Integrating Corporate Social Responsibility Research Paper

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The theme of corporate social responsibility (CSR) has a long history. In 1953, Howard R. Bowen (1953) claimed that companies have the obligation to pursue policies, make decisions, or follow lines of action that are desirable in terms of the objectives and values of the society. According to Archie B. Carroll (1979), CSR encompasses the economic, legal, ethical, and discretionary expectations that society has of organizations. Dealing with economic responsibilities means to transact business and provide needed products and services in a market economy. Addressing legal responsibilities means to obey laws which represent a form of “codified ethics.” Facing ethical responsibilities means to transact business in a manner expected and viewed by society as being fair and reasonable, even though not legally required. Finally, coping with discretionary (or voluntary) responsibilities means to conduct activities which are more guided by business’ discretion than by actual responsibility or expectation. In the 1980s, the stakeholder theory acquired a strong relevance in the academic world. According to Robert E. Freeman (1984), stakeholders are those persons or groups of persons who can affect and/or are affected by the activities a company carries out. The concept of stakeholders personalizes social responsibilities by delineating the specific groups or persons that should be considered when adopting a CSR orientation.

At the end of the 1980s, the expression “sustainable development” was introduced by the World Commission on Environment and Development to mean the economic, social, and environmental issues to take into account to foster permanent development in the world. During the 1990s, a link between the concepts of CSR and sustainable development began to be established. However, the notions of CSR and corporate sustainability have followed separate evolution paths and only recently have grown into convergence. In the past, the theme of sustainability referred only to environmental issues whereas CSR referred to social aspects such as human rights. Nowadays, many scholars consider corporate sustainability and CSR as synonyms. An extensive part of the CSR literature also deals with environmental problems and issues, although a small but essential distinction should still be considered between the two themes: CSR relates to phenomena such as stakeholder dialogue and nonfinancial reporting, whereas corporate sustainability focuses on value creation and environmental management.

In this research-paper, we adopt the definition of CSR provided by the Commission of the European Communities in the Green Paper “Promoting a European Framework for Corporate Social Responsibility,” according to which CSR is the voluntary integration by companies of social and environmental concerns in their business operations and in their interaction with stakeholders. Based on that definition and the above considerations, in this research-paper the expression CSR is used to refer to the social, environ-mental, and economic attitudes, behaviors, and practices adopted by firms.

In the last years, the importance of CSR has rapidly increased. One of the motivations is the change in consumers’ attitudes. Research shows that many consumers prefer to purchase products from and invest in shares of those companies that care for the environment and maintain good citizenship behaviors. However, according to C. B. Bhattacharya and Sankar Sen (2004), there is a positive link between CSR and customers’ purchase behavior only when a variety of contingent conditions are satisfied: when the consumer supports the issue on which the company’s CSR efforts are focused; when there is a high fit between the company and the focus issue/cause; when the product itself is of high quality; and when the consumer is not asked to pay a premium for CSR. A positive relation exists between a company’s CSR actions and consumers’ loyalty, resilience, and word of mouth. For socially responsible firms the most relevant benefits are the enhancement of corporate image and the possibility to gain a focused and/or differentiated competitive advantage.

Despite the long history of CSR, applications of CSR (and sustainability) concepts to supply chains have only emerged in the last 15 years. Teun Wolters (2003) defined “sustainable supply chain management” (SCM) as the techniques and modes aimed at enhancing the social and environmental performance as well as the economic performance (i.e., quality) of the processes that are necessary to grow, process, transport, and sell a product. By applying sustainable SCM it is possible for organizations at different stages of a supply chain to work together so as to create a sustainable product and bring it to the market. The upstream producers thus can have a direct contact with the final purchasing company. Where there is not a dominant company in the supply chain, collaborative roles may develop, in which case the focus is on communication and convergence of plans.

Although external to a firm’s organization, supply chain relationships are absolutely critical in a global world, where companies more and more frequently outsource business activities to suppliers operating in developing countries because of the existence of low-wage labor. Although corporate environmental, health, and safety risks and opportunities are shifted out of the company boundaries, they affect anyway the company performance. Because of sustainable SCM, companies can be held responsible for the social and environmental impacts arising along the supply chains to which they belong. Companies are thus demanded to integrate ecological and social aspects into their decisions and actions along those supply chains. CSR is particularly relevant in trade relationships involving large international trading and manufacturing companies that obtain their major inputs from low-income regions in the world. In these cases, sustainable SCM means taking responsibility for the well-being and performance of small upstream producers in developing countries.

Literature on SCM and CSR mostly focuses on specific topics, such as

  • codes of conduct and formal management systems used by companies;
  • environmental supply chain management;
  • logistics social responsibility, including environmental logistics;
  • purchasing social responsibility, including ethics and environmental purchasing;
  • ethical sourcing or trading; and
  • development of minority- and women-owned supplier companies.

This research-paper reports a literature review for each of the above topics. Some researchers in particular studied specific sectors such as the apparel, food, footwear, forest products, confectionary, and retail industries.

Nonfinancial Reports

More and more companies write nonfinancial reports—that is, voluntary reports which describe relationships with stakeholders and provide interested parties with information on corporate environmental, social, and economic aspects—so following the “triple bottom line” approach. Francesco Perrini (2006), in a survey on nonfinancial reports published by European companies, found that reporting on the supply chain tends to take a partnership approach between a company and its suppliers on issues related to human rights, working conditions, and environmental issues. To provide evidence of such partnerships, and thus enhance credibility, companies often refer to specific management tools—such as Social Accountability 8000 (SA8000)—when describing SCM. In this way, they aim at demonstrating to stakeholders the extent to which CSR in SCM has been internalized and become a routine. Companies also tend to disclose information about corrective actions to remove suppliers that are not compliant with the company’s CSR policy or code of conduct. According to Francesco Perrini, there is an opportunity to pay more attention to supplier relationships in nonfinancial reports. Reporting companies could especially provide more quantitative data about procurement. In addition, a multiyear view could help the assessment process by highlighting the evolution of the relationship between the company and its suppliers as well as the progressive geographical dispersion of the supply chain.

Codes Of Conduct And Formal Management Systems

An increased pressure is placed upon companies by stakeholders, mainly consumers and nongovernmental organizations (NGOs), specifically to develop management systems across the supply chain. Such systems are able to transfer socially responsible behaviors along the supply chain. This stands especially in developing countries when the countervailing powers of governments and civil society are weak and poverty is widespread. The management systems should be able to address all issues and problems related to the conditions under which the products are manufactured, such as the respect of human rights and working conditions at suppliers’ sites. Aggressive campaigns against well-known companies in different industries have forced many companies to adopt strategies to transfer socially responsible behaviors along the supply chain. For instance, consumers and NGOs criticized Nike regarding sweatshop labor issues at its overseas suppliers. Nike initially declined social responsibility for its supply chain partners but later changed its attitude under increased public pressure. In addition to ethical considerations, consumer criticism of perceived CSR deficiencies can be extremely detrimental to corporate profitability and market share. Companies may therefore find it more prudent to anticipate future CSR issues in their supply chains and integrate CSR standards into daily operations along the supply chain. A significant number of companies have adopted standards such as codes of conduct, IS014001 certification, European Eco-Management Audit Scheme (EMAS) registration, or SA8000 certification to influence the practices of their business partners and provide a baseline of social and environmental principles to be respected. IS014001 and EMAS refer to the implementation of an environmental management system, whereas SA8000 focuses on human rights and working conditions and involves the establishment of a social management system analogous and combinable with ISO standards. Other instruments that are used by companies are the United Nations (UN) Global Compact initiative and the ILO conventions. The UN Global Compact is a set of ten principles about human rights, working conditions, environmental protection, and anticorruption policies. ILO conventions largely focus on working conditions.

According to Ivanka Mamic (2005), a typical code of conduct sets guidelines on a range of issues including child labor, forced labor, wages and benefits, working hours, disciplinary practices, freedom of association, occupational health and safety, and environmental practices. In addressing SCM issues and implementing a code of conduct, companies use an integrated approach which covers the following areas:

  • Development of a vision
  • Understanding of the vision by employees and suppliers
  • Implementation
  • Monitoring, feedback, and improvement

Each of these sets of activities takes place at both suppliers and the company.

To transfer socially responsible behaviors to supply chain partners, companies can

  • establish written supplier requirements—that is, guidelines and requirements that report the social and environmental performance the suppliers are asked to pursue. Suppliers are usually required to comply with local law and some international standards. The management systems include, in addition to standards of acceptable behavior, the organizational structures, procedures, processes, and verification system to ensure the compliance.
  • monitor supplier performance to verify their compliance with the written requirements. Typical monitoring procedures involve surveys and site inspections. Companies can conduct audits by means of internal staff or by engaging external consultants (third-party auditing). A typical audit process is composed of (a) a physical inspection, (b) a documentation inspection, and (c) interviews with workers. The physical inspection is used to examine, amongst other things, items such as emergency exits, sanitary conditions in toilet and dining facilities, and the use of personal protective equipment by workers on the shop floor.
  • contribute to suppliers’ awareness building and training on CSR issues. These initiatives can be targeted both to (a) suppliers’ top management, so as to make such managers understand the logic behind CSR, its relevance, and the business case for it; and (b) workers at suppliers’ sites. This step is greatly important to assure that the codes are really implemented starting from the bottom level. In the context of foreign operations, communication and training need to be sensitive to: regional or local dialects; nonverbal expressions; traditions of interpersonal communication; and the nuances associated with translation and interpretation as well as gender, age, religion, or tribal customs. Another critical issue is the lack of knowledge by managers, in particular on the labor laws existing in developing countries. This is an opportunity for dialogue with local governments or NGOs.

When noncompliances are detected, companies can adopt two different approaches: (a) they can terminate the contract with the noncompliant supplier or stop the business until the corrective changes are implemented (namely compliance strategy), or (b) they can also build up the supplier’s own capacity to handle CSR issues and address noncompliances (namely capacity-building). Companies generally develop some form of grading criteria for the audits, with certain standard violations considered as completely unacceptable such as the use of child labor or forced labor. Corrective action plans are generally agreed by the supplier and the auditor and overseen by the company using the standard. The continuous improvement philosophy is part of the capacity-building approach; to promote this culture different actions can be performed, such as continuous training programs. A prerequisite for capacity building is the establishment of a long-term and close relationship with suppliers. Most CSR efforts are still targeted at monitoring first tier suppliers, leaving second-tier suppliers intact or entrusting them to first-tier suppliers’ responsibility.

Environmental Supply Chain Management

George A. Zsidisin and Sue P. Siferd (2001) defined environmental supply chain management (ESCM) for an individual firm as the set of SCM policies held, actions taken, and relationships formed in response to concerns related to the natural environment with regard to the design, acquisition, production, distribution, use, reuse, and disposal of the firm’s goods and services. Stakeholders such as managers, employees, or boards of directors may raise environmental concerns internally, whereas customers, suppliers, other large trading partners, government bodies, members of the community, competitors, and others may raise them externally. A given firm, perceived as the most powerful in its supply chain, has an opportunity to strategically influence the supply chain partners’ attitudes and actions in a way that will be environmentally responsible. Individual firms can serve as champions to spearhead environmental awareness within the supply chain. Nevertheless, the collaborative environmental efforts of one firm may be mitigated if, within the supply chain, another trading partner is more powerful and less dedicated to the reduction of harmful environmental effects.

Changes within the supply chain are necessary to reduce the amount of waste and emissions, as well as the use of nonrenewable resources. The eldest environmental actions applied in a supply chain have been effect directed (with an end-of-pipe approach) such as waste treatment. More integrated actions are waste-directed and emission-directed adaptations in technology such as reuse of materials and packaging, and recovery of products. Legal requirements and changing consumer preferences increasingly make suppliers and manufacturers responsible for their products, even beyond their sale and delivery. The most integrated approach is source-directed and deals with adaptation of raw materials, product redesign, and process changes over the entire life cycle of a product; to evaluate the environmental burdens associated with a product, process, or activity, one of the most adopted techniques is Life Cycle Assessment, which identifies and quantifies energy and materials used and wastes released to the environment.

Some of the ESCM strategies used by companies include

  • written policies relating to suppliers’ environmental performance and communication materials on the company’s environmental goals and expectations (e.g., letters, brochures, articles in supplier newsletters, and Internet and Intranet sites that suppliers use);
  • questionnaires and audits;
  • supplier meetings;
  • training and technical assistance to enhance the suppliers’ own environmental management capabilities;
  • collaborative research and development, by involving suppliers in the design process; and
  • restructuring relationships with suppliers and customers to realize both environmental and economic gains.

Successful ESCM programs show several common characteristics:

  • top-level support;
  • cross-functional teams, involving representatives from the different supply-chain-related functional areas within a company (i.e., procurement, environment, health and safety, manufacturing, marketing, research and development, distribution);
  • effective processes for targeting, evaluating, selecting, and working with suppliers; and
  • effective communication within companies and with suppliers. Open communication is the key to foster a system-wide perspective on environmental performance among supply chain members.

Logistics Social Responsibility

Researchers over the past years have advocated the role of logistics expanding to encompass social responsibility. According to Richard F. Poist (1989), logistics can offer potential solutions to a variety of social issues and problems, including consumerism, employee education and training, occupational health and safety, hunger and homelessness, and environmental and ecological issues. Paul R. Murphy and Richard F. Poist (2002) noted that research in the area of logistics social responsibility (LSR) has lagged behind that of other functional areas of the firm, despite logistics managers’ beliefs that CSR is an important component of logistics that will increase in importance over time. Whereas logistics management encompasses several processes—that is, inbound and outbound transportation management, warehousing, inventory management, management of third-party logistics service providers, sourcing and procurement, packaging and assembly, and customer service, according to the Council of Supply Chain Management Professionals (2007)—the literature on LSR examines only some of those processes, namely purchasing, transportation, packaging, warehousing (related to the forward flow of materials), and reverse logistics (related to the reverse flow). Within such processes, the LSR practices can be classified into six topics: (1) environment, (2) ethics, (3) diversity, (4) working conditions and human rights, (5) safety, and (6) philanthropy and community involvement. Francesco Ciliberti et al. (in press) developed a taxonomy of the LSR practices adopted by companies. The taxonomy involves 47 different LSR practices classified based on five areas, namely purchasing social responsibility, sustainable transportation, sustainable packaging, sustainable warehousing, and reverse logistics.

Paul R. Murphy and Richard F. Poist (2002) conducted a mail survey of logistics professionals employed by members of the Council of Logistics Management. The survey focused on an overview of LSR and attempted to identify key issues, strategies, and functional impacts. As results of the survey, logistics plays a more prominent role in the implementation than in the formulation of CSR policies. The two strategies most used to manage LSR issues involve establishing codes of conduct and increasing the training and education of logistics personnel. Ethical conduct is the most important LSR issue. Three safety-related issues (i.e., safe movement and storage of products, occupational employee health and safety, and hazardous material storage and transport) were also rated as having maximum importance. The most pronounced impacts of CSR issues on logistics functions involved salvage and scrap disposal, packaging, and materials-handling functions.

Potential LSR issues have largely been examined separately, as though CSR had no impact on the overall decision-making process. Craig R. Carter and Marianne M. Jennings (2002) grouped together these issues within a framework and conducted in-depth interviews with 26 managers employed by members of the Council of Logistics Management in the areas of purchasing, transportation, and warehousing. Findings suggested that logistics managers should recognize not only the integration of the different LSR issues into the decision-making processes, but also realize the synergism that comes from building upon their experiences with one LSR issue (e.g., the initiation of environmental activities) when implementing other LSR programs (e.g., developing safety procedures and programs). In their survey, Craig R. Carter and Marianne M. Jennings (2002) also investigated the drivers, barriers, and consequences of LSR. As a result, organizational culture is the main driver of LSR, followed by managers’ individual values. Government regulation and liability are not relevant drivers, and are perhaps more reactive as opposed to proactive drivers of LSR. The most common barrier is difficulty in coordinating activities and objectives of internal functions or external members of the supply chain. This barrier can be overcome by developing written policies (e.g., codes of conduct or IS014001 certification), and through feedback mechanisms such as opening up lines of communication and increasing the amount of formal coordination across functions or organizations in the supply chain (i.e., requiring employees to annually read and sign policy statements dealing with LSR issues). In some cases, organizational culture is a specific barrier, rather than a driver, of LSR. In these cases the organizational culture actually stifles the implementation of LSR activities. For each case in which organizational culture acts as a barrier, the personal values or morals of the logistics managers are listed as a driver. One of the more common consequences of LSR is employees’ satisfaction. Other consequences of LSR include improved employee motivation, enhanced supply chain relationships, and the establishment of trust with customers or suppliers.

Workforce diversity and environmental issues appear to be among the most prominent LSR issues analyzed in the literature. Several studies indicated that women are generally satisfied with their current positions and hold favorable views regarding their future in logistics. At the same time, several other studies revealed concerns regarding opportunities in the profession, with women perceiving fewer opportunities than those available for men. In addition, women are more likely than men to perceive the existence of gender discrimination.

Ethics In Logistics

Ethical considerations are increasingly germane to the logistics discipline since contemporary logistics and SCM emphasize the importance of partnerships and strategic alliances. Central to successful logistical partnerships and strategic alliances is the sharing of information and the trust that this information will not be abused or misused by logistics partners. A review of the literature on ethics in logistics suggests that many of the issues in transportation and purchasing overlap—that is they involve relationships with suppliers, carriers, or other outside organizations. Ethical considerations have received insufficient attention in the logistics journals. Paul R. Murphy and Richard F. Poist (2002) tried to explain the laggard nature of logistics with respect to CSR by referring to Archie B. Carroll’s framework. Since the logistics discipline has tended to address only economic and legal considerations, the limited literature attention to ethical issues in logistics is consistent with a laggard approach to CSR.

Environmental Logistics

Richard F. Poist (1989) stated that logistics is especially well positioned to contribute to environmental and ecological control in terms of packaging issues, pollution control, and energy and resource conservation. Environmental logistics can be considered as a subset of LSR. Several activities, such as vehicle maintenance and route optimization, have been extensively studied in the past, but most papers dealing with them lacked of social and environmental perspective. As more and more businesses find opportunities in the greening of markets, logistics managers need to identify environmentally relevant logistics activities and make environmentally responsible logistics decisions. The decisions of logistics managers on how and where resources are used can potentially have a major impact on the environment. Logistics decisions also intimately interact with other business functions, such as inventory management and product design. Logistics managers thus have to evaluate the environmental impact from a total system perspective and so need to take environmental costs and benefits into consideration. Firms can be classified as environmental progressives, moderates, or conservatives on the basis of their attitude toward environmental logistics. Paul R. Murphy et al. (1996) found that environmental progressives may reject suppliers without sufficient environmental awareness, policies, and procedures.

Environmental logistics decisions deal with

  • raw materials acquisition (i.e., purchasing, vendor selection and location);
  • inbound logistics (i.e., consolidation, mode selection, carrier selection, materials handling, warehousing, backhaul management);
  • transformation (i.e., inventory management, packaging);
  • outbound logistics (i.e., network design, inventory decisions, packaging, consolidation, mode selection, carrier selection, warehousing, backhaul management);
  • marketing (i.e., service level, channel decisions); and
  • after-sales service (i.e., returns handling, parts management, service network).

According to Elizabeth Deakin (2001), “sustainable transportation” is defined as transportation that meets mobility needs while preserving and enhancing human and ecosystem health, economic progress, and social justice now and for the future. Substantial interest in sustainable transportation can be dated back to the early 1990s. The main environmental impacts are associated with (a) emissions of greenhouse gases, (b) emissions of compounds that thin the stratospheric ozone layer, and (c) transport-related production of persistent organic pollutants (POPs) and their effects on biological systems. Sustainable transportation involves, as an example, freight consolidation, mode selection, and carrier selection. Freight consolidation improves vehicle efficiency and thus reduces the environmental impact of transport. Some transport modes, such as rail or sea, use less or more energy than other modes, such as road or air. Carrier selection can ensure that carriers take environmental measures in transport and distribution.

According to Karli James et al. (2005), “sustainable packaging” can be defined as packaging that (a) adds real value to society by effectively containing and protecting products as they move throughout the supply chain and by supporting informed and responsible consumption; (b) is designed to use materials and energy as efficiently as possible throughout the product life cycle; (c) is made up of materials which are cycled continuously through natural or technical systems, so minimizing material degradation and/or the use of upgrading additives; and (d) is made up of components that do not pose any risks to human health or ecosystems. The packaging industry has been under pressure for more than 20 years to reduce the environmental impacts of its products. In some countries, take-back legislation on packaging has made the packaging operation and planning a critical green logistics issue. The debate on the environmental impacts of packaging has recently moved toward a more holistic discussion on life cycle environmental impacts of the entire packaging supply chain.

Sustainable warehousing includes activities such as terminal and warehouse location, proper storing and disposing of hazardous materials, donation of excess or obsolete inventory to local communities, and training to safely operate forklifts.

Reverse logistics includes all issues related to source reduction, recycling, substitution, reuse, and disposal of materials. The reverse logistics definition has changed over time; initially, the expression “reverse logistics” was used to refer to reverse direction (with respect to the forward direction that goes from suppliers to final customers), then the literature on reverse logistics started to include references on the environmental aspects. Lately, its scope has been widened: reverse logistics can be considered as part of CSR, since it deals with the implementation, at the company level, of processes that guarantee the use and reuse (efficiently and effectively) of the value put into products. As the reverse logistics process is less transparent than the forward logistics process, reverse logistics costs are less visible than those present in forward logistics. Hence, information support is necessary to achieve efficient reverse logistics operations.

Purchasing Social Responsibility

Isabelle Maignan et al. (2002) defined purchasing social responsibility (PSR) as the inclusion in purchasing decisions of the social issues advocated by organizational stakeholders. PSR has the same characteristics of CSR, but is divergent because of the purchasing manager’s distinct interaction with a broad set of stakeholders including buyers, suppliers, contractors, the community, and internal employees in most of the other functional areas of the company. Whereas some of these activities may overlap with the general CSR of the firm, the purchasing managers play a distinct role in gathering support from and coordinating with other groups for socially responsible conduct in the company’s relationship with suppliers.

Craig R. Carter and Marianne M. Jennings (2004) found that activities in the areas of diversity, environment, safety, human rights, and philanthropy in purchasing management, which have been studied separately in the past, are related and included within PSR. Purchasing managers should thus oversee PSR programs in a holistic fashion. For example, those organizations that currently promote their activities in one area of PSR should also strategically consider the management and promotion of other areas within PSR. Conversely, firms that fail in one dimension of PSR (for example, sourcing from suppliers that use sweatshop labor, or purchasing materials and packaging that are not environmentally friendly) may harm their overall reputation regarding social responsibility.

The activities encompassed within PSR, which also involve packaging issues, new product design, materials management, and warehousing, support the assertion that purchasing managers must interface with other logistics managers in these mentioned areas in order to accomplish PSR initiatives. At the same time, purchasing managers must coordinate with and manage suppliers to ensure that their organization purchases socially responsible inputs and has a diverse supply base, and that suppliers are in turn managing their own organizations and second-tier suppliers in a socially responsible manner. If a company adopts social and/or environmental standards, the purchasing function can be used to transfer them to suppliers, so generating a chain effect by which quick and deep social and environmental changes can be caused.

Significant drivers of PSR are a people-oriented organizational culture, top-management leadership, employee initiatives, and customer pressure. Top-management leadership has also a significant mediated effect on PSR, through a people-oriented organizational culture; top managers can initiate, require, and support PSR programs, and corporate leaders can also strongly impact PSR by influencing the organizational culture through their own examples. The relationship between customer pressure and PSR emphasizes the importance of coordination between upstream and downstream logistics managers within the firm, specifically with regards to PSR. Government regulation is not a significant driver of PSR and might even act as a barrier to the implementation of certain socially responsible activities, particularly if the regulation is not tailored to specific industries. Firm size is not a driver of PSR either.

Four PSR strategies are employed by companies when faced with specific stakeholder demands. They are positioned along a continuum ranging from proactive to reactive approaches:

  • Reactive (i.e., denying the relevance of any stakeholder issue to the organization and that the firm has stakeholder responsibilities);
  • Defensive (i.e., implicitly acknowledging the existence of stakeholder issues, but avoiding addressing these issues);
  • Accommodative (i.e., addressing stakeholder issues as long as they do not harm established organizational processes and financial performance); and
  • proactive (i.e., systematically anticipating, surveying, and addressing stakeholder demands).

The selection of a PSR strategy is based on a tradeoff between the associated costs and motivations. Three main factors stand out in favor of proactive strategies:

  • Stakeholder pressures
  • Organizational values
  • Concrete business benefits (e.g., no negative publicity, stimulation of innovations, a special link with customers, and increase of employees’ commitment)

The development of PSR practices is based on six consecutive steps:

  1. Assessing stakeholder pressures
  2. Clarifying purchasing policies based on organizational values
  3. Estimating potential business benefits and goals
  4. Choosing a PSR strategy
  5. Implementing PSR practices
  6. Leveraging PSR

The Institute for Supply Management (2007) has defined a set of seven CSR principles directed at supply chain professionals. These principles deal with community, diversity, environment, ethics, financial responsibility, human rights, and safety

PSR practices can be divided as organizational and managerial. The most relevant PSR practices (as they are more cited in the literature) are reported in Table 12.1.

Francesco Perrini (2006) found that reporting relationships with suppliers in nonfinancial reports is divided into more specific indicators, such as those concerning the classification of suppliers by category; the supplier selection policies; and the activities concerning communication, awareness creation, and information. Reporting companies explain that they do not discriminate in any way against minorities in the process of selecting suppliers, but seem to have underestimated the informative power of describing procurement conditions and tend not to explain adequately the unfair pressures on suppliers caused by possible displacement of contractual force.

integrating-corporate-social-responsibility-in-the-management-of-supply-chains-research-paper-t1Table 12.1 Purchasing Social Responsibility Practices

Ethics In Purchasing

Craig R. Carter and Marianne M. Jennings (2004) found that ethics does not constitute a dimension of PSR and explained the results supposing that purchasing managers have made clear practical distinctions between their perceived ethical obligations and their obligations in the area of PSR. In spite of this empirical finding, transgression and impropriety in the procurement process can comprise a company’s CSR mission along the supply chain. Craig R.

Carter and Marianne M. Jennings also found that ethical issues in buyer-supplier relationships consist of two unique dimensions:

  • The first dimension, “deceitful practices,” includes activities such as using obscure contractual terms to gain advantage of suppliers.
  • The second dimension, “subtle practices,” encompasses somewhat more subtle activities such as showing favoritism when selecting suppliers.

Environmental Purchasing

Environmental purchasing can be considered as a subset of PSR and deals with the involvement of the purchasing function in activities aimed to facilitate recycling, reuse, and resource reduction, according to C. R. Carter and J. R. Carter (1998). To control or influence suppliers’ environmental activities, purchasing managers can use vendor rating systems or environmental audits that use quantitative and qualitative factors in determining suppliers’ environmental performance. Companies can also provide design specifications to suppliers that include environmental requirements for purchased items and can collaborate with suppliers to provide materials, equipment, parts, and services that support their environmental goals.

Some of the key drivers to environmental purchasing are

  • the influence of downstream members of the supply chain, including distributors, retailers, and end customers;
  • the extent of coordination between buying and supplying organizations;
  • the support of top management;
  • the organizational culture and philosophy;
  • the initiatives of individual employees;
  • the establishment of specific goals; and
  • the provision of training.

Evidence of the influence of government regulation on environmental purchasing is mixed. Some studies suggest a positive relationship, whereas other studies found no relationship. Regulation can also act as a barrier to environmental purchasing due to its constant changes.

Ethical Sourcing

By ethical sourcing (or trading) Michael Blowfield (2003) meant that a company at one part of the supply chain (typically a brand owner, retailer, or other Western company with a public profile) takes responsibility for the social and/or environmental performance at other stages of the supply chain, especially for that of primary producers. This is a significant change from traditional practice as it means that a company takes responsibility for the behavior of others even if it does not have any long-term formal liability for the results of that behavior (i.e., in contrast to the responsibilities of a subsidiary or joint venture).

According to Michael Blowfield (2003), price is not given much consideration in ethical sourcing, either by the management systems used (e.g., SA8000) or in companies’ programs and social reports. Low prices may encourage the negative behavior that ethical sourcing seeks to prevent, and this in turn will damage the reputation of the companies seeking to take responsibility for their supply chains. Another factor affecting the degree to which ethical sourcing is applied is the importance attached to product provenance.

The industries in which ethical sourcing is most advanced are those in which the supply chain appears to be relatively straightforward and where there is already some motivation for knowing the product origin (e.g., supermarkets need to know where their fresh vegetables come from because of a legal liability for food safety; the sports-shoe industry knows where its trainers come from because of product quality, design, and intellectual property rights issues).

Smallholder producers of tea and cocoa in Kenya and Indonesia have identified as social priorities the type of trading relationship (e.g., timely payment), the security of land tenure, and distribution of benefits, which are generally not mentioned in ethical sourcing. Companies engaged in ethical sourcing are reluctant to deal with the trading relationship. Issues such as land tenure may seem even less within an industry’s control. However, in both Indonesia and Kenya, although for different reasons, some people see the threats to their land as a direct consequence of the supply chain partners’ behavior.

Companies are more likely to implement ethical sourcing initiatives if external stakeholder pressure to do so is strong and external concerns are related to the company’s core business and environmental strategy. Implementation is also more likely if there are identifiable benefits from action (e.g., cost savings or product and market differentiation) or risks from inaction (e.g., reputational damage and loss of market share). Sarah Roberts (2003) found that four supply chain characteristics affect the propensity to implement ethical sourcing in a company belonging to a given stage of the supply chain:

  • The number of links between supply chain members demanding ethical sourcing and the considered stage of supply chain
  • The diffuseness of the considered stage
  • The reputational vulnerability of the supply chain members
  • The power of the supply chain members

As an example, the branded confectionary companies, which are currently considering the most effective way of managing ethical risks in the supply network, face the triple challenges of long supply chains, diffuse sources, and powerful intermediaries with little interest in implementing solutions. Under these circumstances, individual company action makes little sense. Joint action by such an industry to develop a universal code, influence its suppliers, and organize joint monitoring is likely to be a much more effective way forward.

Development Of Minority- And Women-Owned Supplier Companies

Top management support and policies that require the inclusion of minority- and women-owned business enterprise (MWBE) purchasing criteria in the formal evaluation of purchasing managers are positively related to the extent of purchases from MWBE suppliers. Some firms’ MWBE programs are driven not only by social concerns but also by customer considerations, as minorities can represent large and growing market segments for many companies.

Community

Corporate social responsibility activities toward the local community mainly focus on financial donations. Philanthropy strengthens employee loyalty and can also provide a source of corporate competitive advantage. For the most part, community elements of CSR have not been applied to the supply chain. Nevertheless, practitioners and researchers should still be aware of its potential influence and look for opportunities to support the community.

Corporate Social Responsibility Of Small- And Medium-Sized Enterprises In Supply Chains

Several papers have examined the CSR behaviors by small- and medium-sized enterprises (SMEs) along the supply chain. However, most studies consider the role of SMEs as suppliers of larger companies and not as buyers from upstream (large and small) suppliers. An overview of CSR issues in supply chains made up of large customers and small suppliers is reported by Sarah Roberts (2003). Research on supply chain relationships should investigate more in detail networks made up of both large and small firms.

A company’s smaller size often results in lower negotiation power and leverage to modify environmental forces in the market, especially suppliers and politics. Larger companies have more power to stimulate the socially responsible behaviors of their supply chain partners. For SMEs the adoption of CSR practices and their transfer along the supply chain can be difficult also because of the high costs to be incurred and the needed resources and competencies. For example, SMEs are often obliged to rely on third parties, such as NGOs or multinational companies, to monitor suppliers.

As buyers, SMEs can still exert pressure through the supply chain by championing CSR and encouraging partners to adopt a socially responsible behavior. Different strategies are adopted to this end, among them gentle encouragement, exerting direct pressure up and down the supply chain, acting as a best-practices study, and providing supply chain partners CSR-related presentations or an open-house for peers. small and-medium-sized enterprises can also provide advice and training to their suppliers, show a known willingness to use the sanction of switching suppliers for CSR reasons, and identify and share cost savings and income generation from CSR with suppliers. In most cases, SMEs more easily foster environmental than social responsibility along the supply chain.

Conclusions

This research-paper has investigated corporate social responsibility issues in supply chain management. An overview of the theme, together with more detailed literature reviews on specific topics, such as the use of codes of conduct and formal management systems along the supply chain, environmental supply chain management, logistics social responsibility, purchasing social responsibility, ethical sourcing, and development of minority- and women-owned suppliers were given. The role of SMEs within this context as well as the relevance of reporting CSR activities in the supply chain were also discussed. The application of corporate social responsibility to supply chains does not have a long history and the number of related papers is growing. This research-paper has intended to give a contribution to systematize such a dynamic body of literature.

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