According to Poza, there is a general perception that family business are ‘less socially responsible because of their incentive to protect family wealth’ and ‘less ethical because of their incentive to reduce tax liabilities and derive competitive advantage by whatever means possible in the often private, less-transparent world of most family businesses.’ (2007, pg.21). Nevertheless, McKinsey suggests that charity has become an important element by keeping families committed to the business. It can provide ‘meaningful jobs for family members who don’t work in it and by promoting family values as the generations come and go. Sharing wealth in an act of social responsibility also generates good will toward the business.’ (2010, pg. 9). Family businesses have aspiration to protect the family business image through its name and reputation.
Neubauer and Lank identify the benefits of why family businesses set out philanthropic goals. Families believe philanthropy is a way to ‘perform their duty to be compassionate to those less fortunate than themselves. Others see their charitable foundations as a concrete way of returning to society a portion of the wealth that the community has allowed the to accumulate over generations.’ (1998, pg. 259). ‘Furthermore, donating private money to improve the social infrastructure of the community can lead to enhanced human potential, which can create a better climate and resource base not only for the family firm itself but for all of society.’ (1998, pg. 259-60). These results can lead to a win-win situation where everyone can benefit.
McKinsey mentions that families face a challenge when setting out the direction of their philanthropic activities especially when transferring power to the next generation. Families have tackled this issue by ‘creating a discretionary spending budget allowing family members to finance projects that interest them.’ (2010, pg.9). Some family businesses also give family and non-family members the opportunity ‘to participate directly in philanthropic projects through onsite visits and volunteering schemes. This approach is an especially powerful way to engage the next generation early on.’ (2010, pg.9).
Even though there has been an increase in philanthropy, Kaslow has an argument concerning to what extent the charitable work given out should be at a personal or corporate level. Personal responsibility is where ‘ families generally tend to be very supportive of charitable causes, on the whole they prefer to maintain anonymity and a low profile.’ On the other hand, ‘some argue that charitable endeavor can and should take place as a corporate initiative, and that, as well as giving money to good causes, no one should feel ashamed if there is also some benefit for the company.’ (2006, pg.343).
1. Case Study
The foundation factors including social responsibility and philanthropy are the key features into creating a healthy family business. The author will illustrate these factors by using Bottlegreen and to what extent the level of social responsibility and philanthropy is used within the business. Bottle Green is a family owned business that produces a wide range of soft drinks. It has met the whole criterion into making a family business successful but it has an emphasis on its social responsibility and charity work.
3.1. Bottlegreen: Sustainable Principles Bottlegreen’s sustainable principles have been embedded within the business origins. The business started up as a ‘cottage industry business’ between the fair-trade towns of Stroud and Nailsworth. The local culture undoubtedly influenced the approaches of the business. The business took the ideals of the target market and the small family ethos of ‘doing the right thing’. From the early stages of the business to the present day the principles have stayed with them. As they have grown in size and revenue, they have been able to operate at a greater efficiency and with as many sustainable practices they are realistically able to manage.
3.2. Bottlegreen: Sustainable Practices 1. Production Facility Bottlgreen’s production factory has been made eco-friendly as possible. They have designed a water recovery system, which enables them to use recycled water to rinse and sterilize the bottles before they use them. The electricity has been sourced from an eco friendly 100% renewable source. All factory machines use high efficiency variable speed motors, resulting in more than 25% reduction in electricity consumption.
3.2.2. Recycling Waste materials including cardboard waste, plastic wrap, glass, steel drums and scrap paper along with faulty or used bottle cap are sent for recycling. Bottlegreen also return all of the wooden pallets back to the suppliers so they can be re-used again. Plastic barrels are sold to local residents as garden water butts. The money is then donated to the local charity, Winston’s Wish.
3.2.3. Suppliers Bottlegreen source a majority of the products and ingredients locally. This will help reduce food miles. The water used to blend the cordials and presses is drawn from the sites own borehole and the elderflowers used to make the award winning cordial are supplied, as much as possible, from local farms in Gloucester and Kent. In addition, all of Bottlegreen’s glass bottles are made in the UK, resulting in a saving of 260,000 road miles per year.
3.2.4. Distribution As Bottlegreen’s products are distributed across the UK, they aim to reduce unnecessary carbon emissions and road miles where possible. By switching to a local distribution company, Bottlegreen have saved over 30,000 road miles this year, and all of the distribution lorries now run on a 20% bio diesel mix, helping to reduce the amount of fossil fuel consumption and lower our carbon footprint.
3.2.5. Packaging The distinctive conical shape of the Bottlegreen bottles can be considered impractical in terms of being stacked on shelves as well as being transported. The wasted space during the distribution process could be seen as in cohesive with the company’s positioning on sustainability. However the distinctive shape adds to the appeal and sophistication of the drink. Altering the design of the bottle could damage the image leading to a decrease in desire for the brand, producing an undesirable win-lose situation for the company.
An alternative space saving option for the distribution process would be to alter the way the bottles are stacked together. Below you can see how the bottles fit when stacked next to each other in the upright position, while next to it you can see the space saved when laid flat in a head to tail arrangement. Although this technique cannot be used when the bottles are placed on the shelves, it manages to utilise the full use of space during transportation.
1. Bottlegreen: Philanthropy 1. Breakthrough Breast Cancer Breast cancer has become the most common cancer in the UK with over 46,000 women and 300 men being diagnosed each year. Since it can affect everyone in some way or another, Bottlegreen has created a limited edition bottle containing a new cordial flavour known as Bottlepink. With every bottle sold, Bottlegreen will donate 10% to the breast cancer charity, Breakthrough Breast Cancer. The charity fights cancer through research, looking at prevention and cure, campaigning and education.
1. Charitable Functions Bottlegreen is willing to help charities and businesses that are raising funds for praiseworthy projects. Bottlegreen can assist these charities and businesses by donating their products for charitable functions. Recently, Bottlegreen have donated to Marie Care Cancer Care, Action Against Hunger and St Johns Ambulance. The donations may by small but it can make a big difference to a charity. As a result, Bottlegreen will always be known for their philanthropy throughout the community.
1. . Bottlegreen: Conclusion After evaluating the family owned business Bottlegreen, the author of this paper has concluded in believing that Bottlegreen is a successful family business especially in terms of the foundations criteria. The family owners of Bottlegreen established the business using and undertaking sustainable practices while helping the local community through philanthropy. For this reason, these foundations will always be part of Bottlegreen’s values and vision.
Conclusion This assignment only includes several criterions on what makes a successful family business. Nevertheless, they all give an indication on how to create a healthy family business. These criterions may formulate a successful business but there will be consequences if the family business cannot perform in these areas.