SUPPLY CHAIN MARKETING

Corporate Social Responsibility

 
 
 
 
 
 
 

What is CSR?

Definitions of Corporate Social Responsibility (CSR) vary based on a number of factors including industry sector, organizational structure, location and relative business importance.

 

Common elements throughout all CSR definitions are:

a reliance on meeting or exceeding the letter and spirit of legal, ethical, commercial, and other business requirements a focus on the impact of a company’s operations, products, and services on people, communities and the environment.

 


Selected CSR definitions:

 
  • Business for Social Responsibility:
    Achieving commercial success in ways that honor people, communities, the environment and ethical values.
 
  • McKinsey:
    Large companies need to build social issues into strategy. They need to articulate business’s social contribution and define its ultimate purpose in a way that has more subtlety than “the business of business is business” worldview.
 
  • World Business Council on Sustainable Development:
    Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.
 
Other terms used to describe CSR-related activities are sustainability, corporate responsibility, triple bottom line, accountability, corporate citizenship, and business ethics.

 


What Are the Key CSR Issues?

Human rights in the workplace are a measure of the affect of business operations on direct employees and the employees of business partners, including suppliers and vendors in a company’s supply chain.
 
The United Nations Declaration on Human Rights describes the social, economic, civil and political rights of individuals and can be used as a guide for the examination of the impacts of a wide range of corporate behavior, including their operations, product development and supply chain.
 
For cotton manufacturers, human rights issues are primarily focused on the labor conditions of workers in factories and farms, including but not limited to safe working conditions and issues such as child labor, forced labor, discrimination and freedom of association.
 
Marketplace Integrity is the quality of a company's interface with its customers through its product or services. As viewed through a CSR lens, marketplace integrity is defined by the extent to which a company’s policies and procedures has a positive impact on:
 

product integrity in manufacturing quality and safety truthful disclosure, labeling and packaging of products, and the ethical marketing, advertising, pricing, distribution and selling practices.

 
Environment Impacts are increasingly being measured by companies who want to manage the effects of their operations, products and supply chains on the environment.
 
In recent years corporate environmental management has transcended legal and regulatory compliance to be seen as a business imperative that can create efficiencies and result in cost savings. Environmental concerns include materials use, energy use, water use, biodiversity, transportation, emissions, including CO2 emissions, effluents and waste from suppliers, products and services.
 
For information about cotton sustainability and organics, click here.
 
Economic Development and Community Investment refers to a wide range of actions companies can take to have a positive impact on communities.
 
Companies are increasingly using their business and philanthropic assets to positively impact communities where their retail or manufacturing takes place. By hiring and training people from local communities or siting facilities in ways that contribute to local economic development, companies can bring economic and social value to communities.
 
Governance is the set of processes, customs, policies, laws and institutions affecting the way in which a company is directed, administered, managed or controlled. Increasingly, CSR is an area of concern by senior executives and oversight by company boards of directors.

 


What Drives CSR?

External Drivers:
 
Globalization & the Information Age:
 
The Internet and Web 2.0 has facilitated the accessibility to all kinds of information. This is exemplified by non-governmental organization (NGO) web campaigns against specific companies and, increasingly, against specific factories. You Tube videos depicting factory conditions, for example, increase speed of the news cycle. If a fire occurs in a factory in Guangzhou province, the news can spread globally in minutes.
 
Corporate Scandals:
 
The Worldcom and Enron scandals of the 1990s left a strong public distrust in corporations. In a recent Gallup poll, those surveyed placed the lowest amount of trust in companies and national legislative bodies. US consumers are increasingly concerned about products coming out of China, based on some quality concerns regarding toys, pet food that did not meet company’s quality standards.
 
Shareholder Activism:
 
Investor support for better corporate performance on environmental and social issues has increased steadily over the past decade. By May of 2007, investors had already filed 359 shareholder proposals, compared with a total of 367 in 2006. (Forum for Institutional Shareholder Services) The top issues included climate change, increased disclosure of political contributions and enhanced sustainability reporting. Other common issues include requests for the creation of company codes of conduct, disclosure of factory locations to payment of a living wage for workers in the global supply chain.
 
Sustainable Development:
 
Whether evidenced by the popularity of Al Gore’s movie, “An Inconvenient Truth,” or the increase in purchases of hybrid cars, the public is thinking more about the impact their actions will have on future generations. Companies have been at the focal point of this concern.
 
Growing Governance Gap:
 
Gaps in consensus about who should exercise oversight over societal needs stem from: 1) poor governance practices in individual countries, leading to conflict, corruption, and uncertain rule of law; 2) a lack of clarity or consensus about global rules and norms; and 3) the blurring of the roles played by business, government and civil society.
 
Internal Company Drivers:
 
Changing Values of the Workforce:
 
Employees are more engaged and interested in CSR issues in recent years, and tend to have higher expectations for the companies they are working for. In 2004, 81% of Americans said a company’s commitment to social issues is an important factor in deciding where to work. (Cone Communications)
 
Cost-Savings:
 
As companies implement key CSR strategies, many are experiencing cost savings and efficiencies associated with these initiatives, whether caused by systems improvements, energy efficiencies, or reduced labor turnover.
 
Reputational Risk Mitigation:
 
With consumers paying more attention to CSR issues and buying more sustainable products, companies are recognizing the impact of CSR on their company’s reputation. In a recent survey, 60% of respondents identified factors related to corporate responsibility such as labor practices, business ethics, and environmental responsibility as helping shape their view of particular companies. (Environics International)
 
Market Expansion and New Product Opportunities:
 
As countries like Brazil, China and India grow into thriving markets for consumer products, companies are seeking new ways to sell their products in culturally appropriate ways. Also, increased consumer interest in CSR has seen the increase in products and certifications such as “green”, “sustainable”, “fair trade”, “organic” and “sweat-free”.
 
Changing Stakeholder Relations:
 
Companies have shifted the way they view stakeholders. Shareholders are no longer the only stakeholder companies are listening to. Increasingly, companies have a much broader definition of stakeholder that includes civil society organizations, socially responsible investment groups, government, employees and consumers.
 

How Can CSR Drive Business Success?

 
Improved Financial Performance: Research finds a slightly positive correlation between CSR performance and broad financial performance. Industry leading companies are often the ones leading using both financial and CSR measures. A meta-study of 52 studies finds that CSR and financial performance are positively correlated and mutually reinforcing. (Orlitzky, et al, 2004)
 
Better Management: Implementing CSR systems can result in better management for companies, including employee recruitment and retention, customer attraction and retention and improved investor relations. Investors are willing to pay premiums for companies with high governance standards at the rates of: 14% in North America & Western Europe; 25% in Asia and Latin America; and 30% in Eastern Europe and Africa. (McKinsey). CSR may also improve operational inputs and resource management, as evidenced by companies who conduct life cycle analyses that result in major savings for the company.
 
Enhanced Reputation: Survey results demonstrate that consumers focus on a company’s behavior when making buying decision, both from a positive and negative perspective. On the positive side, 79% of Americans take corporate citizenship into account when deciding whether to buy a particular company’s product. Conversely, 91% of U.S. consumers who learn about a firm’s negative corporate citizenship practices would consider switching to another company, 85% would pass the information to family and friends, 83% would refuse to invest in that company, 80% would refuse to work at that company and 76% would boycott that company’s products. (Cone Communications)
 
Increased Productivity and Quality: Manufacturing facilities that develop management systems designed to ensure fair and safe working conditions often find correlations with their quality improving, including reduced error rates and better systems for managing quality.
 
Reduced Regulatory Oversight: National and local governments have demonstrated their willingness to reduce the number of inspections or paperwork required of companies who have demonstrated over a period of time that they are willing to be pro-active in their attempts to improve conditions. Sometimes companies are even given “fast-track” treatment when applying for operating permits or other forms of government permission.
 

How Can My Company Be More Socially Responsible?

 
CSR Integration: After years of focusing on single issues or external standards, companies are making efforts to embed CSR into the fabric of their organizational and accountability structures. Critical to this effort is that CSR be embraced not only at the highest executive levels (including the Board of Directors), but that its implementation is incorporated into corporate goals, employee job descriptions and reward systems. All aspects of a company’s operations should be considered in order to ensure integration into business operations: including product design and development, manufacturing and sourcing, logistics and transportation, marketing and communication, and education and training programs.
 
Ethical Sourcing: Ethical sourcing involves the responsible management of the upstream and downstream social, environmental and community impacts of your company’s operations and products through the product’s entire life cycle. This life cycle includes product design, merchandising, product development, manufacturing/sourcing, distribution, retail, consumer, post-consumer and disposal of a product. Potential environmental impacts can include materials management (e.g. toxicity), re-usability and recyclability of products, purchasing preferences for eco-friendly products, energy or resource-efficient products & processes, environmental health & safety for suppliers. Labor and human rights considerations should include compensation, working hours, discrimination, freedom of association and prohibition of child and forced labor.
 
Stakeholder Engagement: Companies have shifted from focusing strictly on maximizing value for their shareholders to knowing and prioritizing a wider group of stakeholders’ needs, and recognizing the benefits of incorporating those needs into their core business strategies. Engagement means substantive two-way interaction between a company and its stakeholders, focused on mutual learning and/or solutions. Stakeholders can include employees, consumers, governments, civil society representatives (labor rights, environmental, human rights, animal rights, fair trade and women’s organizations), multi-lateral organizations and socially responsible investment firms.
 
Transparency and Reporting: Stakeholders are increasingly interested in knowing about the CSR performance of companies, and more and more companies are publishing CSR reports: 52% of the 250 largest global firms issued CSR reports in 2005. (KPMG) Whether a formal, published CSR report or enhancing information available on a company’s website, providing more information about your company’s CSR performance increases trust with stakeholders, provides a platform for communicating goals and progress on a consistent basis, and can be used as a tool to enhance access to capital.
 

What Standards and Initiatives Can My Company Learn From?

 
AA 1000: AA1000 was designed by Accountability to help companies integrate stakeholder engagement into business decision-making processes and improve organizational performance. The AA1000 framework seeks to help companies engage stakeholders effectively in the development of the indicators, targets, and reporting systems they feel are needed to ensure that transparency efforts are effective. There are five modules in AA1000 standards cover the: (1) AA1000S assurance standards; (2) governance and risk management; (3) measuring and communicating the quality of stakeholder engagement; (4) integration of accountability processes; and (5) accountability for small and medium organizations.
 
Ethical Trading Initiative (ETI): This UK-based initiative convenes a wide range of organizations from all parts of society “to improve the lives of poor working people around the world.” ETI is an alliance of companies, NGOs and trade union organizations working to promote and improve the implementation of corporate codes of practice which cover supply chain working conditions. The ETI has developed a standard, the ETI Base Code, which includes nine clauses reflecting key international standards with respect to labor practices. They’ve also developed “The Principles of Implementation” which set out general principles governing the implementation of the Base Code. Participating corporate members include Chiquita, Gap Inc., Inditex, Marks & Spencer, Next Retail, and the Pentland Group.
 
Fair Labor Association (FLA): The FLA is a multi-stakeholder initiative, composed of brands and retailers, human rights and labor rights organizations and universities dedicated to building innovative and sustainable solutions to substandard labor conditions. Factories were recently permitted to participate as well. The FLA conducts independent monitoring and verifies conditions to ensure that the FLA’s Workplace Standards are upheld where FLA company products are produced. Through public reporting, the FLA seeks to hold companies accountable and provide consumers and shareholders with credible information to inform buying decisions. Current participating companies include Nike, the adidas Group, Liz Claiborne, Nordstrom, Puma and Philips van Heusen as well as over a hundred collegiate licensees.
 
Fair Factories Clearinghouse (FFC): The FFC is a collaborative industry effort involving retail and consumer brands and retail trade associations to create a system for managing and sharing factory audit information. The FFC houses a global database of factory information and social compliance audit reports for the purpose of managing and sharing non-competitive information about workplace conditions in a manner that seeks to be cost-effective, can inform sourcing decisions by retailers and brands, and help improve factory workplace conditions around the world. Current members include VF Corp., Levi Strauss & Co., Nike, the adidas Group, Mark’s Work Warehouse and LL Bean.
 
Global Reporting Initiative (GRI): The GRI is a standard with globally applicable guidelines for preparing company sustainability CSR reports including both social and environmental indicators. The GRI's vision is that reporting on economic, environmental, and social performance by all organizations is as routine and comparable as financial reporting. The Sustainability Reporting Framework—of which the Sustainability Reporting Guidelines are the cornerstone—seeks to provide guidance for organizations to use as the basis for disclosure about sustainability performance, and also provides stakeholders a universally-applicable, comparable framework in which to understand disclosed information. Hundreds of companies globally use the GRI’s Guidelines as a reference for their sustainability reporting efforts.
 
ISO 140001: The ISO 140001 environmental management standards exist to help organizations minimize how their operations negatively affect the environment by causing adverse changes to air, water, or land, comply with applicable laws, regulations, and other environmentally oriented requirements. ISO seeks to establish an organized approach to systematically reduce the impact of the environmental aspects that an organization can control.
 
Organisation for Economic Cooperation and Development (OECD) Guidelines for Multinational Enterprises: The Guidelines are recommendations addressed by governments to companies operating in or from adhering countries. The guidelines provide voluntary principles and standards for responsible business conduct in a variety of areas including employment and industrial relations, human rights, environment, information disclosure, combating bribery, consumer interests, science and technology, competition, and taxation.
 
Social Accountability 8000 (SA 8000): SA 8000 is a standard that specifies requirements for social accountability to enable a company to develop, maintain, and enforce policies and procedures along their global supply chain. The standard is an auditable certification standard based on international workplace norms. If a facility meets the standard, it will earn a certificate attesting to its social accountability policies, management, and operations. Companies that operate production facilities can seek to have individual facilities certified to SA8000 through audits by one of the accredited certification bodies. Companies that use the SA 8000 standard include Chiquita, Dole, Gap Inc., Eileen Fisher and Toys “R” Us.
 
United Nations Global Compact (Global Compact): The Global Compact is a framework for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labor, the environment and anti-corruption . It is a voluntary initiative with two objectives: a) Mainstream the ten principles in business activities around the world and b) Catalyze actions in support of UN goals. Companies who join the Global Compact are required to publish an annual report outlining how the ways it is supporting the Global Compact and its principles. Almost 3000 companies are members of the Global Compact globally.
 
Worldwide Responsible Accredited Production (WRAP): WRAP is an independent, non-profit organization dedicated to the certification of lawful, humane and ethical manufacturing throughout the world. WRAP has developed the Apparel Certification Program, designed to independently monitor and certify compliance with the key labor and security standards, ensuring that a given factory produces goods under lawful, humane, and ethical conditions. WRAP monitors factories for compliance with detailed practices and procedures implied by adherence to these standards. Historically focused on the apparel industry, WRAP has recently expanded their scope to other sectors. Companies that use the WRAP standard for the factories that make their products include VF Corporation, Kellwood and Sara Lee.
 

How Can I Find Out More?

What resources can I access?
 
General CSR:
 

Human Rights/Labor Rights:

 
  • Amnesty International (AI) is a worldwide movement of people who campaign for internationally recognized human rights.
  • Business and Human Rights Resource Center is a web-based information resource that is updated hourly with news and reports about companies’ human rights impacts worldwide. The site covers over 3,600 companies, over 180 countries and receives over 1.5 million hits per month. Topics include discrimination, environment, poverty & development, labor, access to medicines, health & safety, security, trade.
  • Business Leaders Initiative on Human Rights is a program to help lead and develop the corporate response to human rights. It is a business-led program with 14 corporate members.
  • Clean Clothes Campaign (CCC) is an international campaign focused on improving working conditions in the global garment and sportswear industries, and empowering the workers in it.
  • Clear Voice Hotline Service couples a confidential worker reporting service to give employees the opportunity to report grievances in a safe and secure manner with training for factory managers in best practices for managing grievances.
  • Human Rights First Human Rights First is a major human rights organization based in New York that believes that building respect for human rights and the rule of law will help ensure the dignity to which every individual is entitled.
  • Human Rights Watch Human Rights Watch is an independent, nongovernmental organization with offices around the globe, dedicated to protecting the human rights of people everywhere.
  • International Business Leaders Forum works with business, governments and civil society to enhance the contribution that companies can make to sustainable development.
  • International Labor Rights Fund (ILRF) is an advocacy organization dedicated to achieving just and humane treatment for workers worldwide.
  • Workers Rights Consortium (WRC) is an independent labor rights monitoring organization, conducting investigations of working conditions in factories around the globe. The WRC’s primary focus is the labor practices of factories that make apparel and other goods bearing university logos.

External Monitoring Firms:

For those companies seeking an independent resource to conduct as assessment of factory conditions, there are a number of accredited organizations who have the capacity in Latin America. The following websites maintain an updated list of accredited monitoring firms (for their particular standards) for Latin America: