SUPPLY CHAIN

The Socially and Sustainable Supply Chain: CSR and the Consumer

The Socially and Sustainable Supply Chain: CSR and the Consumer

Literature Review

Over the last decade corporate social responsibility (CSR) has risen steadily higher on the international agenda. Extensive expectations of responsible corporate behaviour are also embedded in a number of initiatives from governments and global organisations.

Large West European and North American multinational companies are now, in particular, finding it necessary to develop CSR programmes and initiatives to comply with societal expectations, voiced by sophisticated interest groups often backed up by media.

In an increasingly media-driven society, the concern with brand profiling and reputation effects, are seen to demand corporate responsibility at a new level. This trend has been backed up by several analytical arguments, including Freeman and Harrison's (1999) argument for the benefits of broad stakeholder engagement, Fombrun et al.'s (2000) argument for CSR as a part of reputation building and Elkington's (1998) argument for CSR as a contribution to long-term commercial, ecological and social sustainability.

However, while the engagement of firms in CSR and stakeholdership has received extensive support in business practice as well as in parts of the management literature, other parts of the literature have raised serious concerns about the consequences of extensive CSR engagement for competitiveness and strategic focus. Notably, Jensen (2001) has argued that, in a world where firms must serve multiple stakeholders, each with their own claims as to what the legitimate goals of the firms should be, firms are left without a focus, and without a benchmark against which their managers can be held accountable. In Jensen's own words “Because the advocates of stakeholder theory refuse to specify how to make the necessary tradeoffs among these competing interests, they leave managers with a theory that makes it impossible for them to make purposeful decisions, with no way to keep score, stakeholder theory makes managers unaccountable for their actions.” Adding CSR to other more conventional business concerns, in other words, introduces, for Jensen, a critical governance problem.

With increasing outsourcing of industrial production (Sturgeon, 2002; Langlois, 2003) the controversy of CSR engagement also spills over to management of the extended supply chain. In the view of the CSR proponents, a credible CSR policy must also include the extended supply chain. Initiatives like the Ethical Trading Initiative and the Forest Stewardship Council have thus sensitised public opinion, media and companies to corporate responsibility far beyond the boundaries of the firm. For instance, acceptable labour conditions in the textile industry in Asia, that supplies West European and North American retailers, is seen to be a necessary element of a credible CSR policy for the retailers. Likewise, acceptable forest management from raw material suppliers is seen to be a necessary part of CSR policy not only for paper manufacturers, but even for printers.

However, from the perspective of Jensen's governance critique, the adoption of CSR policies across the supply chain is just as problematic as the adoption of CSR in an individual firm. In this context the governance problem translates into contractual challenges ...