Stakeholder and Shareholder Influence

[Maximum number: 12]

Extract A Lush promises to invest in UK stores after return to profit Ethical UK high street retailer Lush, best known for its highly scented bath soaps and handmade cosmetics, returned to profitability in the financial year 2021-22.

The latest statement of comprehensive income for Lush showed a pre-tax profit of £29m during 2021-22 compared to a loss of £45m in the previous year. However, turnover was lower at £408.7m, down from £437.8m in the previous year.

Lush operates retail outlets in 48 countries and has manufacturing facilities in six countries. It plans to attract more customers by investing in larger outlets with services such as health spas and hairdressers.

The business made no dividend payments to its shareholders in 2022. "We have to invest money now. We need to refit our shops." said Mark Constantine, one of the co-founders of Lush.

The group continues its policy of charitable donations, with Lush raising funds of £6.3m for several charities.

Extract B Selected cost and sales data for Lush's bath soap department

Table for Question 3.3.4.2c - Stakeholder and shareholder influences question 1 — Edexcel A-Level Business A2

Extract C Lush boss Mark Constantine happy to lose £10m after leaving social media Ethical beauty brand Lush is expected to lose £10m in sales after leaving four major social media platforms. Lush's co-founder, Mark Constantine, shut its Facebook, Instagram, Snapchat and TikTok accounts. Its Facebook and Instagram accounts had 10.6 million followers.

Constantine said he had no choice and that it is a price he is willing to pay. He was concerned over research showing the negative impact of social media platforms on many teenage girls, key consumers for Lush. "We've tightened up during the global health crisis, it won't destroy us. We will find new ways to connect with our customers as well as using the older tried and tested routes," he added.

Extract D Lush has been 10\% employee owned since 2017 The employees of Lush and its ethics are at the heart of the business. In 2017, Lush shareholders gifted 10\% of the company shares into the Lush Employee Benefit Trust (EBT). There are five Trustees who look after the trust on behalf of the employees.

The purpose of having an employee ownership scheme is to: - protect our ethics - ensure the independent ownership of the business - maintain the bonus culture - promote two-way inclusive communication - give every Lush employee a voice.

Extract E We Believe - Lush's guiding statement for 25 years We believe in: - making effective products from fresh, organic fruit and vegetables, the finest essential oils and safe synthetics - making products by hand using little or no preservative or packaging, using only vegetarian ingredients, and telling you when they were made - buying ingredients only from companies that do not test on animals - happy people making happy soap, putting our faces on our products and making our mums proud - our products being good value, that we should make a profit and that the customer is always right.

Assess the extent to which Lush considers its stakeholders when making
business decisions.

Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the general marking guidance. The indicative content below exemplifies some of the points that candidates may make but this does not imply that any of these must be included. Other relevant points must also be credited.
QS: QS8, QS9
Knowledge, Application, Analysis, Evaluation - indicative content
- Stakeholders are people or groups who have an interest in the actions of
a business. They include owners, employees, customers, suppliers, local
community, the government and environmental groups
- It can be argued that Lush does consider its stakeholders when it makes
decisions with Extract E stating what Lush believes in and how it affects
many of its stakeholder groups
- Lush insists that its suppliers do not test on animals and that Lush cares for the environment by the decisions it makes about the ingredients that go into its products
- Customer needs are important and Extract E states that products should be good value and the customer is always right
- Although Lush is known for its ethical values, it still aims to make a profit as a company and reward shareholders when it can, by its decision to
invest into the business in order to grow it
- Extract D shows how employees are given a share in the business and the opportunity to voice their opinion which demonstrates that employees are considered when making decisions at Lush
- However, it could be argued that even though all stakeholders are
considered to some extent in its decisions, the most important stakeholder group is still the shareholders and decisions will be made with them as the priority
- Lush is a company and so has responsibilities to make a return on
investment for its shareholders and perhaps the decisions affecting other stakeholders are really made to benefit the shareholders
- Revenue has fallen in recent years and a decision not to pay dividends to shareholders was made to reflect this
- Lush has donated £6.3m to several charities which could reduce
dividends to shareholders
- Lush is continuing to invest in its retail outlets and expand via health spas and hairdressers which shows that revenue and profit are still a
major objective and priority for the business
- In conclusion, Lush is not a typical business and has ethics at the heart of its culture and although it does probably consider the impact of its
decisions on all of its stakeholders, its shareholders are likely to be the
most important

Level

Mark

Descriptor

0

No rewardable material.

Level 1

1-2

Isolated elements of knowledge and understanding - recall based.

Weak or no relevant application to business examples.

Generic assertions may be presented.

Level 2

3-4

Elements of knowledge and understanding, which are applied to the business example.

Chains of reasoning are presented, but may be assertions or incomplete.

A generic or superficial assessment is presented.

Level 3

5-8

Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context.

Analytical perspectives are presented, with developed chains of reasoning, showing cause(s) and/or effect(s).

An attempt at an assessment is presented, using quantitative and/or qualitative information though unlikely to show the significance of competing arguments.

Level 4

9-12

Accurate and thorough knowledge and understanding, supported throughout by relevant and effective use of the business behaviour/context.

A coherent and logical chain of reasoning, showing cause(s) and/or effect(s).

Assessment is balanced, wide ranging and well contextualised, using quantitative and/or qualitative information and shows an awareness of competing arguments/factors leading to a supported judgement.

3.3.4.2c - Stakeholder and shareholder influences question 1