Examining Woolworths Group Limited's Ethical Management
This report analyses Woolworths Group Limited, an Australian owned company that operates in multiple areas such as retailing supermarket food, liquor and some accommodation. It analyses the company, stating any news reports where the company has been praised or criticised for its management or conduct such as the ALH scandal, the poker machine scandal and the child labour scandal. This paper uses the PESTLE framework to analyse the organisation with particular focus on its ethical management, Woolworths’s weakest point and the source of the majority of its criticisms. In relation to the PESTLE framework, this paper shows that Woolworths needs to change its conduct and management to focus more on its ethical and legal practices if it wishes to stay competitive and that Woolworths needs to have an independent body of management with no financial incentive to alter the morality of its practices.
Introduction
Woolworths Group Limited is an Australian owned, public, non-governmental company that operates by retailing supermarket food, liquor and general merchandise as well as some hotels in Australia and New Zealand. The company began functioning in September 1924 in Sydney and became a part of the ASX in 1993. Woolworths Group Limited now includes more than 1000 supermarkets under Woolworths, Foodtown, Countdown and Thomas Dux banners. Woolworths’s mission includes providing fresh food, with particular focus on accessibility of these foods for all Australians by lessening prices and conducting research in consumer patterns. Their main stakeholders are customers, suppliers, communities and shareholders. Woolworths relies on financial support from its shareholders and aims to meet their expectations through profit. Woolworths is also highly active within the community, contributing at least 1% of pre-tax profits to the communities they operate in as part of their values.
Value
According to Woolworths’s statement of values, it wishes to create a customer-led culture, generate sustainable sales, evolve their drinks business, empower their portfolio businesses and become a lean retailer. One of its big concerns is sustainability of the planet and resources. Whilst Woolworths does live up to standards in terms of keeping their mainstream employees satisfied. According to Glassdoor. com, Woolworths has an overall rating of 3. 6/5. On the other hand, there are inconsistencies within Woolworths’s claim to care for sustainability as there have been multiple critiques of Woolworths for unnecessarily covering organic fruits and vegetables with cling-on plastic. Not to mention that Woolworths has been fined for its poor treatment of overseas workers, betraying their values of leading a store-led “culture and team. ”
Political
Woolworths shows to be placing donations and support to whichever party it deems best suitable for its own causes. Between the 2012-13 elections, Woolworths donated to three separate parties. This contradicts Woolworths’s claim that it doesn’t make any political donations unless it is an “event or function”. Woolworths doesn’t have any significant political values when lending support to parties, rather prioritising its own foreseeable business outcomes over political stability of the nation. As a member of the foods and staples industry, Woolworths is susceptible to multiple issues that are controlled or influenced by the government; a few examples are that its practices can be prohibited or banned by the government, farmers can lose incentive if the government doesn’t subsidise certain goods, tariffs imposed from and upon the government can affect Woolworths’s ability to import/export, the wage and working conditions legislation imposed by the government will affect the availability of labour for Woolworths. Economic Under a mixed-market economy Woolworths contributes to the economic environment by providing goods and services to the society with relatively affordable prices which people from all socioeconomic backgrounds can access, making an average of 4. 6% of the Australian GDP. It has annual sales of greater than $51 billion and employs over 1. 2 million Australians. They have produced evidence proving that 100% of their fresh meat is Australian produced, 96% of fruits and vegetables are grown in Australian farms and there are 3490 Australian businesses accommodating Woolworths with production.
Woolworths approaches tax fairly and transparently displays its activities online in a “tax transparency report”. However, in 2012 the Sydney Morning Herald revealed that Woolworths had been abusing the cheap labour in countries such as South Africa and Thailand to avoid higher costs in production. Woolworths’s goal for economic gain has essentially motivated their overlook of human rights Woolworths considers different economical factors such as consumer spending patterns and growth in the food industry to accommodate various output levels throughout the economy. Woolworths considers the business cycle stage, efficiency of their share products, exchange rates, type of economic system and interest rates in the process of production. They also consider interest rates when borrowing capital.
Social Rights
Woolworths has become more passionate about the representation of women in management and executive roles as well as gender equity. In their “Corporate Responsibility Report” they promise that at least 40% of managerial and executive roles will be held by women. They aimed to eradicate any prejudice in the workplace, stating that all members in charge of hiring will undertake an “unconscious bias training” to ensure that members will be hired based on merit and skill. On the other hand, Woolworths’s commitment to social rights has been undercut by multiple human rights scandals it has been involved in. For example, in April 2018 Woolworths was found to be covering up their severe underpayment of migrant trolley-collectors who were being paid as low as $10 per hour, as opposed to the minimum rate. Many of the trolley-collectors were migrants from countries such as Iraq and India who were extremely vulnerable to exploitation as a result of their migrant status. According to the 2017 Corporate Human Rights Benchmark, Woolworths falls in the 20-29% band range out of 100%.
Trade international
The Woolworths Group engages in fair trade with its partners, instructing members to consider the proposed terms and conditions of supply to Woolworths, maintain any information and advice they deem necessary as well as assess the consequences of business with Woolworths. They engage in open communication with all their trade partners through negotiating contracts and maintaining ethical coordinators on their behalf. On the other hand, Woolworths has declared it will never use cotton from Uzbekistan as a critique of the exploitation of schoolchildren to harvest cotton under unfavourable conditions. Woolworths’s trade decision demonstrates its dedication to its central values. Woolworths’s decision to trade with Thailand has been critiqued as a hypocrisy to its attitude towards child labour as the Thai company has been uncovered to have abused the labour of children in prawn-peeling factories. Woolworths has a multitude of options for trading partners which it chooses to ignore for cheaper production.
Law & Justice
The Woolworths Group doesn’t contribute to the upholding of laws and regulations that protect society as it has been exposed of breaking these regulations multiple times. For example, in January 2016 Woolworths was charged over $11 million to a private property developer as a result of bad faith in upholding the contract. Another example of Woolworths’s activities which has both compromised the organisation’s ethics and had a negative societal effect was its involvement in spying on gamblers, offering extra drinks in bids to increase profits. Multiple whistleblowers admitted to recording the “Ins and outs” of people’s lives. Woolworths’s poor management and involvement with ALH has been critiqued as it is believed that the act encouraged irresponsible gambling and that involvement with ALH undercut Woolworths’s ethical standards. Anti-trust laws in Food and Staples Retailing industry affects its conduct and practices, discrimination law affects its hiring practices, consumer protection limits its ability to act in a fully self-beneficial manner, employment laws affect its ability to hire and fire workers. Overall, Woolworths is able to function appropriately within the rules and regulations although it has had some scandals in the past.
Environmental
The Group has dedicated itself to sourcing environmentally sustainable commodities, issuing a plan to aim for zero waste going to landfill by improving recyclability of the brand’s packaging. They plan to eradicate polystyrene by 2020 and introduce user-friendly instructions for efficient recycling. Whilst Woolworths has posed an environmental threat in the past through unnecessary plastic packaging, it is beginning to acknowledge environmental issues and fix them. This was proven by its recent single‐use lightweight plastic bag ban in stores. Woolworths received 9/9 in the WWF Palm Oil Buyers’ Scorecard in 2016 as a result of preventing negative environmental and social impacts of palm oil production. It has also reduced its carbon emissions by 10% below their emissions in 2015 by using natural refrigerants in a closed system. Woolworths has become more aware of the environment as it has become aware of the dependence of its business on climatic stability. Pollution and climate change would detrimentally affect Woolworths’s business, fueling its changing attitudes to more costly waste management and recycling.
Finance
Woolworths Group Ltd is a relatively unique corporation because it is more reliant on the domestic financial market. It uses financial instruments such as shares to increase its confidence, although it does undercut its full ownership of the company it provides people to invest financially in the corporation. However, it can also be said that Woolworths is reliant on international finance as it relies on New Zealand, Hong Kong and China to cover niches within the operation. Its industry-specific revenue is expected to increase 3. 0% annually, representing a weaker nominal performance by the entire industry as opposed to Woolworths. However, its major rivals Coles and ALDI have also deterred Woolworths’s continual revenue growth, encouraging Woolworths to expand its operations. Woolworths’s decrease in store prices has significantly increased its market share and power. The organisation has never undermined financial regulation and oversight, its financial reports are open to the public to encourage transparency and ethical conduct. The interest rates for capital have fluctuated and yet Woolworths has been able to borrow as a result of its solid investment grade credit rating. Inflation is properly managed by the RBA who aims to keep the inflation rate between a 2-3% long term average.
Conclusion
Woolworths Group Ltd is a highly active corporation in multiple areas, such as Food and Staples, Accommodation, Petroleum and Department stores. The Group bases the majority of its business decisions on its goals; to build a customer led culture, generate sustainable sales, evolve their drinks business, empower their portfolio businesses and become a lean retailer. Although the Group has faced many issues in the past, they uphold their core sociopolitical values such as diversity in hiring and equity in hiring as well as promoting environmental sustainability. The challenges the group will face is its redemption from past scandals such as the poker machine scandal and the ALH scandal. It has also suffered from these scandals at cost of its reputation. However, it has opportunities to redeem itself, starting with a single-use plastic bag ban, a significant move on Woolworths’s part as well as raising $500 000 for the farmers in the drought, strengthening the sense of community.
Business recommendations for the Woolworths Group Ltd include a change in approach to management; whilst Woolworths is able to produce considerable amounts of revenue it has suffered from these scandals that have damaged its reputation. The management needs to place more focus on ethics coordination and management, if the business has a separate body just for the ethics of the corporation separate from any financial motivations the company will be able to improve its reputation and rating from an F. However, it could also be argued that if Woolworths has an ethical body their costs will be higher which would ultimately decrease its ability to create affordable products.
