FÖ0307 Environmental and social responsibility marketing 100921

Individual course Project Proposal

Corporate Responsibility

A comparative analysis of Asian suppliers in the electronic industry

Phase 1- Literature Review of Private-Public Partnerships

(20101019Manuscript)

Keywords:

Corporate Social Responsibility (CSR), NGO-business Collaboration, Public Private Partnership (PPP), Stakeholders Theory

Supervisor: Cecilia Mark-Herbert, Swedish University of Agricultural Sciences, Department of Economics

Student’ Name

Address Phone e-mail

LIU, Luna Studentvagen 32:23B, Uppsala 0765-828-618 luna.formosa@gmail.com

Abstract

Between January and May 2010, there were 13 young workers constantly committed or

attempted suicide at the two Foxconn production facilities in southern China, shocked the public

and highlighted the serious discussion of Foxconn Management concerning the CSR issues as

well. The Foxconn Technology Group is a Taiwanese owned company, and as playing the

biggest and leading electronic supplier for many popular products, such as iPone and iPad of

Apple Company and so on. In spite of both Apple and Foxconn are committed to adopt EICC as

their corporate responsibility. Hence, the study aims at describing how the PPPs and NGO-

Business collaborations applied in the corporate code of conduct which could be expected in

handling a human relation crisis situation.

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Table of Contents

1. Introduction.........................................................................................................................3

2. Aim......................................................................................................................................7

3. Method and Approach.........................................................................................................7

4. Analysis of Literature..........................................................................................................7

5. Conclusions and Suggestions............................................................................................13

6. References.........................................................................................................................15

7. Appendix ...........................................................................................................................18

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1. Introduction

1.1 Problem formulation

Following a string of suicides at its Chinese factories, there were ten Chinese migrant

workers died, while three survived their injuries. The suicides at Foxconn have highlighted the

issue of highly stressful working conditions in the global electronics industry. These severe

tragedies have the public concern at international level on how and why Foxconn has been

shaken by the suicides and the bad press. Foxconn Technology Group mentioned will raise

workers’ wages, and has installed safety nets on buildings to catch would-be jumpers.

According to press from Foxconn, it “has responded with psychologists, punch bags,

swimming pools, and asking employees to promise not to kill themselves.” Besides, with

permission from the Apple Company, the supplier, Foxconn has committed to turn up the works

salary.” However, do these reactions could improve the actual working conditions in China?

The Faxconn Tech Group, is a Taiwanese Company, has factories in Taiwan, China,

India and Czech Republic. Due to the author is from Taiwan, and feel the obligation to learn

through the discussion and the implementation of CSR and PPPs to push Taiwanese suppliers to

improve their CSR managements overseas and in Taiwan as well. With the geographic

advantage, the author has more knowledge of the difference political and stoical contexts

between Taiwan and China. Comparing with China which is still has one-party system and

seriously restricted political and discourses regulation regarded as undemocratic country;

basically Taiwan as a young democratic country shares higher democracy, freedom of speech,

and association and so on. However, there are still a number of violation of labors happened in

Taiwan as well. Contributed of diverse discourses and strong networks alliance with other NGOs

at the international level, Taiwanese companies have been asked to take more responsibility to

respond the appeals from the civil society concerning social and environmental issues. Hence,

the knowledge will help the research to develop structures and questions of the future approaches

in the second phase of the study.

Due to the civil society and media highly spotlighted on Foxconn, recently there is an

investigation of the case released on 12 of October. The report is investigated by Students &

Scholars Against Corporate Misbehaviour (SACOM) and some NGOs based on Hong Kong and

Asia. In terms of Foxconn’s attitudes, so far the Foxconn company denies the accuses outlined

by the report. The report is a close investigated on the concerns of low wage, excessive overtime

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work and harsh management. The report also focuses on Foxconn’s wage increase proposal,

even though it is still below the living wage standard that they advocate.

In the past few years, as the report mentioned that“…sweatshops are characterized by

massive labor law violations such as underpayment, no social insurance, and high levels of

industrial injuries……to make up the ‘loss’, management everywhere has developed different

tactics to boost productivity in the factory.” Therefore, the tragedies presented by the media and

mentioned on the criticisms in terms of "workers are ordered to stand during the work shift,

tasks are broken down into more precise and tedious steps, production targets keeps surging,

and workers have to compete with each other for production bonuses, etc. In this sense, workers

are treated inhumanely like machines. Worker degradation did not stop. It merely returned in

more insidious forms. Foxconn has mobilized a lot of resources to address the tragedy of worker

suicides. Unfortunately, it has not committed to structural reform.”

Therefore, based on the research findings, SACOM has a list of demands for Foxconn

and its buyers including Apple, Nokia, HP, Dell, Sony, Sony Ericsson, and Motorola:

1. Foxconn must honor its promised wage increase and offer basic wage at CNY 2000 to all workers in China;

2. Foxconn should consult workers on relocation plans to make the process transparent;

3. Foxconn should end the abusive use of student workers;

4. Apple and other electronics brands should reform their purchasing model. The brands should raise their unit price to ensure that workers have a living wage;

5. Apple and other buyers of Foxconn should deliver codes of conducts to all workers and ensure that they can understand their rights;

6. Brands should work with Foxconn to conduct labour rights training for workers with monitoring from labour nongovernmental organizations (NGOs);

7. Foxconn should work with the existing trade union to launch democratic elections in accordance with the Trade Union Law in China;

8. Foxconn should provide more supportive services to workers;

9. An investigation on work pressure of workers and working conditions, including management methodology should be conducted by Foxconn and independent scholars;

10. Apple should enter dialogue with labor NGOs on the working conditions and long term improvement.

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According to the above point5, 6, 7, 8, 9 and 10 on the report, there are some calls for

concerning the implementation and expectation of CSR from different stakeholders in this case.

In fact, although the supplier, Foxconn, and the company Apple have mentioned they’ve

integrated the CSR into their management.

Hence, the study will continue to perceive discussion of stakeholder regarding NGOs in

the PPP. Concerning the enforcement of CSR under PPP context, what kind of mechanism could

improve the working conditions gradually in the supplier in Asian context? On the other side,

there are some articles written by some former managers pointed out that, concerning the current

issues and crises, for the previous top managers for Foxconn, the former managers alto suggest

Foxconn should re-construct the management strategies, the enterprise culture and the visions

should related to CSR more. That’s brought up the concern of the study.

1.2 Limitation

Concerning time limits, the study will focus on the news, investigation and reports concerning the Foxconn case since May to December in 2010 and an ongoing case. Therefore, the study will divide into 3 phases as following:

At phase 1, the study has started to do a literature review of PPP theory, esp. the NGO-Business

Partnership. The study tries to clarify the definition, successes, failures, and arguments of the

context. The current paper at phase 1 could help the research er get inspiration for the rest

study . This is the main part is dealing with in the paper.

At phase 2, the study will do a comparative study between Foxconn and other supplier, such as

Fujitsu, which has good reputation concerning the implementations of CSR. During the period,

the author would like to do some semi-interviews and questionnaires from different stakeholders,

esp. from the NGO’s side.

At phase 3, the study will try to analyses from the view of NGO concerning the mechanism and

challenges of implementation of CRS based on PPP theory.

1.3 Basic information

-About the Global Economy

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As Julia Rotter & Nurgül Özbek (2010) illustrated “ due to globalization, literature on PPP has

become quite an extensive field, especially, since the United Nations Conference on

Environmental and Development(UNCED) in Rio de Janeiro in 1992.”

The study would not cope with the sustainability and degrowth discourses of products in

terms of the influences of global economy, esp. managements and consumption values in strong

sustainability, however, due to features of the life cycle of current electronic products mentioned

in this case are very short, the study would not go too much further discussion of this part. The

perspective of the study regards is being more positive of the implementation of CRS and PPP in

the field. As professor Pietra Rivoli mentioned on her first-hand investigation, the book The

Travels of a T-shirt in the Global Economy: An Economist Examines the Markets, Power and

Politics of World Trade. Reflecting and arguing the negative and positive sides of global

economy, she saws the gradually improvements of labors and environmental concerns since

1999, the protests toward World Economic in coming 2000. (Rivoli, 2009)

The perspective of current globalized economy, the study is based on the illustration that

“we are now in an era of globalization. As a process that touches on many aspects of our

economies, societies, and cultures, it is important to investigate how it interfaces with global

environmental changes.” And “in response to criticism of their poor environmental practices in

the late 1980s and early 1990s, particularly in developing countries, many global firms began to

‘green’ themselves. With a lack of outside forces to regulate them, they have embraced self-

regulation via voluntary initiatives. This enthusiasm by industry for self-regulation is driven in

part by an attempt to improve their public images, and in part by economic factor…..” (Clapp &

Dauvergne, 2005)

-About the Foxconn

Hon Hai Precision Industry Company, better known by its trade name Foxconn (Fushikang), was

founded in Taipei, Taiwan in 1974. Foxconn is currently the world’s largest contract electronics

manufacturer, meaning that it makes most of its money as a made-to-order manufacturer, not by

selling its own brand products. The company is poised to take in over 50 percent of global

electronics manufacturing service industry revenue by 2011. Under the leadership of founder and

CEO Terry Gou, Foxconn declares itself “the most trusted and preferred partner in all aspects of

global electronics outsourcing to help customers de-risk their business.”4 Tragically, in the first

five months of this year as of 27 May 2010, a startling 13 young workers attempted or

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committed suicide at the two Foxconn production facilities in Shenzhen City in southeastern

China, bringing a public relations crisis, and a crisis of corporate responsibility, to virtually all

Foxconn’s image-conscious customers, including Apple, HP, Dell, IBM, Samsung, Nokia,

Hitachi and other electronic giants. (Chan and Pun, 2010)

2. Aim

With the understanding and premise of PPP and NGO business Collaboration, the aim is to

describe three main topics that had been brought up: (1) Strategic involvement of NGOs; (2)

Motivational factors & benefits arising from PPPs and NGO-business Collaboration; (3) Success

and Challenges factors, for further study concerning the implementation of CSR in Asian

contexts.

3. Method and approach

In the first phase, this study firstly tries to describe the case of Foxconn and some arguments

from the NGO’s aspects. Enhancing the importance of CSR and PPP concern, then this study is

based on the literature review mainly on articles and books from academic management journals

and website. This study is basically inspired by a previous research done by Julia Rotter &

Nurgül Özbek (2010), Public-Private Partnerships: NGO-Business Collaboration. Additionally,

the research papers and literatures recommended by the course supervisor have been taken into

account. Base on such premise, the study has basic and broader comprehension of PPP theory,

and would like go further to see the role and discussion of NGO in terms of NGO-business

Collaboration.

4. Analysis and Discussion

After reading through the articles and materials, the analysis is conducted on three main topics

that had been brought up by the researchers for the common interests and concerns: (1) Strategic

involvement of NGOs; (2) Motivational factors & benefits arising from PPPs and NGO-business

Collaboration; (3) Success and Challenges factors. But before making the analysis the four main

topics, the study will give brief explanations of the stakeholders, PPP, and the NGO-Business

collaboration.

Concerning the stakeholders, “the discovery phase reorganizes the managerial view of

stakeholders, moving them form outside the sphere of business to giving them a central role in it.

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It requires managers to identify key stakeholder groups and assess the company’s economic,

social, and environmental impacts on these groups throughout the value chain. In effect,

stakeholders value for business comes to represent the market internalization of a social and

ecological dimension that was viewed…” (P.179, Laszlo, Chris 2008) Besides, regarding

managing sustainability, Marc J. Epstein reminds readers to identify the stakeholders, especially

“how an organization chooses to define its stakeholders is an important determinant of how

stakeholder relations are considered in sustainability decision-making and how stakeholder

reactions are managed.” With such concern, here I’d like to borrow the stakeholders model of

Dell (Figure1) mentioned by him, Dell as the global computer company, has grouped its

stakeholders into four categories: (Marc, 2008)

Figure1: Dell Stakeholders Model (Marc, 2008)

Concerning the definition of PPP, as the United Union Development Program (UNDP)

mentioned, generally the PPP is regarded as “a voluntary or collaborative alliance which

implies cooperation between tow (or more) actors be it public, private, non-governmental

organizations (NGOs) or any group of individuals which could fundamentally have different

objectives, values, cultures, structures, but are sharing risks, responsibilities, resources,

competencies whilst committed to common tasks which would achieve their specific individual

goals” (www, UNDP, 2006, p.12). From Julia Rotter & Nurgül Özbek ‘s study “this type (the

definition of UNDP) of cross-sectoral alliance can be used for example as a way to emphasize

on a Corporate Social Responsibility (CSR) commitment.” Hence, this study would also like to

rely on this UNDP definition as well (Julia & Nurgül, 2010)

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Concerning the discussion of NGO-Business Collaboration, Julia Rotter & Nurgül Özbek

(2010) illustrated that “in all the articles covered, the overall perspective towards NGO-Business

collaboration shows a common understanding that it is an ongoing trend among corporations

and non-profit organizations as well. The involvement level of the collaboration may be defined

in several ways. Thus it is a fact that alliance can be conducted at all strategic levels and both

parties can gain in the long run at all kinds of these involvements as long as it is chosen

carefully according to the goals set mutually to be achieved.”

For concerning the functions of NGOs especially from a research with a long term and

holistic perspective, Arno Kourula & Salla Laasonen (2008) classified the NGOs into three

categories according to their focus: NGO–business interface, NGO–business–government

interface, and NGOs as one of many corporate stakeholders. Six main themes they gave are

identified: (a)Activism and NGO influence, (b)dyadic partnership (NGO–business), (c)cross-

sector partnership (NGO–business– government), (d)global governance and standardization,

(e)national-level governance, and (f)stakeholder management.

In terms of social advocacy, Manuel London provides the researchers an over view of

definition of advocacy (Table 1), especially the extremely vital function of NGOs (2010):

How they do it (advocacy strategies)What advocates do(advocacy actions)

Cognitive Emotional Behavioral

Take public action Explain their viewpointpubliclyAre not afraid to beviewed as outspoken

Pursue a causedoggedly (do not giveup easily)Put their reputation onthe lineWarn targets aboutpotential lossesDo not take “no” for ananswer

Stand up for what theybelieve is rightParticipate indemonstrations, boycotts,and other actions thatconstrain a target’sbehaviorUpset the status quo; takepeople out of their comfortzone

Ensure fairtreatment of others

Stand up for others’ rights by expressing a clear opinion

Warn of the dangers of inequitable treatment

Treat others fairly andequitablyMake fair decisionsdespite others’disagreementGive others a chance tovoice their opinions

Act altruistically Champion the cause ofpeople who cannot speak for themselvesProvide information about others’ hardships (for instance, data on numbers of people affected)

Express empathy andsympathyShow pictures of howothers are sufferingExpress the dangers ofthe situation continuing

Organize resources to helpothersDeliver services

Table 1: Examples of advocate actions and strategies (London , 2010)

4.1Strategic involvement of NGOs

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In order to enhance the benefits and advantages of Strategic involvement of NGOs, the study

provides a case study gave by Marc Epstein. He gives us a clear picture, from the case study on

BHP Billiton (Figure 2), he demonstrated the advantages of implementation of concerns from

PPP fields: (Marc, 2008)

Figure 2: BHP Billiton value drivers (P.35, Epstein, Marc J., 2008)

Furthermore, Epstein shows the reader the values from the company and societal which will help the study to improve the function and expectation of CSR. (Figure 3)

Figure 3: BHP Billiton: beyond the business case Epstein, 2008)

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4.2 Motivational factors & benefits arising from PPPs and NGO-business Collaboration

While concerning the NGO-Business Collaboration in PPP, there are 5 main factors, Strategy,

Danger, Confrontation/Collaboration Spectrum, Insider/Outsider, and Tools, have been

mentioned in the following table (Table 2), Steve Waddell gave the reader a comparative aspects

concerning the characteristics for the civil society business strategies:

Table 2: The Confrontation to Collaboration Spectrum (Waddell, 2006)

Characteristics of the Four Civil Society (CS) Business Strategies

ForcingChange

PromotingChange

FacilitatingChange

ProducingChange

Strategy Mobilize NGO to force change and stop corporate actions

Work in CS to influence business

Working with the business for mutual gain

Working in a minority position inside an industry to create basic reform by taking business share

Danger Marginalization Irrelevance Co-optation Commercialization

Confrontation/CollaborationSpectrum

Ideology: business is viewed negatively.

Influence: force, demand, and pressure for change.

Ideology: business is viewed guardedly.

Influence: must give inducements to change.

Ideology: business is viewed positively.

Influence: must give inducements to change.

Ideology: business is viewed critically.

Influence: proactive confrontation with alternative models / systems that take business share.

Insider/OutsiderSpectrum

Control: CS control with no business involvement.

Revenues: CS-based with membership fees and donations.

Control: CS control, may have some business involvement.

Revenues: CS-based with membership fees and donations.

Control: Usually shared business – NGO and often government.

Revenues: Mixed, often business emphasis.

Control: Shared or NGO control.

Revenues: Dominantly business-based.

Tools Boycotts, demonstrations, public opinion campaigns, lobbying politicians, negatively screened social investment fund

NGO Advisory Groups / Boards / Committees, corporate monitoring, NGO accountability frameworks; NGO scientific research

Joint business-NGO boards like the GRI, contracts, NGOs developing / buying for profits

Cooperatives, business community advisory committees, employee ownership, positively-screened social investment funds, program related Investments, micro-enterprise funds

4.3 Success and Challenges factors

From an overview research, Julia and Nurgül summarize the success of a PPP relies heavily on

expectations, holism, commitment and clear guidelines but also heavily on ethical issues, which

are not to be underestimated. (Julia & Nurgül, 2010) And through the literature review focuses

on the benefits and success factor, they mentioned “it has to be acknowledge that there are also

many costs and risks involved.”

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According to Kanter (1999), effective collaboration requires connections

at three levels across collaborating organizations, represented by continuing

contact among: (Trafford & Proctor, 2006)

1) top management to develop broad goals and monitor progress;

2) middle managers to develop plans for joint activities; and

3) operational personnel, who carry out the day-to-day work of the

alliance.

From the insights of Trafford & Proctor (2006), they reminded the challenges of the

partnership should be concerned due to “partnerships create a new form of accountability

between their members which rests primarily on trust. Where there is mistrust and hostility

between some or all of the partners, then the effective operation on their partnership may be

difficult to achieve”, therefore, in terms of discussion on “collaborative activities within and

between organizations, points to the potential problems and pitfalls associated with

collaboration and, by association, with partnership” includes:

loss of control – the inability to take action if things seem to be going wrong or

differently from expectations: shared decision-making may be problematic;

multiple goals – stakeholders are likely to want to achieve their own particular goals

which may not relate to the stated purpose of the partnership; and

tension between autonomy and accountability – members may be accountable to their

stakeholder groups, which may mean checking back before committing to a decision.

Furthermore, while concerning Ethos, “the characteristic spirit or attitudes of a community,

or people (Webster, 1992). It comes very much to the fore in strategic alliances when the co-

operating firms continue to be independent organizations and a new situation appears in which

an interaction is established between two firms with different organizational cultures. This

usually implies different leadership styles and different objectives, which may lead to lack of

trust between the parties and to conflicts which may arise when the time comes to make

decisions (Buono, 1991). Similarly, cultural conflicts are more common in joint ventures, where

a closer contact between the partners is required, than in contractual alliances (Schultz, 1998).”

(Trafford & Proctor, 2006)

From this above research, it has shown that “the partners must work extremely hard at

understanding each other, developing common objectives, and being truly committed to

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achieving a mutually desired and acceptable outcome. Otherwise, the relationship will never

truly succeed. The key to making partnerships work comprises common sense, trust, open

communication, the right environment, and a good plan and strong leadership.” The success

factors outlined, Trafford & Proctor remind researchers to look at five helpful research indicate

“Communication, Openness, Planning, Ethos and Direction, which may be present in a

successful partnership venture.”

Besides, Nutavoot Pongsiri provided an important observation of several cases namely

“ partnerships require effective government regulation, which should be based on a stable and

trusted system of enforceable laws concerning property rights, contacts, disputes and liabilities.

A clear legislative framework specifying the roles of the public and private sectors, their

relationships and the areas for co-operation is essential for building their sustainable

partnerships . ” (Pongsiri, 2002).

From Nutavoot’s viewpoints, Public-private partnerships should be seen “in partnerships, the

private sector needs to consider its social responsibility, while the public sector needs to create

the appropriate legal and regulatory structures, as well as a democratic and participatory

process in decision making (ADB, 1999, p.3) ” ;furthermore, Nutavoot reminds the researcher,

in fact, PPPs may “achieve cost reductions at the price of democracy and equity (Rosenau,

1999, p.27).”

5. Conclusions and Suggestions:

From the conclusion from Julia Rotter & Nurgül Özbek (2010), they conducted that

“sustainability and CSR seems to be the key underlying issues that motivates most companies to

engage in PPP, especially with focus on the environmental and ethical business practices of the

private sector. Those are followed by more specific and technical attributes such as expertise,

transparency, risk management, reputation, positioning, response to external pressure, etc.

There seems to be a power struggle as well as barriers regarding knowledge transfer and

learning environment, which can determine the success or failure of a PPP.” But generally,

they pointed out that “in order for a PPP to be successful, trust, commitment and clear rules

have to lie at the heart of a PPP together with the acknowledgement that it is a developing

process.”

Therefore, based on the current literature review at the 1st phase, the study, from the indictors

and suggestions demonstrated by the researches, at the phase of 2nd and 3rd, the key questions

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should be brought up will include Communication, Openness, Planning, Ethos and Direction,

be presented in a successful or failed partnership venture.

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Appendix:

1. About the EICC: (Version 3, 2009, EICC)

The EICC code of conduct provides “guidelines for performance and compliance with critical CSR policies” and covers five main areas:

• Labor• Health and Safety• Environment• Management System• Ethics

The ELECTRONIC INDUSTRY CODE OF CONDUCT states that the Electronic Industry Code of Conduct establishes standards to ensure that working conditions in the electronics industry supply chain are safe, that workers are treated with respect and dignity, and that business operations are environmentally responsible. Considered as part of the electronics industry for purposes of this Code are Original Equipment Manufacturers (OEMs), Electronic Manufacturing Services (EMS) firms and Original Design Manufacturers (ODMs) including contracted labor that may design, market, manufacture and/or provide goods and services that are used to produce electronic goods. The Code may be voluntarily adopted by any business in the electronics sector and subsequently applied by that business to its supply chain and subcontractors.

To adopt the Code and become a participant (“Participant”), a business shall declare its support for the Code and actively pursue conformance to the Code and its standards in accordance with a management system as set forth in the Code.

For the Code to be successful, Participants must regard the code as a total supply chain initiative. At a minimum, participants shall also require its next tier suppliers to acknowledge and implement the Code.

Fundamental to adopting the Code is the understanding that a business, in all of its activities, must operate in full compliance with the laws, rules and regulations of the countries in which it operates.1 The Code encourages Participants to go beyond legal compliance, drawing upon internationally recognized standards, in order to advance social and environmental responsibility.

The Electronic Industry Citizenship Coalition is committed to obtaining regular input from stakeholders in the continued development and implementation of the Electronic Industry Code of Conduct (EICC).

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