourcing Board composition, Executive compensation, Risk management, Stakeholder engagement, Transparency, Ethics KPIs, Progress tracking, Certifications, Benchmarking, Future commitments, Investment Presentation, Stakeholder messaging, Business integration, Digital innovation Each unit received unique identifiers linking to source document, page number, and section location for traceability throughout the analytical process. 3.3 Develop Categories and Coding Scheme Deductive Framework Development Deductive Framework Development is building a coding scheme based on established theories and literature to guide data interpretation (Fife & Gossner, 2024). The deductive approach was taken to develop the coding scheme using the recognized literature base of CSR reporting frameworks, mainly the GRI Standards, the SASB frameworks, and the academic literature of CSR. This theoretical approach has guaranteed consistency with internationally renowned principles of sustainability reporting. The six broad categories were defined: Environmental (ENV), Social (SOC), Governance (GOV), Performance (PERF), Communication (COMM), and a more specific subdivision in each of the above-mentioned categories. Category Definitions and Structure Environmental category encompasses seven subcategories (ENV-1 to ENV-7) covering carbon emissions, energy use, waste management, sustainable sourcing, water conservation, packaging, and supply chain impacts. Social category includes six areas (SOC-1 to SOC-6) addressing employee relations, health and safety, community investment, customer health, human rights, and local sourcing. Governance category covers six dimensions (GOV-1 to GOV-6) including board composition, executive compensation, risk management, stakeholder engagement, transparency, and ethics. Performance and Communication categories each contain specific measurement and reporting elements. Quality Assessment Scale and Dimensions A four-point quality scale was developed with specific operational definitions based on the actual disclosure patterns observed: Table 2: Quality Assessment Scale and Dimensions Quality Level 1 - Minimal Definition Basic statements without detail Coding Criteria General commitments, no specific metrics or context 13 2 - Basic Some detail provided 3 - Good 4-Comprehensive Comprehensive information Detailed, quantified, contextualized Limited quantification, basic context provided Detailed metrics with contextual information Full metrics, targets, methodologies, thirdparty validation Time dimension coding captured temporal orientation: C=Current data (present period reporting), R=Recent data (historical reference points), F=Forward-looking commitments (future targets and commitments). Quantitative presence was measured on a four-point scale: 0=No quantitative data, 1=Some quantitative elements, 2=Substantial quantitative data, 3=Comprehensive quantitative reporting with benchmarks and targets. 3.4 Ethical Considerations This study will maintain ethical considerations in all phases of the research. The risk of harm is minimal due to the nature of the research, which is a secondary analysis of publicly accessible corporate reports. Nonetheless, I intend to cite all my sources and report the data in good faith to uphold the academic honour code. They will not include personally identifiable information or sensitive information, and only publicly accessible corporate sustainability reports will be used. Transparent inclusion criteria and open access sources adhere to the principles of fairness, replicability, and accountability (Lynch et al., 2020) 14 4. Analysis 4.1 Preliminary Quantitative Overview The content analysis considered 298 independent CSR disclosure statements in 10 reports of 2022-2024. Distribution across the four companies included Tesco with 89 units (29.8%), Sainsbury's with 78 units (26.2%), ASDA with 67 units (22.5%), and Morrisons with 64 units (21.5%). The coverage was primarily Environmental (35%), Social (28%), Performance (18%), Governance (12%), and Communication (7%). Quantitative data was found in 67% of disclosures, with the environmental category ranked high in its ability to quantify at 84 percent, and the Governance category at a low 43 percent Commitments made into the future made up 45 percent of the temporal orientations, current statistics 38 percent, and past references 17 percent. The rate of target-setting rose by 32 percent between 2022 and 2023 among all firms. The scores of the quality ranged between 1.8 and 4.0, whereas the industry average reflected an increase of 2.8 (2022) to 3.4 (2023). Third-party frameworks compliance refers to: GRI (67% of reports), TCFD (58%), and SASB (25%). The quantitative patterns form the baseline of the further qualitative analysis of positioning and disclosure sophistication. 4.2 Analytical Framework Validation Testing the Coding Scheme on Tesco (Sample 2022 Extract) Table 3: Coding Scheme Validation - Tesco Sample Extract Text Extract ESG Code "Tesco aims to achieve carbon neutrality in its Group ENV1 Category operations by 2035, aligned with a 1.5?C pathway for Scope 1 climate targets and 2 emissions. The target is to reduce absolute carbon emissions by 60% by 2025 compared to a 2015 baseline." 15 Carbon emissions & "Tesco switched to 100% renewable electricity in its ENV2 Energy use & operations by 2030, achieving this goal 10 years ahead of renewable transition schedule." "Tesco donated £93 million in the UK and €6 million in SOC3 Community Ireland to local community projects and charities." engagement & charitable giving "From 2022, Tesco includes sustainability targets in its GOV2 Executive Performance Share Plan, with 25% of awards linked to carbon compensation reduction and food waste reduction." to ESG "Tesco achieved a 52% reduction in Scope 1 and 2 emissions PERF2 Progress vs targets linked compared to a 2015 baseline." The Tesco validation confirms the coding scheme's methodological rigor. Each disclosure mapped to exactly one subcategory without overlap, demonstrating mutual exclusivity. All content proved codable, ensuring exhaustive coverage. The structured definitions enable consistent inter-coder reliability standardized examples like "£93m community donations" reliably align with SOC3, while emissions targets consistently fall under ENV1, validating the framework's practical applicability. Reliability Statistics This IBM SPSS reliability analysis evaluated the internal consistency of a two-item scale (Quality and Quant) using 298 valid cases with complete data. Table 4: Reliability and Scale Statistics Measure Cronbach's Alpha Cronbach's Alpha Based on Standardized Items N of Items Scale Mean Scale Variance Scale Std. Deviation 16 Value .952 .960 2 5.56 4.335 2.082 Table 4 demonstrates exceptional reliability with Cronbach's Alpha of .952 (.960 standardized), far exceeding the .70 acceptability threshold. The overall scale has a mean of 5.56 with standard deviation of 2.082, indicating good variability across the two-item measure. Table 5: Item Analysis and Correlations Item Mean Std. Deviation N Inter-Item Correlation Quality 3.35 .963 298 .924 Quant 2.21 1.159 298 .924 Table 5 reveals Quality (M=3.35, SD=.963) and Quant (M=2.21, SD=1.159) show strong interitem correlation of .924, confirming they measure closely related constructs. Quality demonstrates less variability than Quant, but both items contribute meaningfully to the scale. The high correlation supports uni-dimensionality, while the excellent Cronbach's Alpha establishes this two-item scale as highly reliable for research applications. 4.3 Overall CSR Performance Table 6: CSR Performance by Company and Year Company 2022 Average Quality Tesco 2.4 ASDA 3.2 Morrisons 3.1 (2022/23) Sainsbury's 3.4 (2022/23) 2023 Average Quality 3.0 3.6 3.3 (2023/24) 3.7 (2023/24) 2024 Average Quality 3.6 3.9 (2024/25) Improvement +1.2 +0.4 +0.2 +0.5 Sainsbury's Maintains Leadership with Accelerating Performance Sainsbury's demonstrates consistent leadership throughout the period, maintaining the highest CSR disclosure quality across all years (3.4 ? 3.7 ? 3.9). Their steady improvement trajectory shows sustained excellence, reaching near-optimal disclosure quality by 2024/25. This suggests established CSR practices being continuously refined rather than reactive improvements. 17 Tesco Shows Remarkable Transformation Tesco demonstrates the most dramatic improvement, starting from the lowest position in 2022 (2.4 average quality) but showing consistent year-on-year growth, reaching 3.6 in 2024. This represents a 50% improvement over three years, suggesting a major strategic shift toward comprehensive CSR disclosure and potentially positioning themselves as a sustainability leader. 4.4 CSR Performance by Category (2022-2024 Average) Table 7: CSR Performance by Category (2022-2024 Average) Category Environmental Social Governance Performance Communication Tesco 3.2 2.8 2.6 3.1 2.7 ASDA 3.6 3.4 2.8 3.7 3.2 Morrisons 3.9 3.5 2.8 3.7 2.7 Sainsbury's 4.0 3.2 3.2 3.9 3.2 Categ
