From supply chains to value chains: A spotlight on CSR
Malika Bhandarkar and Tarcisio Alvarez-Rivero* 1. Introduction Corporate social responsibility (CSR)1 has become a hot topic in boardrooms across the world. Changes in corporate value systems are being driven by pressures from different actors, including governments, consumers, non-governmental organizations (NGOs) and institutional investors (diagram 1). Multinational corporations (MNCs) have operations spread across the globe, relying on both foreign affiliates and arm’s-length suppliers arrayed along global supply chains, many of which encompass developing countries. What then does the growing CSR movement mean for developing country producers? The chapter addresses this question.
Tier I Tier II Tie r III
NonGovernmental Organization Multinational Corporation Consumer Supply Chain, consisting of:
CSR has relevance to many facets of a corporation’s operations. Strong CSR policies can help to recruit the right people for the job, keep attrition rates low by promoting a “feel good” quotient, improve corporate image, prepare for future regulation, empower “soft” laws (Vogel, 2005, p.162), appease green customers, and convince institutional investors that the corporation is following sustainable practices that positively impact the bottom line. * Policy Integration and Analysis Branch, Division for Sustainable Development, UNDESA, United Nations, New York. The views expressed in this document are those of the authors and do not necessarily coincide with those of the organization to which they are affiliated.
Industrial Development for the 21st Century
Managers are being asked to raise profits but in more socially and environmentally responsible ways. The bottom line continues to be the baseline for measuring corporate success. CSR activities must be seen as providing a measure of shareholder value (e.g., reputation, goodwill) which enhances a company’s ability to produce income now and in the future. Multinational firms have created a new global economic space, sourcing products from farflung global production networks and supply chains (Palmisano, 2006), and CSR advocates argue that MNCs ought therefore to be accountable not only to their shareholders but also to the communities that are affected by their decisions and transactions with suppliers wherever they may operate. Simultaneously, companies are finding business value in increasingly engaging in community programs across the world, as larger shares of their revenues and profits are earned from international operations.
2. CSR in international supply chains
With globalization of production networks, corporations have to extend the reach of their CSR policies not only to their overseas subsidiaries but also to suppliers over which they have varying degrees of operational control. The magnitude of the challenge involved in promoting CSR within MNCs and along their supply chains is illustrated by the fact that there are over 63,000 MNCs with over 800,000 subsidiaries multiplied by millions of suppliers and distributors (UNCTAD, 2001). For developing country firms, the challenge is how to use CSR to competitive advantage, avoiding the risk that weak CSR practices exclude them from global supply chains. CSR is a considerable investment for small and medium-sized enterprises (SMEs) but at the same time the investment has the potential to contribute to long term competitiveness.2
2.1 Supply chains & SMEs in developing countries
Developing country firms can at times face contradictory pressures: on the one hand, buyers want to be able to certify that their suppliers comply with one or another CSR code of conduct; on the other, they require low prices and tight delivery schedules. While some suppliers in developing countries will be able to meet the challenge, others may face difficulty, none more so than SMEs. For, they are likely to...