Corporate Social Responsibility is Beneficial to the Success of a Supply Chain

Introduction to Research

Corporate Social Responsibility (CSR) is a vague term. Even today the definition is not pinned down succinctly1. In light of this our position that companies should incorporate CSR for their benefit in the design of their Supply Chains (SC) appears difficult at first. !anagers under pressure these days from various sta"eholders find it hard to balance #uarterly results e$pectations regulatory e$pectations and consumer e$pectations%. &ow can adding something vaguely defined li"e CSR to this mi$ possibly lead to a benefit' (irst while there is no single definition of CSR that does not mean that a broad consensus of its dimensions does not e$ist. In fact a study of definitions from various sources advocating or voicing their stance on the concept found that there is broad consistency across five dimensions. )hese dimensions in no order are* environmental social economic sta"eholder and voluntariness+. In a world where competition is moving towards the SC webs of large firms, CSR becomes a fundamental competitive advantage when applied to SC practices. -ational and international bodies are effectively adopting non.tariff barriers because of the demands of citi/enry for environmental and social responsibility from internationally operating firms0. Sustainable practices also have benefits for SCs loo"ing to drive down their operating costs. )hese practices can reduce raw material needs or generate additional revenue1. (urthering the benefits of CSR to SCs is the element of financial ris" reduction. Companies that are e$tending their chains across borders and oceans need to be aware of the differences in norms of supplier operations in those new conte$ts2. (inally the nature of globali/ed media means that an irresponsible practice in one part of your chain can affect the continuity of your business as a firm3s sta"eholders agitate for the practices they want to see from a broader base of people4. )he global push for environmentally friendly corporate behaviour shows through evolving regulatory standards. 5ith growing demand for environmentally friendly6 green products countries are now effectively introducing non.tariff barriers by restricting the import of products produced by non.compliant companies. )his means that internationally operating businesses need to adapt their SC and manufacturing methods in order to #ualify to compete in the changing global mar"et. 7n e$ample of this global concern is a push for providing solutions to e.waste and improved general manufacturing methods that has caused stricter compliance norms and increased penalties for those who won3t change in India8. Companies that have not ta"en the steps are now being forced to catch up and revaluate their supply chain and strategic planning to comply with the regulations. &ere the concepts of green supply chain management 6 sustainability are being introduced in companies that did not ta"e the initiative. It is clear that these environmental actions on the part of governments are setting a higher baseline for what is acceptable. It means that CSR must become a part of SC strategic planning if a company wants to ma$imi/e its long.term opportunities. SCs that adapt #uic"ly to this reality can reap both the benefits of wider mar"ets and the strategic advantage of being legally compliant with regulations ahead of time19. 5ith resources becoming less available sourcing sustainable materials and reducing the amount of raw materials used can help companies financially11. )hrough changing their production process to have low environmental impact that reduces waste levels and pollution as well as being more efficient it can lead to lower raw material costs reduced environmental6 safety e$penses and improved corporate image. 7dditionally firms that continue along this road also design their products with these goals in mind. )hese practices can be summed up under the concept of :reen Supply Chain !anagement (:SC!)1%. ;perating costs are increasing. )raditional manufacturing and supply chain management does not plan for reduction in costs

based on environmental factors. Changing towards ecofriendly manufacturing in the sense of ma"ing factories more efficient with electricity consumption choosing suitable pac"ing alternatives such as bamboo cardboard and finally pac"ing items with less wastage to ensure ma$imum capacity not only increases profits but provides consumers6 governments with the green products they desire. It turns out that a green SC is the same as an efficient SC1+. In this case the benefit is lower costs. )here is a further financial benefit to be found in CSR for SC managers. <oor CSR planning creates financial ris"s for companies that are e$tending their supply chains. ;nce outside their familiar surroundings companies may come into contact with suppliers that have differing business practices. 7n e$ample of this is given through !attel3s e$perience with sourcing some of its toy manufacturing to China. Some subcontractors followed !attel3s specifications for using low.lead.content paint but a few did not1,. !attel was clearly not wholly irresponsible. )hey had inspection methods in place before this incident and had given subcontractors specifications. &owever they did not ta"e sufficient steps to guarantee their supplier3s practices aligned with their specs as shown by the discovery of lead paint in their products. )he financial impact was significant10. 7 final e$ample of poor CSR impacting a SC comes from =ritain and the E>. )esco a =ritish grocery store chain e$perienced an issue where meat products they sold tested positive for horse ?-7. )he end result was they lost +99 million pounds in mar"et value and left with a tarnished brand. &orse meat is at the @value3 or @budget3 end of the mar"et. If )esco had ta"en more responsibility in the sense of establishing a standard of which it wishes to serves its customer it would have eliminated the loss in mar"et value and brand tarnishing and maintained positive customer relations11. (rom these e$amples it is clear that not incorporating CSR planning into SC! can lead to poor outcomes for various sta"eholders within and outside the company. )his lac" of planning can spiral #uic"ly out of a company3s control in today3s media.rich world. 7 Aournal article in the Academy of Management Perspectives states the strategic CSR case for a media.rich world B)he importance of recogni/ing the strategic nature of supply chain management (SC!) has been amplified as sta"eholders have focused more attention on environmental and social responsibility partly because of increasing media coverage. )hese sta"eholders have in many cases become more adept at organi/ing themselves and leveraging media attention to promote change in sourcing practices but C businesses have been slow to adAust to this reality.D p1, (source4). <ractices that have gone unnoticed in the sourcing processes of firms will not remain unnoticed in the medium to long term and firms should act before they are forced to act. 7 solid case in support of this is the =angladeshi Rana <la/a collapse. &ad companies followed some of the five dimensions of CSR they could have averted the accident and the ga/e of consumers activists and regulators. Instead it was found that many of the maAor brands li"e 5almart <rimar" and =enetton were aware of the issues around sourcing wor" through =angladesh. p +%0 (source19). )hus despite "nowing the ris"s the companies went on with their sourcing strategy without regard to various important sta"eholder communities whose attention was now able to simultaneously fi$ate on continuing reports regardless of their distance from =angladesh. =eyond the human and reputation damage incurred there were other unforeseen conse#uences* some companies chose to relocate to other countries incurring those costs while others faced continuity issues over several wee"s due to protests at 099 factories by wor"ers (source19). 7dditionally this "ind of pressure does not only flow downstream but can flow upstream to suppliers. :eorgia <acific (:<) was a supplier for &ome ?epot (&?). It found itself facing a sudden activist campaign about its business practices. )hey weren3t directly targeted but their customer &? was. 5hile :< dismissed the actions as trivial at first they #uic"ly found that their customer was unhappy to have activists hanging off their corporate head#uarters attracting media attention. )hey were

forced to halt their usual operations and source from a competitor while they wor"ed out the certification process that &? now re#uired12. )he campaign drew significant enough attention to change a customer3s re#uirements. )his illustrates that lac" of foresight in SC CSR planning can bring world or country.wide attention and pressure on several points of a supply chain forcing it to adapt regardless of the costs. In conclusion a strategic CSR stance is beneficial to SC!. It brings to a globally stretched firm a focus on five elements they need to "eep in view while planning their SCs* environmental social economic sta"eholder and voluntariness. 7 SC managed while "eeping these categories in mind will be able to better navigate the changing world than a competitor who does not while providing the value sought from it. )his is an immense benefit for all sta"eholders.

?ahlsrud 7. (%994). &ow corporate social responsibility is defined* an analysis of +2 definitions. (p. 1) 2 Eumar S. )eichman S. F )impernagel ). (%91%) 7 green supply chain is a re#uirement for profitability (p. 1%8%) 3 ?ahlsrud 7. (%994). (pp. +.1) 4 :upta G. 7bidi -. =ansal ). F Eumar Hain R. (%91+) :reen Supply Chain !anagement Initiatives by I) Companies in India (pp. 1.2) 5 :upta G. 7bidi -. =ansal ). F Eumar Hain R. (%91+) (p. 4) 6 Eumar S. )eichman S. F )impernagel ). (%91%) (pp. 1289-1292)
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?ahlsrud 7. (%994) page 1. :upta G. 7bidi -. =ansal ). F Eumar Hain R. (%91+) (p. 4) Eumar S. )eichman S. F )impernagel ). (%91%) (p. 1%28)

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:SC! is defined as production processes which use inputs with relatively low environmental impacts are highly efficient and generate little or no waste or pollution. :SC! can lead to lower raw material costs production efficiency gains reduced environmental and occupational safety e$penses and improved corporate image (-inlawan et al. %911). page 4
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:ilbert H. F 5isner H. (%919) D It appears that !attel properly specified the use of low.lead.content paint for its toys to its manufacturing subcontractors. &owever because high.lead.content paint is readily available at least in China and is cheaper and easier to use than low.lead.content paint some subcontractors purchased and used these unsafe paints in manufacturing toys for !attelD(p. ,%)
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:ilbert3s (%919) research D In total !attel spent more than 09 999 labor hours investigating the toy recalls. =y the middle of %992 !attel had spent an estimated I,9 million on product recall.related activities ((arrell E)&ICS 7-? S><<JK C&7I- !7-7:E!E-) +0 (%992) and the impact from the %991 and %992 toy recalls reduced gross profits in %992 by an estimated I21 million (!attel %992 7nnual Report)D (pp. +0.+1 16 :lendon (%91+)
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