89336396 csr-case-johnson-and-johnson

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Why Corporate Social Responsibility Matters
Assessment Number 2 – Case Study: Johnson & Johnson
Submitted by
Philippe Schwyn
Student ID: 807FBBA009
Submitted to
Mr. Jose Roberto L. Del Rosario, Jr.

Submitted on
December 28, 2011

Outline:
1) First, assess the extent of CSR adoption in “Johnson and Johnson” by answering the
following questions:
a. Which levels of “Johnson and Johnson’s” management are involved in the
company’s CSR initiatives?
b. Has the company developed a comprehensive strategy that defines the
borders of its CSR initiatives? If yes, explain the strategy employed by the
company and comment on its comprehensiveness.
c. Discuss specific CSR programs that “Johnson and Johnson” has initiated to
implement its CSR strategy. Which of the following CSR areas do they cover?
1. Supply chain responsibility.
2. Environmental responsibility.
3. Social responsibility and Human Rights.
4. Community Investment.
2) Second, assess the effectiveness of the implementation of “Johnson and Johnson’s”
CSR strategy by answering the following questions:
a. Does “Johnson and Johnson” appear to have adopted a spirit of full
disclosure?
b. Are there discrepancies or contradictions between the company’s stated CSR
policy and its actions? What about between the company’s policy and the
actions of its subsidiaries and supply chain partners? If so, what do you
believe are the reasons for these discrepancies?
c. Is the company in voluntary compliance with SA8000?
d. Is there a correlation between the company’s profitability and the
effectiveness of its CSR program over the last 3 to 5 years?
e. Discuss your opinions relating to the motivation and the intent of “Johnson
and Johnson’s” management in leading a CSR effort.

1. First, assess the extent of CSR adoption in “Johnson and Johnson” by answering the
following questions:
a. Which levels of “Johnson and Johnson’s” management are involved in the
company’s CSR initiatives?
Johnson & Johnson is one of the most recognized socially responsible organizations among
the Fortune 500 companies, which is reflected in consistent top listings both in the Harris
Interactive National Corporate Reputation Survey and Barron’s Magazine (JnJ 2012). The
company has achieved such status due to a long running commitment to social
responsibility, which in turn resulted in a number of commendable behaviours and very low
scandalous incidents during the last several decades. Most frequently cited examples
include swift and voluntary product recalls, especially the recall of their Tylenol painkillers in
1982. As far as online research can reveal, Johnson & Johnson does not have a CSR
dedicated division to oversee the implementation and audit of policies, but instead
established a corporate structure that ensures that all business decisions are subjected to its
social values and growing of a socially responsible organizational culture. In such terms, all
J&J employees are involved in the company’s CSR initiatives, including its CEO and board of
directors.
b. Has the company developed a comprehensive strategy that defines the borders
of its CSR initiatives? If yes, explain the strategy employed by the company and
comment on its comprehensiveness.
Johnson & Johnson became an early socially responsible company under the Chairmanship
of one of its founder’s sons, Robert Wood Johnson II. Heading the company to international
success from 1932 to his death in 1963, Robert Johnson also established the socially
responsible company credo and four strategic principles, which persisted to this day.
The four strategic principles include:
1. To be broadly based in human health care
2. To follow a decentralized management approach
3. To manage for the long term
4. To focus on people and values
The company credo is a one page document which summarizes to the following points to be
followed in terms of importance.

First Responsibility - Customers
• Doctors, Nurses and Patients, Mothers and Fathers and other users of J&J products
• All J&J Products must be of highest quality
• The reduction of costs to offer reasonable prices
• Prompt and accurate service of customer orders
• Providing profit opportunities for suppliers and distributors
Second Responsibility – Employees
• All employees are considered individuals
• Respect for personal dignity and merit
• Provide job security
• Fair compensation
• Clean, orderly and safe working conditions
• Respect and supportive of family responsibilities
• Freedom of expression (suggestions and complaints)
• Equal opportunities for those of equal qualification
• Provision of competent, just and ethical management
Third Responsibility – Community
• Responsible behaviour towards local communities and the world community
• Support of “good work”, charities and fair payment of taxes
• Encouragement of civic improvements, health and education
• Sustainable usage and protection of properties, the environment and natural
resources
Fourth Responsibility – Shareholders
• J&J must make a “sound” profit
• Exploration of opportunities
• Continuation of R&D and innovation

• Physical expansion (purchase and introduction of new equipment, facilities and
products)
• Recognition of mistakes and taking responsibility thereof
• Building of reserves and provisions for adverse times (JnJ 2008)
The above framework describes a very comprehensive CSR strategy with clear boarders and
priorities. With its principles and credo, J&J communicates an understanding of its industry
and strengths, clearly limiting itself to activities of expertize. Furthermore, all business
decisions are to be subjected to these guiding principles, putting the customers first,
employees and the community second and third, and shareholder interest last. According to
these principles, any project which does not satisfy all points included in the long-run should
not be considered (JnJ 2008).
While these principles are comprehensive and if implemented as intended forces the firm to
provide important services for humanity in a responsible and sustainable way, there are
several issues, I believe to be vital to a comprehensive CSR strategy, that are not included.
Modern-day CSR issues addressed in J&J’s principles:
Fair Trade
Fair Trade is provided for in the company’s first priority on customers, guaranteeing profit
opportunities to its suppliers and distributors while focusing on socially relevant products.
Human Rights
Human Rights are provided for in the company’s second priority on Employees,
guaranteeing equal opportunities, fair compensation and a safe and inspiring working
environment. The company further encourages its employees to engage in charitable or
socially beneficial activities, which is proven to have a beneficial effect on personal psyche
and is exercised by 80% of its workforce according to its 2008 sustainability report.
Environment
The environment is provided for in the company’s third priority on the community,
guaranteeing sustainable usage of resources. The principle further stipulates the promotion
of and support of third party efforts for this cause, health and education.
Issues not addressed in J&J’s principles:

Compliance and Auditing
Johnson did not include provisions to force compliance with his principles nor setup internal
or external auditing rules to keep corporate performance in check. This was also mentioned
as a stakeholder critique in the Chairman’s message of the 2008 sustainability report. While
the company explains its commitment to improving this issue in the same report, there are
some performance indicators mentioned and the company now employs Price Waterhouse
Coopers (PWC) as an external auditor to its CSR activities.
Among several standards, mostly healthcare related, the company supports the Carbon
Disclosure Project as one of the more popular ones. Other standards mentioned include the
Global Reporting Initiative for the preparation of the sustainability report, however the
company does not commit itself in usage. Johnson & Johnson currently ranks 62 on the
general GRI score sheet.
Transparency
This addresses a similar concern as compliance and auditing. The company’s principles and
credo do not include any clauses on transparency, somewhat disallowing the public to
measure J&J’s compliance and performance on their own or external standards and indexes.
Again however, the company has recognized the need for transparency and promises
improvements in transparent sustainability reporting throughout its operations.
Corruption
Both the company’s principles and sustainability report make no mention of corruption. We
would argue that for most international corporations, especially those supplying
governments and health institutions around the world, this should be an important topic
and taken notice of.
Supply Chain
Other than issues of fair trade the credo also doesn’t require the company’s suppliers or
distributors to commit to J&J’s CSR values. Independent of the company credo however, the
firm has started to audit its supply chain according to its own extended principles. In 2008, it
had audited 35% of its supply chain on child labour, production quality and other diverse
issues. In 2009 it claims to have audited 98%.
In summary, Johnson & Johnson has a long standing history of socially responsible
behaviour that is no doubt the result of its early CSR adoption and visionary approach of

Robert Johnson II. When reading the company’s sustainability reports, one cannot help but
notice that most of the language used emphasises “good intentions” rather than
commitments, which perhaps is a reflection of the general CSR problem and vagueness of
many contemporary efforts (e.g. UN Global Compact, GRI etc.). Most of these initiatives are
guidelines and many companies can benefit from its branding by mere association rather
than mandatory, auditable and punishable commitments. In these terms we would argue
that Johnson’s credo and principles have done a satisfactory job in committing his company
to a long-term set of realistic guidelines that seem to have embedded itself in J&J’s
corporate culture over time, even though there is certainly room for a more comprehensive
and definite formulation of strategy.
c. Discuss specific CSR programs that “Johnson and Johnson” has initiated to
implement its CSR strategy. Which of the following CSR areas do they cover?
In addition to the before mentioned principles Johnson & Johnson in 2006 established a
series of sustainability goals for 2010, which it summarized in two CSR programmes called
Healthy Planet 2010 and Healthy People 2012. The two programs included the following
goals respectively:
Healthy Planet 2010 (Summarized)
• Transparency: 100% of manufacturing and R&D facilities are to provide public
environmental sustainability information.
• Energy: 7% absolute CO2 reduction from 1990 levels and reduction of fleet emissions
by 30% from 2003.
• Water: 10% reduction in water use from 2005
• Waste: 10% reduction of hazardous and non-hazardous waste from 2005
• Packaging: Elimination of PVC packaging in several sectors and strong increase of
sustainable paper in office and packaging.
• Product Stewardship: all operating companies to establish sustainability plans and
electronic products “take back” programs
• Environment: Subject all employees to recurring environmental education
• Biodiversity: All operating companies to establish sustainability plans for biodiversity
• Compliance: Zero accidental environmental releases; zero environmental violations
While most other goals have been achieved by 2010, compliance experienced a

slight negative trend towards year-end and was not achieved. The company reacted
with more awareness programs and waste management training.
• Supply Chain: 100% of external manufacturers in conformance with J&J External
Manufacturing standards. (JnJ 2010)
Healthy People 2012
• Create, Promote and Sustain an Organizational Culture of Health
• Reduce Employment Health Risk Factors
• Promote a consistent Approach to the Deployment of Occupational health Services
and Standards (JnJ 2010)
With the expiration of the Healthy Globe 2010 goals, the company has established new CSR
goals for 2015 with anew program titled Healthy Future 2015. Healthy People will continue
of course until its expiry in 2012. In line with J&J’s credo, the program focuses on the
improvement of people’s health, environmental sustainability and business vitality. To
achieve such, the program includes goals across seven priorities. These include:
• Advancing global health through research and development for neglected diseases
and affordable access to our medicines
• Advancing community wellness
• Enhancing outcome measurement in philanthropy
• Fostering the most engaged, health-conscious and safe employees in the world
• Building on our legacy in safeguarding the planet
• Partnering with suppliers that embrace sustainability
• Committing to enhanced transparency and accessing the power of external
collaboration (JnJ 2010)
The program further stipulates well-defined measurement indicators and targets, which can
be viewed in its 2010 sustainability report. Selected targets for include:
• All J&J products that address diseases of the developing world achieve WHO
prequaliﬁcation
• 20% absolute reduction in facility CO2 emissions.
• All suppliers in high-risk countries confirm awareness of and conformance with the
human rights provision of J&J policies (JnJ 2010)

1. Supply chain responsibility.
Healthy Globe 2010 to some extent covers the company’s supply chain responsibility, as it
requires 100% of its external manufacturers to conform to the company’s eternal
manufacturing standards. The target was achieved to 98%, which is an acceptable margin of
error, given the dynamic growth and decentralized nature of the company. The problem
with the 2010 goals however is, that external manufacturers only cover roughly 1000 of the
company’s 50’000 suppliers. Healthy Future 2015 intends to extend this effort to more J&J’s
suppliers while increasing the share of diverse suppliers (e.g. minority and women owned
businesses). The following two 2015 targets are aimed at increasing supply chain
responsibility:
• All strategic suppliers have two or more publicly reported sustainability goals
• All critical employees receive human rights training
While J&J’s efforts in supply chain responsibility are being increased, the efforts fall short of
an extensive auditing program. Furthermore the company has stipulated sustainability
standards for external manufacturers, but fails to extend such principles to all of its
suppliers. This is understandable to some degree, especially given the company’s high
number of suppliers and the company may circumvent this problem by accelerating
partnerships with new suppliers which are easier to audit, as they have lesser leverage over
J&J (i.e. existing suppliers enjoy more leverage because it is a greater effort to terminate
existing supply arrangements versus selecting the best of new competing ones). In any case,
we would argue that the company’s focus on supply chain responsibility is a moderate
approach.
2. Environmental responsibility.
Johnson & Johnson has made several advancements in terms of environmental
sustainability with its Healthy Globe campaign and includes a series of more aggressive
targets for 2015. Successes in 2010 included 9.5% reduction in water use compared to 2005,
25% reduction of hazardous waste and strong reduction of PVC packaging to the same base
year. 2015 goals include the increase of on-site renewable energy to 50 megawatts, 10%
reduction in absolute water consumption and 10% reduction in absolute waste disposal.
3. Social responsibility and Human Rights.
Human rights is a topic of increased interest in recent years, especially with the emergence
of continued slavery and human trafficking. Johnson & Johnson have included human rights
and a dignified working environment already in their 60-year-old company credo and

extends these values to its suppliers with its Healthy Future goals. As included above, the
company will require all suppliers in high-risk countries to conform to its own human rights
principles and will train its own employees dealing in such circumstances or subjected to
potential human rights infringements.
4. Community Investment.
J&J invests in the community primarily through a healthy workforce internally and through
health oriented philanthropic activities externally. The increase of health levels among its
employees is attended to by its Healthy People 2012 program, which includes free health
checks and better health services throughout its offices internationally. In 2010 it has well
achieved its targets for its US workers while staying slightly behind its 2012 targets abroad.
For 2015 the company plans to achieve benchmark safety and health performance in the
workplace. To benefit the community 2015 targets include 100 community health education
initiatives launched across 25 countries and an increase of the people reached by these
initiatives.
In summary, the company employs a fairly extensive CSR program internally which
benefited from a long-standing history of socially responsible success. However, as J&J is
doing well for itself and earns high critical praise for its responsible management, the
company seems to lack somewhat in determination when it comes to enforcing its
principles in its supply chain. Except for a strong position in human rights, compliance with
J&J’s principles seem largely voluntary.
2) Second, assess the effectiveness of the implementation of “Johnson and
Johnson’s” CSR strategy by answering the following questions:
a. Does “Johnson and Johnson” appear to have adopted a spirit of full disclosure?
There is wealth of links and information on the JnJ.com website explaining a multitude of
policies, commitments, efforts and accreditations in the field of CSR. More recently the
company has dedicated a large part of its websites solely to its CSR activities under the URL
JnJ.com/responsibility and the company stated in its sustainability reports that 60% of its
sites report their environmental performances. While the company certainly seems portray
a strong commitment to CSR, activities in terms of transparency, while noted, have a
tendency of being crowded out by the wealth of information on other topics, thus making it
hard to understand the full extent of disclosure. In addition, almost all statements on its

website and associated links merely explain “good intentions” rather than observable facts
and figures and even though the sustainability report claims that environmental site
performances are available on its website, its transparency link only explains that
transparency is important, that the company is committed to it and that 60% of site have
reported figures. Judging from this we would argue that the company has adopted a limited
spirit of disclosure, not publicising individual site performances, especially in areas other
than the environment. For example, it is not possible how many children under the age of
16 are working in J&J associated sites, for what kind of work and under what kind of
circumstances. Furthermore, the company does publicize some factual numbers in its
sustainability report; however, these numbers are to be read with caution, as it is up to J&J’s
discretion to formulate its CSR programs into areas of existing strengths while covering up
chronic weaknesses. There are also little references to industry standards or weaknesses or
comparisons with other companies. A more illustrative example of this is the countless
listings of recognitions and awards under the GRI section of the responsibility page of
JnJ.com. With literally dozens of awards presented it is difficult for the viewer to dissect
relevant information, as it is unlikely for all these rewards to represent credible awarding
bodies. Finally J&J’s GRI rating of 62nd
is not extraordinary and not posted on their website
and there is no more mention of an independent audit in the 2010 report.
b. Are there discrepancies or contradictions between the company’s stated CSR
policy and its actions? What about between the company’s policy and the
actions of its subsidiaries and supply chain partners? If so, what do you believe
are the reasons for these discrepancies?
Despite the arguments in the previous paragraph, we would argue that Johnson & Johnson
largely commits to its social responsibilities, mainly because of its low incidents of scandals
and strong performances in times of crisis. As scandals mainly include minor incidences with
corruption, the company has been exemplary for the past several decades in terms of
product recalls, admitting and attending to its mistakes. There have been no major issues of
cover-ups or the like. Mild corruption on the other hand is a common issue in multinational
companies who have to deal with government contracts on a regular basis and might even
have to be accepted for the time being. With the information available to an outsider, of
course, the company’s CSR performance is presented in a comprehensive and consistent
manner, however, we have to ask ourselves how a sustainability report claiming absolute
CO2 reductions of 20% is compiled if only 60% of sites report their environmental numbers.
This argument gains in relevance if we consider the figure being calculated to a base year of
1990 at which time it is improbable that any such numbers have been compiled.
c. Is the company in voluntary compliance with SA8000?

The company doesn’t make any official statement on its website about compliance with or
SA8000 certified facilities. Given the stipulations in its credo on the working environment
however we may assume that J&J complies, voluntarily in this case, with the standard. With
its Healthy Future 2015 companies it also extends these standards to its suppliers.
d. Is there a correlation between the company’s profitability and the effectiveness
of its CSR program over the last 3 to 5 years?
Comparing Johnson & Johnson’s stock value and Gross Profit Margins over the past five to
six years there is no, or negative correlation to its CSR programs over the same time as can
be seen in the following two charts.
(Ycharts 2012)

(Ychart 2012)
e. Discuss your opinions relating to the motivation and the intent of “Johnson and
Johnson’s” management in leading a CSR effort.
In our opinion, J&J has a vested interest in a strong CSR image, given that its products are
not just consumer products, but consumer health products. With healthcare, medicines and
similar products, trust is one of the most important factors in sales as potential customers
will not buy products from a company that doesn’t portray an interest in the betterment of
society or value human life. One of the most publicised developments in Johnson &
Johnson’s sustainability reports is its employee health programs and health improvements.
This makes a lot of sense, as it would probably be detrimental to have an unhealthy
workforce represent the sales force of a leading health care provider.
Other Sources:

1) JnJCanada 2012, Awards and Recognition, http://www.jnjcanada.com/awards-
recognition.aspx
2) JnJ 2008, Sustainability Report 2008,
http://www.socialfunds.com/shared/reports/1248455053_Johnson_Sustainability_Report_
2008.pdf
3) JnJ 2010, Sustainability Report,
http://www.jnj.com/wps/wcm/connect/f9f1148046e763e7b0b4bae02a8d6552/110421_FI
NAL_J%26J_2010_ResponsibilityReport.pdf?MOD=AJPERES
4) Ychart 2012, JnJ gross margin & price chart,
http://ycharts.com/companies/JNJ/gross_profit_margin#zoom=10
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