Developments in Supply Chain Management: Mandating compliance for CSR in the supply chain – RIP CSR?

Hot topic seminar, University of Portsmouth, 29th October 2008

Dr. Ian Harwood

Lecturer in ManagementSchool of Management, University of SouthamptonRoom 3019, Building 2, Highfield, Southampton, SO17 1BJEmail: iah@soton.ac.uk, Tel: 023 8059 7789, Fax: 023 8059 3844

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Beijing, China – Oct. 22, 2008“Wal-Mart Announces Global Responsible Sourcing Initiative at China Summit”

• At the Summit, Wal-Mart laid out a series of requirements for companies who want to do business with Wal-Mart, including:

– Required demonstration of compliance with environmental laws and regulations

– Partner with suppliers to improve energy efficiency and use fewer natural resources

– Higher standards of product safety and quality

– Greater transparency and ownership

http://walmartstores.com/FactsNews/NewsRoom/8696.aspx

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Hot topic for discussion

• Reputation risk and supply chain management

• What is the impact of mandating CSR compliance along the supply chain?

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Public

GovernmentBusiness

Political influenceTaxationLegislation

Adapted from Carroll & Buchholtz (2006)

Political processVoting rightsInterest groupsContributions

Lobbying

Purchase powerRegulationsTaxationLegislation

Purchase powerShareholdingInterest groupsBoycottsProtests

AdvertisingMarketingPublic Relations

Key influences

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Corporate Social Responsibility Terminology

• 20 different terms uncovered (so far)

• Numerous terms exist for CSR in supply:

– Green Supply Chain Management (Srivastava, 2007)

– Environmental Purchasing (Carter et al, 2000)

– Purchasing Social Responsibility (Carter, 2005)

– Ethical Sourcing (Roberts, 2003)

– Socially Responsible Purchasing (Maignan et al, 2002)…

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Definitions• Corporate Social Responsibility (CSR) is regarded as:

– “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis” (European Commission, 2001, p.8).

– “a commitment to improve community well-being through discretionary business practices and contributions of corporate resources” (Kotler and Lee, 2005, p.3)

– “voluntary corporate commitment to exceed explicit and implicit obligations imposed on a company by society’s expectations of conventional corporate behaviour” (Falck & Heblich, 2006)

Economic

Legal

Ethical

Discretionary

Make a profit

Obey the law

Do what is right, avoid harm

Contribute to community, be philanthropic

Friedmanite view

Source: Adapted from Carroll (1979)

CSR

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Examples of CSR

1. Fund staff for voluntary work

2. Support fresh water schemes

3. Pass on your technology

4. Look after employee health

5. Encourage customers to raise funds

6. Campaign sponsorship

7. Set up a charity

8. Recycle office supplies

9. Support a conservation scheme

10. Cycle to work

11. Cut delivery miles

12. Work with local producers

13. Spread the word in schools

14. Help people with disabilities

15. Set your staff a challenge

16. Share your facilities

17. Tap into eco-friendly workers

18. Purchase from sustainable stocks

19. Protect wildlife

20. Serve Fairtrade

21. Reward greener customers

22. Use ‘green’ suppliers

23. Educate your clients & staff

25. Plant a tree

26. Reduce carbon footprint

Source: adapted from Mullen (2008)

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• ‘Embedding Corporate Responsibility into Procurement: a force field analysis’ (Harwood, I.A. & Humby, S.)

• Explanatory cross-case analysis (Yin, 2003): 9 organisations

– Public (3) and private (6) mix

– Mainly services rather than manufacturing

– Utilities, media, pharmaceuticals, communications, construction, and central government departments and agencies.

• Semi-structured interviews with senior managers (procurement or CSR).

Study 1: A snapshot of progress

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Findings

• Wide range of levels in CSR activities and understanding.

• 5 case organisations were accommodative towards CSR, the others wanted to proactively get involved in CSR (Maignan, et al., 2002).

• Minimal integration between ‘mainstream’ (VFM) activities and CSR-related initiatives.

• Specific concerns and issues:

1) Vocabulary 4) Integration2) Measurement and data integrity 5) Data sharing3) Risk Management 6) Motivation and Perception

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Embedding CR further in supply

• “Our outward image is good but internally we still have major challenges in changing the mind set of many procurement people”

• “We only look one step down the supply chain – it wasn’t thought important or possible to go beyond the immediate supplier”

• Assuming CSR is a ‘good thing’ (Carter et al, 2000; Carter, 2005) – how can CSR be further embedded into the procurement function?

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• Positive environmental & social impacts

• Potential cost savings

• Benefits to company reputation (risk)

• Increased market penetration

• Staff performance increased through CSR

• Enhancing supplier performance

• Increasing interest in CSR

• Up swell of public / customer opinion

• Political drivers / trade offs

• Increasing media / lobbyists activity

• Compliance with standards / legislation / regulation

Driving Forces (+) for CSR

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• Cost of CSR / additional resources

• Prioritising resources between competing CSR activities

• Initiative overload (fads and fashion)

• Cynicism / style over substance

• Inertia / culture

• ‘Not my problem’ syndrome

• Limited success stories / sector specific

• Limited reward mechanisms

Restraining Forces (-) against CSR

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• Conflict between CSR and VFM in procurement decisions

• Traditional procurement measurement systems

• Competitive dynamics in a global environment

• Problems over data integrity

• Persistent stakeholder demands for profit

• Uncertainty over what CSR entails

Restraining Forces (-) against CSR

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Study 1: Summary & Conclusions

• Most focus on one element of CSR

• Many good examples… but also cynicism and confusion

• Key actions include:

1) Reduce cynicism & inertia 4) Challenge reward structures2) Increase data integrity 5) Investigate risk efficiency3) Increase awareness/training

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Study 2:

• ‘Attitudes of SME Owner/Managers Towards Supply Chain Pressures to Engage in CSR’ (Baden, D.A.; Harwood, I.A., Woodward, D. & Knight, A.)

• Sample: EU definition of SMEs <250 employees, turnover <50 million Euros

• Mixed methods

– 25 exploratory interviews

– 103 responses to a survey

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‘Have you had to satisfy customers on the following issues?’

– Health and Safety – 67% responded often/sometimes– Environmental issues – 55% responded often/sometimes– Employees/staff issues – 43% responded often/sometimes– Social/community issues – 35% responded

often/sometimes

• Environmental issues included:– Environmental policies, ISO14001, compliance with

WEEE, waste management and recycling policies.

• Social issues included:– Equal Opportunities, Investors in People, or SA8000.

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Motivation to engage with CR

• SME Owners/directors main driver of engagement with CSR which supports research showing values of SME owners are more closely aligned with their business behaviour.

• Additional benefits for being environmentally responsible:

– Increased reputation (87% said yes/probably)– Personal values (78% said yes/probably) – This supports view that intrinsic motivation is a key

driver towards responsible business.

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Impact of increased compliance

• Most happy to comply with criteria (environmental 82%), (social 55%).

• Half indicated annoyance at extra bureaucracy

• Over a third thought it would be a pointless box-ticking exercise.

• A quarter would be put off tendering in future.

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Do you think that imposed standards set a lower level of responsible behaviour than your organisation would set for itself?

0

5

10

15

20

25

30

35

40

45

no not sure yes

75%

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The ceiling effect (Michael, 2006)

• SMEs believe voluntary effort to be the best way to encourage them to be more socially/environmentally responsible.

• Fairly neutral regarding the benefits of regulation, and supply chain pressure.

Level of environmental/social

activity

Imposed standard

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Hot topic for discussion

• Reputation risk and supply chain management

• What is the impact of mandating CSR compliance along the supply chain?

• Conviction vs compliance CSR… the ‘ceiling effect’

• If CSR actions are mandated in the supply chain… does it spell the end for CSR?

• Or… do we actually mean something other than CSR?

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Acknowledgements

• ‘Embedding Corporate Responsibility into Procurement: a force field analysis’ (Harwood, I.A. & Humby, S.) – 2007 – The Achilles Group for funding

• ‘Attitudes of SME Owner/Managers Towards Supply Chain Pressures to Engage in CSR’ (Baden, D.A.; Harwood, I.A., Woodward, D. & Knight, A.) – 2008 – ESRC funded

• Next steps…

– ‘The resilience of corporate responsibility activities in the face of major organisational change’ (Harwood, I.A.; Humby, S.; James, K. & Chick, G.) – 2009?

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Recent publications…• Baden, D.A., Harwood, I.A. and Woodward, D.G., (….) The effects of procurement

policies on ‘downstream’ Corporate Social Responsibility activity: Content-Analytic insights into the views and actions of SME owner/managers, International Small Business Journal, (submitted)

• Baden, D.A., Harwood, I.A. and Woodward, D.G. (2009), The effect of buyer pressure on suppliers in SMEs to demonstrate CSR practices: an added incentive or counter productive?, European Management Journal (in press)

• Harwood, I.A. and Humby, S. (2008). Embedding corporate responsibility into supply: a snapshot of progress, European Management Journal, Vol. 26(3), pp.166-174.

• Baden, D., Harwood, I.A., & Woodward, D. (2008), The impact of buyer pressure on SMEs to demonstrate CSR activities: evidence of the ceiling effect, EBEN-UK Conference, 1st-2nd April 2008, New Hall, University of Cambridge, UK.

• Baden, D., Harwood, I.A., & Woodward, D. (2008), The effect of supply chain drivers on SMEs’ motivation to engage with CSR activities: a psychological perspective, AIB-UK & Ireland Chapter Conference (AIB-UKI), 28-29th March 2008, University of Portsmouth, UK.

• Baden, D., Harwood, I.A. & Woodward, D. (2007) Attitudes of SME Owner/Managers Towards Supply Chain Pressures to Engage in CSR, British Academy of Management conference, 11-13th September 2007, University of Warwick, UK.

• Harwood, I.A. & Humby, S. (2007) Embedding Corporate Responsibility into procurement: a force field analysis, 16th Annual IPSERA Conference, 1-4 April 2007, University of Bath, UK.http://sotoncsrcommunity.wordpress.com/