Global Supply Chain: Corporate Social Responsibility - Research Paper Example

Global Supply Chain: Corporate Social Responsibility Abstract Integrated supply chains are becoming an important part of the competitive business environments as firms seek to generate strategic advantages. However, these economic benefits derived from the coordinated supply chains come with certain social obligations. In reacting to shareholder and customer concerns for corporate social responsibility (CSR), many purchasing firms are employing programs within their supply chains that are aimed at guaranteeing that suppliers act in an accountable manner. The concerns addressed converge to the extent to which buyers have to be responsible for the ethical conduct of their suppliers. This paper gives theoretical and managerial analysis of the extent to which supply chain management should exercise governance in relation to corporate social responsibility. Key words: Corporate social responsibility, supply chain management, strategic Global Supply Chain: Corporate Social Responsibility Introduction In the current business trends companies are increasingly adapting to the global momentum of corporate social responsibility (CSR). It has been observed that the concept has the ability to boost the sales revenue and market share by changing the customers’ perceptions concerning the company. Peloza (2006), states that there exists a mutual relationship between CSR and Corporate Financial Performance (CFP). The concept does not purpose to change the company into an NGO as the main reason for the existence of a business is to make profit. It only ensures that the profits are made as a result of responsible practices. The responsibility of purchasing management and logistics has become increasingly important for the achievement of the organizations and CSR has become the most important concept for a highly competitive business. The concept has received increased attention from the supply chain experts because the conduct of the supply and purchasing management has a considerable impact on the firm’s reputation (Carter, 2000; Cooper et al., 1997; Lysons and Gillingham, 2003). Overall supply chain CSR functions including community procurement have been practiced in various sectors such as labor and human rights, the food industry, the environment, biotechnology and health and safety. The Chartered Institute of Purchasing and Supply cautions that failure to capture the implication of these issues can result in interference of the firm’s supply chain. Analysis of the state of the field of global supply chain management Globalization characterizes the setting in the international scene where business transactions of multinational companies take place. With increasing globalization and offshore sourcing the concept of global supply management has become a significant issue for businesses (Mullerat, 2009). Like the traditional chain management, the concept focuses on the ways of streamlining costs, increasing revenues and managing the assets in an entity. The major difference is that global supply management involves companies with worldwide operations and suppliers rather than the local or national orientation. Global supply management involves many countries and this presents multiple difficulties that need to be properly addressed. The companies need to consider the impact of the global supply chain management on the overall costs. The local labor costs may be considerably lower; companies need to look at the cost of operations, space, expense and tariffs of carrying out business overseas. Furthermore, companies need to consider the exchange rate and do further research on all the elements of the global supply management concept. The companies applying the concept should address the issue of time while conducting business in other countries. The productivity of workers in other countries and extended shipping times can either have positive or negative impacts on the company’s lead time. Other aspects coming into play including the weather conditions in different parts of the world which can have a huge impact on the production and shipping. The company also needs to make decisions about the outsourcing plan and reasons as to why businesses opt to retain some aspects of supply management closer home. However, these reasons are not as significant as other countries such as India have become centers of outsourced services (Mullerat, 2009). These services are provided by highly qualified workers and are cheaper as compared to the Western countries. Another aspect that must be taken into consideration in the global supply management is the supply chain management strategy. The company must compare the vendor bids within the parent country first as it can prove to be more complex to do it from a wide range of global suppliers (Horrigan, 2009). The company should base its decision on a comprehensive research. Companies may settle for the lowest prices without taking all other factors into consideration. In addition, companies must make decisions about the number of suppliers as fewer suppliers could be easier to manage but may also lead to potential problems in situations where one seller is unable to deliver as expected or where he tries to leverage the supply power in order to obtain price concessions. There are other issues regarding the plant and machinery needed as well as the location can cause logistical issues for the companies. Companies should analyze these issues in terms of the global supply and devise strategies that appropriately address them. Recurrent themes from the peer reviewed literature Companies are moving towards global competitiveness and they have chosen a socially responsible orientation to gain a competitive advantage. There has been a commercial relationship and companies are shifting their production activities to countries with lower operating costs and where issues related to CSR move along the global supply chain. The theme that is recurrent in the literature is the relationship between buyers and suppliers. Issues regarding the environment are considered to be the backbone of social responsibility. The main reason for the existence of a company is to generate profit while at the same time fulfilling social obligations. The recurrent issues are global supply chain, CSR and the overall business relationships with the stakeholders and the society (Ogden & Watson, 1997). Important issues or current dilemmas in the field as identified from your research and the literature The current dilemma in the field as it has been observed is that the global supply chain can be a risk for the company. There are inherent risks that are associated with operations of businesses. There are operational risks and financial risks associated with the purchasing and buying activities in an organization. However, the operational risk is more adverse since loss of reputation can lead to loss of market base which is disastrous for a company (Schwalbach, 2010). The reputation of a company’s supply chain has the greatest potential to affect the reputation of the company. This places responsibilities on the supplier to monitor the environmental and social concerns that affect the stakeholders. Background information on the research topic It is the key priority of the economic organizations including the European Union (EU), World Trade Organization (WTO) and the Asian- Pacific Economic Cooperation (APEC) to help the member countries to acquire free economic environment. The regions within the trade areas have witnessed economic integration into a global economy. This has led to the emergence of new challenges such as increasing pressure to lower the cost of production and the requirements to adhere to international standards and practices (APEC, 2010). Different perceptions exist across the member countries and the industry sectors serve as the basis of the CSR concept. In the contemporary world, companies are acknowledging the importance of integrating long term sustainability strategies into their businesses. This has led to the establishment of the framework of Corporate Social Responsibility and strategic supply chain management for the survival of the business. Supply chain management is a key business concept that aims at identifying the processes of reducing costs in a business (Schwalbach, 2010). It needs continuous monitoring and evaluation of relationships between the entity and the suppliers. It can be described as a two way network that involves a system of organizations, information and resources, organization and activities from the supplier to the customer. In conclusion, when companies start to strategically integrate CSR into their supply chain management by monitoring risks associated with their partners they go the extra mile to ensure supply chain efficiency and sustainability in the long term. Current theories and areas of debate for your topic The constantly developing debate over CSR is evolving simultaneously with a critical rethinking of the corporate theory as explained by Horrigan (2009). The growth in the integration of environmental and social concerns in the business interactions and operations with companies’ stakeholder networks has been contributing to enhancing new models in which CSR is combined with all economic functions. The current theories in this study may be classified into four categories based on the aspects of economic integration, social integration, politics and ethics. The first theory is the instrumental theory which is seen as a strategic tool to generate wealth and achieve overall economic objectives. This theory has been widely accepted in the business environment as observed in the business tradition. Wealth creation is the main objective for the existence of a business since it dictates the management idea of responsibility. The profit motive does not exclude taking into account the interests of the stakeholders and the society at large. Mitchell et al., (1997); Odgen and Watson, (1999) argued that the satisfaction of stakeholder interests in certain situations contributes to maximizing their value. The second theory is the political theory that deals with the interaction and relations between the entity and society and the power position of the business and the inherent responsibility. There are two main approaches: corporate citizenship and corporate constitutionalism although there are other possible approaches (Horrigan, 2002). The third is the integrative theory that analyzes how businesses integrate social demand and argue that an entity depends on the society for its existence. The social issues are the way in which society interacts with the business and gives it prestige and legitimacy. The fourth is the ethical theory that focuses on the ethics that form a basis of the relationship between business and society. These are the current theories that deal with the topic of CSR. Compare and contrast the areas of agreement and debate The debate has attracted the attention of researchers as the current topic of study has been incorporated with the current style of doing business contributing to a new form of economic success. There are various areas of debate that are stated below: The first deep debate - One best theory of Corporations in Society This debate involves the possibility of accounting for all the components of corporations and their position in the world in relation to the universal theory. Based on the complexity of corporate responsibility, regulation and governance there is no single theory that is universally acceptable (Horrigan, 2002). Second deep debate- Multi- level interconnectivity between Corporate, social and global interests The debate concerns the jurisdictional and sectoral issues of responsibility and governance that relate to CSR in the modern setting. The modern company is viewed as an object of responsibility and regulation, governance and interaction between the macro-level global perspectives of the environment (Horrigan, 2002). This also looks at the extent to which a neo-liberal alliance of interests across the political and economic sectors has captured the social scene and the implications it has on CSR governance. The third deep debate- Civil society vs. Market capitalism This debate states the CSRs ability to reconcile the needs of the civil society and market capitalism. Capitalism has inherent weaknesses in meeting the needs and conditions in the contemporary world (Horrigan, 2002). These are the loopholes that are exposed in the extent to which capitalism privileges financial generation of wealth over social responsibility. These are the major areas of demand in the current theories. Impact of Global Supply Chain: Corporate Social Responsibility in the pharmaceutical industry The pharmaceutical industry is dynamic, global and vulnerable to social and environmental risks (Mullerat, 2009). The companies along the pharmaceutical global supply chain need to employ appropriate strategies to address the risks appropriately. The industry is under pressure by stakeholders with hopes of developing and distributing their products efficiently. The industry must take into consideration the ability to be socially responsible to the stakeholders. The long term advantage of CSR ensures sustainable economic advantage for companies. Their chain covers drug research, development manufacture, distribution and a wide range of health care services. The industry is fundamentally about health and therefore touches on the social aspects of people. The industry has exhibited massive public benefits for the public in the past few decades. The companies in the industry should make their profits responsibly by taking CSR into account. The overall impact on the industry is positive and it can be maximized by use of technology to promote corporate social responsibility (Ogden and Watson, 1997). The companies in the industry should practice strategic sourcing and procurement by setting up supplier guidelines that include environmental and social requirements codes of conduct. Continuous process improvement should be conducted to facilitate communication and streamlined manufacturing processes that better production methods. Product lifecycle management should be applied as it helps the companies to meet their obligations in the society. The companies should practice performance management as it is one of the most environmentally proactive tools. By applying these tools the companies can maximize on the concept of global supply chain and corporate social responsibility. Specific areas of further research in this topic that would prove beneficial The current research in the global supply chains and CSR shows that the concept has been beneficial to businesses globally. There are some areas that need further research as they have not been conclusively covered in the current studies. The future research program in this area of study contains important issues of theoretical, empirical and cross-disciplinary research. The significance of CSR in the global economies achieving massive normative recognition and being properly regulated points to the special role of law and scholarship in this enterprise. The first area of ongoing research draws upon cross-disciplinary sources in fulfilling the 21st century program for harmonizing the forces of globalization, civil and corporate society and market economies as explained by Horrigan (2009). The research area has various multiple features. The different forms of public rationales and policies for CSR must be explored in connection with their changing conceptions and models of governance drawn from market capitalism. There is the frequent theme of opening up corporate decision making structure and processes to a wider range of informational bases, interests and group dynamics Schwalbach (2010). The other area concerns the level of national corporate regulatory regimes that deal with reforms to modify the corporate law. Future research should also involve the specific legal and regulatory reform matters that are targeted by supranational bodies. An example of such as case is where the European Commission identifies a requirement for more interdisciplinary research on CSR relating to areas of corporate governance, innovations, industrial relations, in the field of SME (Small Medium Enterprises) and the social and environmental objectives. These are some of the areas that are suitable for future research. Potential impact of corporate social responsibility on global supply chain management research in the next 3–5 years Integrated supply chains are increasingly becoming an important part of the competitive landscape as businesses seek to generate strategic advantages (Horrigan, 2009). Companies will be responding more efficiently to the stakeholders concerns by implementing programs that ensure that they act in a manner that is socially responsible. There will be increased awareness among companies in respect to labor practices and environmental issues. CSR implementation in global supply chains will be characterized by procedural justice rather than by the monitoring. This leads to an increase in the supplier compliance and overall improvement in the buyers and suppliers relationship. The adoption of CSR in global supply chains has led to many economic benefits and should be practiced in all sectors for mutual benefits of the entity and the society. Conclusion The concept of corporate social responsibility (CSR) is slowly taking form in the contemporary world especially since it not only boosts revenue but also market share for a company. Through CSR a company has the ability to win over new customers as well as retain the old ones by showing genuine concern for the societal needs. Supply is a vital aspect in business, with integrated supply chains making a bigger part of the competitive business environment. Adopting CSR in global supply will result in numerous economic benefits for all the parties involved. The society will reap off its benefits as will the business entities and this will go a long way in ensuring that respect and cooperation between the two is upheld. References APEC. (2010). Corporate social responsibility in the global supply. Retrieved November 2, 2010, from http://hrd.apec.org/index.php/CorporateSocialResponsibilityintheGlobalSupplyC hainhtml. Carter, C. R. & Jennings, M. (2000). 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Academy of management journal. Peloza, J. (2006). Using corporate social responsibility. Schwalbach, J. (2010). Corporate social responsibility and stakeholder dynamics. Gabler Wissenschaftsverlage. Read More