The Impact of Corporate Social Responsibility Adoption into Global Supply Chains - Literature review Example

Individual Research Name Institution Tutor Date Table of Contents Individual Research 1 Table of Contents 2 EXECUTIVE SUMMARY 4 Introduction 5 Literature Search 6 Discussion 13 From the literature reviewed, it has been established that when CSR is brought into the entire supply chain, there are many benefits that will arise. These include a strengthened collaboration amongst the participants. The improved relations will lead to a better productivity and therefore a subsequent reduction of costs. Quality standards are also likely to benefit because they will be safeguarded and the products that are created will tend to be more sustainable. Employee demands and expectations will be satisfied as everything will be produced within conditions that are compliant to global standards and negative impressions that sometimes arise within the supply chain, and even sometimes legal implications will be eliminated. Most significantly however is that the company will be able to attract and retain its workers, because the positive reputation that will arise will draw the attention of the best potential employees. A CSR-compliant supply chain will enable creation of new opportunities within markets as it will provide a way of branding the product and expanding its market scope in the process. 13 Recommendations 13 Reference List 15 Andersen, M., and Skjoett-Larsen, T., 2009. Corporate Social Responsibility in Global Supply Chains. Supply Chain Management: An International Journal, 14 (2), pp. 75-86 15 Beghetto V., Agostinis, L. and Taffarello, R., 2016. Innovative Technology for Sustainable New Materials. European Journal of Sustainable Development, 5 (4), p.11 15 Magnier, L. and Schoormans, J., 2015. Consumer Reactions to Sustainable Packaging: The Interplay of Visual Appearance, Verbal Claim and Environmental Concern. Journal of Environmental Psychology, 44, pp. 53-62 16 Perry, P., 2012. Exploring the Influence of National Cultural Context on CSR Implementation. Journal of Fashion Marketing and Management: An International Journal, 16 (2), pp.141-16 16 EXECUTIVE SUMMARY Global businesses operate within a highly competitive and dynamic environment. An effective company therefore has to ensure that it has an edge above the others, and this often means having to satisfy the changing requirements of customers. One of these relates to sustainability in business practice, hence global companies must adopt Corporate Social Responsibility (CSR) into their day to day practice. This paper investigates the impact of CSR adoption into global supply chains. Through an extensive literature review, it identifies the intention and impact of CSR on each of the five main phases of the global supply chain. It notes that CSR adoption is driven by demands of the global marketplace, and generally results in an adjustment of how the phases are pursued, with the eventual income being cost reduction, better profits, productivity and improved corporate reputation. It is noted that available literature is often too specific to contexts, hence a need for a broader study of such impacts. In addition to further research, it recommends that global firms should ensure simplicity in CSR implementation and avoidance of too many suppliers. Ethical principles should therefore be fully embraced in global business strategy, with relevant studies being undertaken to justify the need for such changes. Introduction Organizations today operate under stiff competition, a dynamic business environment and the growth of information and communications technologies (Mushanyuri, 2013). As a result, they strive to safeguard their position within the market, with the subsequent need to ensure a sustainable growth pushing most towards adopting Corporate Social Responsibility (CSR) practices (Kim et al., 2014). CSR involves voluntarily embracing of environmental and social concerns into business processes and any relations between it and other businesses or stakeholders. According to Perry (2012), its adoption helps in cost reduction, enhancement of profitability and productivity and improvement of corporate reputation and image. CSR is, therefore, a leading issue in ensuring that modern organisations can prosper responsibly. Through the introduction of the ethical aspect of business, they are therefore able to ensure increased benefits to customers while enhancing their corporate image and minimizing negative behaviours. CSR considerably affects the supply chain in international business (Leon, & Juan, 2014). This paper seeks to analyse the impact of CSR in the context of global supply chains. Through an evaluation of relevant academic articles, it will critically discuss the aspects in which CSR affects the different phases of the typical supply chain of a global business namely procurement, production, distribution, transport, packaging and warehousing. It will then outline the implications of what has already been documented in the different articles. The paper will then conclude on the issues, while also suggesting what needs to be done so as to ensure that CSR works better in improvement of business competitiveness for global business. Literature Search The behavior of multinational firms that operate within global supply chains is often a matter of great interest and even debate. A number of related studies may be reviewed in relation to CSR and its effect on the supply chain. Mushanyuri (2013), for instance, offers an analysis of the impact that CSR has on supply chains that are already sustainable. Through content analysis, it establishes the role of competitive pressures on markets which end up seeking materials from international markets. However, it reveals that there is a growing complexity in supply chains, even as corporations are under pressure to be more environmentally and socially responsible. Slack (2012) on his part investigated the extent to which global businesses a practice CSR, which most of them profess. The findings indicate that even though CSR principles are a common feature in most strategic documents, their implementation is not adequate especially in the developing world. The reason provided for this is that CSR has not actually been fully integrated into the respective companies’ business models, as shown in their project benefits and cost assessments and choice of technology. Chan et al. (2014) acknowledge the significance of CSR in corporate governance. While investigating the CSR and corporate governance aspects, they reveal that the two are applied to companies as a way of enhancing their relations with all stakeholders. While applying stakeholder and legitimacy theories, it reveals that a firm that provides a greater amount of CSR information ends up with better ratings in corporate governance and tends to end up in a higher profile level of business. In addition, they experience growth. Ferri et al. (2016)’s article examines the importance of Responsible Procurement Management for the global firm, concluding that institutional contexts affect both an organization’s overall CSR and the institutionalization of RPM itself to become a function on its own. Institutional context determines the practitioners’ operational boundaries, while the organizational environment determines the ability of management to change activity. Perry (2012) further explores the way in which national cultural contexts can be used in supporting the implementation of CSR. The findings indicate that aligning CSR with local cultural characteristics. It is further noted that when the government actively promotes CSR, businesses are more likely to be compliant due to increased accountability. Socio-economic development levels also have an effect on the implementation of CSR, in addition to the level of managerial competency. Perry & Towers (2013) investigate the factors promoting and limiting supply chain CSR implementation within the garment manufacturing industry. The findings indicate that adoption of SCM principles helps to support CSR through neutralizing the challenges faced retail buying. The overall conclusion is that supply chain relationship management is more helpful in ensuring effective CSR implementation, as compared for instance to the traditional approaches to auditing and monitoring of the processes. On packaging, which is another important phase of the supply chain, Roper & Parker (2013) study the relationship between CSR and the traditional profit agenda of businesses, particularly in the fast-food industry. The article notes that fast-food packaging creates a major source of litter, and the trend is on the rise throughout the developed world. It most significantly confirms that the evaluation of a brand is quite negatively affected if considered to be a source of litter. Makasi et al. (2014) discuss the role that CSR plays in ensuring brand positioning, with reference to printing and packaging. It concludes that measures that target employees and particularly offer education and health care services tend to strongly improve business corporate images and positions, and further that companies and communities share perceptions on the positioning of corporate brands. Some studies illustrate the significance of CSR, and therefore its motivations and effects. For instance, Harwood et al. (2011) investigate the intentions behind the involvement of some United Kingdom businesses in CSR activities. Findings indicate that many organisations engage in a variety of CSR activities, especially relating to energy reduction, waste recycling and control of the carbon footprint. The participation of businesses is guided by the overall feeling that it is considered the right thing to do, hence a moral rather than instrumental motivation for engaging in it. Customers, legislative requirements are the main drivers behind the need to practice CSR in firms, in addition to unions, lobby groups and media. Leon & Juan (2014) explore how CSR may be enhanced in logistics firms, noting that globalization has resulted in heightened competition hence a continuous effort to increase efficiency and cut costs. It reveals the positive trends in adoption of CSR, confirming that it can effortlessly help to reduce distribution costs and environmental costs of business. Andersen & Skjoett-Larsen (2009) offers a conceptual framework for the analysis of CSR practices within a global supply chain, with reference to IKEA, a Swedish company, and how it handles CSR issues with its suppliers. It points out the need to ensure that CSR is incorporated across the whole organisation, and this is inclusive of all offshore suppliers and subsidiaries. Sharing of experience, employee training and choosing only suppliers who engage in ethical business is necessary. Gilberthorpe & Banks (2012) investigate the relationship between CSR as a strategic business model and the kind of development it results in, with reference to two multinationals based in Papua New Guinea. They reveal the need for such global businesses to consider local social contexts rather than pre-set performance standards, hence a close consideration of affected communities will result in more beneficial CSR strategies. Perry & Towers (2013) revisit the factors promoting and limiting supply chain CSR implementation within the garment manufacturing industry. They establish that adoption of SCM principles helps to support CSR through neutralizing the challenges faced retail buying. The overall conclusion is that supply chain relationship management is more helpful in ensuring effective CSR implementation, as compared for instance to the traditional approaches to auditing and monitoring of the processes. Global marketplaces are significantly defined by current issues such as regulatory impacts, environmental concerns, societal reputation and commercial benefit (Perry, 2012). According to Mushanyuri (2013), issues to do with sustainability often lead to integration of supply chains. Hence the ability of the business to mitigate the potentially damaging impacts of features such as the bullwhip effect on a supply chain, through ensuring efficiency in the flow of materials and information down and up a supply chain. When CSR is adopted into the supply chain, therefore, the result will be in additional to the typical supply chain, in what is termed as reverse logistics. This involves planning, implementation, and control of the most efficient and cost effective flowing of materials, information and products from consumption to their origins for purposes of recycling, return, repair or reproduction. Reverse logistics leads to two main by-products; waste, and product information that will then be transmitted to further product development in order to make improvements. The network however mostly addresses environmental issues, with the assumption that other issues relating to people are dealt with through agreements and codes of conduct that are taken up by partners within the supply chain. An effective incorporation of CSR involves applying responsible practices in every phase of the global supply chain; Procurement and Purchasing Phase. Social responsibility will require CSR implementation in both execution and decision-making processes. The business, will for instance, ensure that it is compliant with all available, relevant standards as relates to environmental concerns. It will also involve applying CSR ideas in for example, opting for recyclable or recycled material and ensuring that the technology applied in the making of materials is as less energy consuming as possible and lead to the production of minimal waste (Roper & Parker, 2013). According to Magnier & Schoormans (2015), consumers usually evaluate product brands using their packaging, and this is more the case in fast-moving consumer goods. Lowering the environmental effect of packaging might, for instance, involve the used material that is ecologically-designed, and this refers to designs which promote ecological and sustainable efficiency. The global business has the obligation of identifying the suppliers who also practice CSR in whatever they do and always uphold regulations. This requirement makes it necessary for the company to make a background check on how the suppliers go about their business, and procurement will only be done when CSR is confirmed. Production Phase. CSR may take either a reverse or forward series of processes in chain management. When CSR is brought into production, the process ensures that the product design considers the well-being of the environment in everything that is done (Slack, 2012). The company will in this case, therefore, seek a long-term environmental friendliness and establish systematic mechanisms that will enable the reduction of waste and disposal of any such wastes in a manner that will not pose hazards to nature. It will also closely monitor every phase of the manufactured product’s life cycle so as to ensure that wherever possible, there can be recycling, reuse or reproduction of materials as a way of safeguarding nature (Gilberthorpe & Banks, 2012). If any of these is possible, then it should be an apparent component of the production process as it will help to achieve the organisation’s obligation to the society and humanity. Distribution Phase. The business will have the obligation of ensuring that while the best approach to the transportation of the finished product is as efficient and cost-effective as possible, it is most importantly sensitive to the maintenance and improvement of socio-economic and environmental sustainability. Transport networks are on their part often accused of greenhouse gas emission and release of hazardous wastes (Perry & Towers, 2013). When CSR is fully adopted therefore, the company may for instance be keen on giving transportation contracts mostly to local service providers, installing a mechanism for monitoring the involved staff to ensure that they comply to all regulations and rules during transportation and coming up with strategies that will facilitate security and safety throughout the entire phase. Packaging. The global business must embrace environmentally and socially friendly practices. In CSR, the phase will have to the negative effects of ensure that the ultimate effect of the material used is minimal on the environment. This is mostly done through strict adherence to relevant regulations and laws that relate to such packaging, hence the company will be keen on warehousing, storage and deterioration prevention (Chan et al., 2014). A CSR-sensitive business will therefore seek the application of waste reduction, recycling of material and preference for non-hazardous materials throughout. This will be supported by cutting down of energy consumption and creation of systems that will be as friendly to the ecosystem as possible. Size is a significant matter in determining the best CSR-guided packaging process. This is because it will determine the quantities of material that will be used in the process, so that depending on how they will be designed, resource efficiency can be guaranteed (Beghetto et al., 2016). When the size is minimized for example it will be possible to have the most optimal loads and therefore reduction of the cost and carbon footprint of the entire phase across borders. Warehousing Phase. The location of storage facilities will have to be closely considered as a way of avoiding any social and environmental issues that might arise. Further, the phase should ensure safety of the storage process, so that in case for instance materials or products are potentially hazardous, the risk is not unnecessarily posed to the surrounding community and the world in general. CSR will go further to provide extra materials that will benefit the entire society. Most importantly however, the company will have to ensure that safety of all workers within the function is ensured so that their humanity is well-respected (Freis et al., 2016). Discussion From the literature reviewed, it has been established that when CSR is brought into the entire supply chain, there are many benefits that will arise. These include a strengthened collaboration amongst the participants. The improved relations will lead to a better productivity and therefore a subsequent reduction of costs. Quality standards are also likely to benefit because they will be safeguarded and the products that are created will tend to be more sustainable. Employee demands and expectations will be satisfied as everything will be produced within conditions that are compliant to global standards and negative impressions that sometimes arise within the supply chain, and even sometimes legal implications will be eliminated. Most significantly however is that the company will be able to attract and retain its workers, because the positive reputation that will arise will draw the attention of the best potential employees. A CSR-compliant supply chain will enable creation of new opportunities within markets as it will provide a way of branding the product and expanding its market scope in the process. Recommendations Although the various studies provide a lot of useful and comprehensive information, it appears difficult to draw generalisations from them because they seem to be very specific to the issue or organization in question. There is therefore the need for further studies that will take a more general outlook of the issue. The implementation of CSR should also incorporate a number of features, so as to ensure that its impact is optimized. In order to ensure that a global business avoids ethical criticisms within its supply chain, which might lead to a negative impact on its brand, it will need to first, ensure simplicity. Operations within the highly competitive global markets usually comes with the pressure on businesses to control costs, as a result of which supply chains end up trying to switch suppliers as a way of minimizing their overheads and in the process making them quite complex. This should however be avoided through strategic management, because having many subcontractors ends up causing a negative effect on visibility of the supply chain and therefore greater risk to buyers. Strict adherence to ethical principles will assist, and management will need to ensure that social and corporate responsibility is a strong and uncompromised part of its overall strategy, and most importantly that they are enforced in every component of the supply chain. It must be a necessity in all commercial decision-making. CONCLUSION The competitive nature of today’s global marketplace makes it necessary for businesses to be ahead of the rest so as to be successful. One of the ways that this happens is through adoption of sustainable practices, usually in the form of a CSR strategy. The literature reviewed shows the necessity of CSR, the increasing need to adapt to local social and environmental concerns, the tendency of multinational firms to fail in CSR implementation, the motivations behind CSR practice in the companies and the relative effectiveness of the practice in place of traditional bureaucratic systems. The study recommends further, focused studies on the impact of CSR on the global supply chain and its full adoption in decision-making. Reference List Andersen, M., and Skjoett-Larsen, T., 2009. Corporate Social Responsibility in Global Supply Chains. Supply Chain Management: An International Journal, 14 (2), pp. 75-86 Beghetto V., Agostinis, L. and Taffarello, R., 2016. Innovative Technology for Sustainable New Materials. European Journal of Sustainable Development, 5 (4), p.11 Chan, M., Watson, J., and Woodliff, D. (2014). Corporate Governance Quality and CSR Disclosures. Journal of Business Ethics, 125, pp.59-73 Ferri, L., Oelze, N., Habisch, A and Molteni, M., 2016. Implementation of Responsible Procurement Management: An Institutional Perspective. Business Strategy and the Environment, 25, pp. 261-276 Freis, J., Vohlidka, P. and Gunthner, W., 2016. Low-Carbon Warehousing: Examining Impacts of Building and Intra-Logistics Design Options on Energy Demand and the CO2 Emissions of Logistics Centers. Sustainability, 8(5), p.448 Gilberthorpe, E and Banks, G., 2012. Development on whose terms? CSR discourse and social realities in Papua New Guinea’s extractive industries sector. Resources Policy, 37, pp.85-193 Harwood, I., Humby, S. and Harwood, A., 2011. On the resilience of Corporate Social Responsibility. European Management Journal, 29, pp.283-290 Kim, K., Jeong, B. and Jung, H., 2014. Supply chain surplus: comparing conventional and sustainable supply chains. Flexible Services and Manufacturing Journal, 26(1-2), pp.5-23 Leon, R., and Juan, A., 2014. Promoting Corporate Social Responsibility in Logistics throughout Horizontal Cooperation. Managing Global Transitions, 12 (1), pp.79-93 Magnier, L. and Schoormans, J., 2015. Consumer Reactions to Sustainable Packaging: The Interplay of Visual Appearance, Verbal Claim and Environmental Concern. Journal of Environmental Psychology, 44, pp. 53-62 Makasi, A., Govender, K and Munyoro, T., 2014. The Effects of Corporate Social Responsibility on Corporate Brand Positioning. Mediterranean Journal of Social Sciences, 5 (20), 2597- 2607 Mushanyuri, B., 2013. The Impact of Corporate Social Responsibility on Sustainable Supply Chains; a Review of Literature. European Journal of Business and Social Sciences, 1 (10), 52-60 Perry, P., 2012. Exploring the Influence of National Cultural Context on CSR Implementation. Journal of Fashion Marketing and Management: An International Journal, 16 (2), pp.141-16 Perry, P., and Towers, N., 2013. Conceptual framework development: CSR implementation in fashion supply chains. International Journal of Physical Distribution & Logistics Management, 43(5), pp.478-501 Roper, S and Parker, C., 2013. Doing well by Doing Good: A Quantitative Investigation of the Litter Effect. Journal of Business Research, 66:2262-2268 Slack, K., 2012. Mission impossible? Adopting a CSR-based business model for extractive industries in developing countries. Resources Policy, 37: pp.179-184 Read More