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ACCA Applied Knowledge · Business and Technology · Sustainable business practices

Zentra Ltd, a clothing retailer, discovers that a overseas supplier uses workers below the legal minimum age. Zentra's board decides to end the contract, even though switching suppliers will raise costs by 8%. Which view of corporate social responsibility does this decision most clearly reflect?

The decision reflects a stakeholder view of CSR. The board accepts higher costs to avoid exploiting workers in the supply chain, showing it considers the interests of groups beyond shareholders. A pure profit-maximising approach would not voluntarily take an 8% cost increase for ethical reasons.

  1. AA pure shareholder-wealth maximisation view, because lower risk raises profit
  2. BA stakeholder view, because the board has given weight to ethical treatment of people beyond the company's own ownersCorrect
  3. CA compliance-only view, because the company has no discretion
  4. DA mercantilist view, because the company is protecting domestic suppliers

Explanation

Accepting a cost increase to avoid exploiting child workers shows the board giving weight to the interests of stakeholders other than shareholders. A pure shareholder-wealth view would not accept a deliberate 8% cost rise for ethical reasons. The company was not forced by compliance, and the question says nothing about protecting domestic suppliers.

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