Corporate social responsibility
On 24 April 2013, The Rana Plaza in Sevar, Bangladesh collapsed killing 1,129 people and injuring 2,515 people. The building was home to garment factories, manufacturing products destined for the racks of the leading brand name clothing outlets found on the streets and in malls in Europe and the United States. More than half the victims were women along with their children who were in nursery facilities within the building. In the weeks following the tragedy as the collapse was investigated it emerged that warnings that the building had become dangerous were ignored. The incident is considered the deadliest garment-factor accident in history (BBC, May 2013). Politicians, advocacy groups and even the Pope spoke out whilst protestors and consumers campaigned directly at retailer's outlets. The response from the fashion industry was mixed; some responded to provide help and some attempted to establish an accord on building safety in Bangladesh; in fact 38 companies had signed up to this as of May 2013 (IndustriALL, 2013). Yet 14 Major North America retailers including Walmart refused to participate claiming they had, for over two years already, been working on an agreement to improve safety in Bangladesh factories (Huffington Post, 2013). Later that year these and other North American companies eventually announced plans to improve factory safety in Bangladesh; however, these plans were criticized for failing to include any binding commitments to pay for improvements (Greenhouse and Clifford, 2013).
This tragedy has passed by and is no longer headline news. Pressure groups continue to campaign and consumers continue to buy garments save a few who are serious about shopping basket activism and make choices accordingly. Overcrowded garment factories in Bangladesh and other parts of the world are not uncommon, and overcrowding and poor working conditions are just the start of practices that our Western eyes would judge to be unacceptable, yet can be found all over the world in the supply chains of many of the goods we buy without question. So why is something not being done? Well it is, and corporate social responsibility (CSR) is very firmly on the boardroom agenda. Firms now consider the impact of their actions on the environment, the world and society at large in terms of what they do. CSR policies can usually be found somewhere in the annual accounts and reports to shareholders for most household name brands; some even place these centre stage, supported with resources and focus that turn policy into action within the business. The problem here comes when an organization considers how a corporate intent in this area needs to be implemented beyond the boundaries of the firm, and the supply chain presents the biggest challenge. If we believe that child labour is wrong, or farming methods that leave orangutans homeless should be stopped then we have set a standard, however being 100 per cent certain no practices upstream in our supply and value chain network contribute to these is an immense challenge. Furthermore, being certain for one supply and value chain network is difficult, but looking across all supply and value chain networks makes CSR in the supply chain one of the hardest things for any business, especially one that sources from the far corners of the world.
It could be argued there is little to compel a business to invest in CSR, after all there is no legal imperative yet to take responsibility for the actions of others in a supply chain and if customers still buy T-shirts following a factory collapse then such events are perhaps not so bad for business after all. However, the business case for CSR is now much greater than any philanthropic desire to work for the greater good and a company that ignores what is happening here does it at their peril. Consumers don't expect to have to think about the things they put in their shopping basket, they expect the brand they are buying from to have done this; they expect companies to be socially responsible (Penn et al, 2010).
Notwithstanding the fact that there remains a gap between expectations and consumers adjusting their buying decisions accordingly (Pelsmacker et al, 2005) this expectation cannot be ignored and there are packs of hungry investigative journalists out there just looking for a story that might bring a household brand to its knees. For example, in 2008 Primark found itself having to fire three Indian suppliers because they allegedly used child labour to carry out embroidery and sequin work on garments following the broadcast by the BBC of footage claimed to be from a Bangalore factory showing children at work on behalf of Primark. Primark had in fact worked to implement a strict code of practice with its suppliers that prohibit the use of child labour in its supply chain and so complained about the broadcast. Three years later their complaint was upheld on the basis that the authenticity of this footage could not be established and the BBC apologized. The problem, however, was the damage to reputation had been done. The interest in the original story appearing to show exploitation of children by a big corporate seemed to be much greater than that of the later story suggesting the footage may not be authentic.
The risk of brand damage through poor practices or even suggested poor practices in the supply chain cannot be ignored, if consumers come to lose confidence the brand is tainted. CSR action in the supply chain therefore becomes essential to reduce risk. Yet some firms have seen an opportunity to build brand values upon positive CSR initiatives, clearly setting out how their business operates and its core principles. Here CSR action is to strengthen a brand. In fact the business case for CSR is fact multi-tiered according to the starting point of the firm and its corporate aims and objectives. This is given in Figure 12.10.
FIGURE 12.10 The 'tiers' of the business case for CSR
How Innocent built a brand on good CSR
The Innocent Drinks Company holds two thirds of the UK smoothie market. Originating as the start-up company of three Cambridge University graduates the company flew in the face of the big brands and developed a new unique 'pure and healthy' brand proposition for their smoothies based around letting the ingredients speak for themselves supported by the strapline 'never ever from concentrate'. Before long Innocent 'smoothies for kids' became a feature of school lunchboxes up and down the country. Sustainability forms an integral part of the Innocent brand proposition and is apparent through the company's efforts to consider its impact on society, the environment and the world at large. Specific initiatives address nutrition, ingredients, packaging, production, and the company has set out to leave a legacy; giving 10 per cent of all its profits to help fund NGOs in the countries from which it sources its fruit. Innocent's suppliers are part of their brand and Innocent claim only to source fruit from suppliers who have to demonstrate that they look after their workers and the environment. Whilst being confident in achieving this has its challenges, Innocent is open about how its assessment approach attempts to realize this. Nevertheless Innocent's suppliers form part of its overall brand proposition and as such need to meet certain standards that align with this. The good practices at farms in third world countries help make the Innocent brand what it is.
CSR is a broad label that means all sorts of things according to what a firm feels it needs to concern itself with. This changes according to the nature of a business and what they are involved in but would typically include environmental impacts, human impacts (such as child labour, forced labour, unsafe or poor working conditions), social impacts and obligations such as being a good neighbour. There are now a number of reference points in the form of frameworks that help guide a firm as to what to look for. These exist in a number of forms ranging from documents that establish principles, guidelines and standards (CBSR, 2009). These include:
• The United Nations Global Compact;
• The Global Reporting Initiative (GRI);
• Voluntary Principles on Security and Human Rights (published by the US State Department);
• The AA1000 standard;
• The ICMM Sustainable Development Framework;
• The IFC Performance Standards on Social and Environmental Sustainability;
• FTSE4Good index; and
• Dow Jones Sustainability index.
Across the different frameworks for CSR are different areas of focus or they serve different purposes, but there is a high degree of consistency regarding the types of impacts or areas that need to be considered. A company serious about CSR could use one of these frameworks to guide its focus and action or might choose to decide for themselves the types of impact they are concerned about. Deciding on a CSR goal or standard to follow is the easy bit, making it happen in practice is more difficult and knowing where to start is even harder and here we can use supply and value chain mapping to help (see below). Tackling CSR impacts in the supply chain presents challenge because we are dealing with things we cannot easily see or understand, often in other countries, where cultural norms are very different and our Western standards or ways don't apply. Despite the difficulty here, with the right determination and resources it is possible to address CSR impacts. Wieland and Handheld (2013) suggest that companies need to audit products and suppliers and that supplier auditing needs to go beyond direct relationships with first-tier suppliers. They also state increased visibility and collaboration with local partners is crucial to successfully managing social responsibility in supply chains. The companies that have successfully addressed supply side CSR all have one thing in common and that is they have directed energy into understanding and getting close to what happens upstream. Ways to do this include:
• Vertically integrate - buy the supply chain. Provides control but only if you can then influence what happens locally.
• Contractual obligations - focuses the supplier and perhaps the supplier's supplier, but the issues of policing and compliance remain. Breaches of contractual obligation and using cheap sub-contractors can go undetected unless there is someone on the ground watching what is going on.
• Periodic auditing - useful to get a feel for what is happening at a factory or plantation and allows conditions to be assessed.
More effective if visits are unannounced but still doesn't provide any certainty as a factory owner determined to cut corners will have any things of concern well out of sight before the auditor has got through the factory gates. Moreover if the auditor is an outsider, and does not know the local territory or how things get done they can easily be fooled or miss something.
• Local presence with local knowledge - someone on the ground, ideally full time, with local knowledge, ideally a local also and with a clear role and remit to ensure standards are met. The stature, local standing and status of this individual is key to making this work and they must be incentivized so as to prevent them going native or being corrupted.
CSR is not a separate topic that can be bolted on; it has to run like veins through everything a firm does, especially the efforts of a purchasing function. CSR is not separate to SCM or SRM, it is integral, shaped only by the specific aims and goals of the organization in this respect.