Tag Archive | Corporate Social Responsibility

The Worst Supply Chain in the World?

Is Cargill the worst company in the world? In their new report, titled Cargill: The Worst Company In the World, the environmental protection organization Mighty Earth argue that this is actually the case: “[W]hen it comes to addressing the most important problems facing our world, including the destruction of the natural environment, the pollution of our air and water, the warming of the globe, the displacement of Indigenous peoples, child labor, and global poverty, Cargill is not only consistently in last place, but is driving these problems at a scale that dwarfs their closest competitors.” Mighty Earth highlight several problems in Cargill’s supply chains, for example: “It took Cargill months […] to address relatively simple issues in their palm oil supply chain that other companies had dealt with long ago.” and: “Cargill still does not have a comprehensive approach to prevent and address the growing intimidation and violence of human rights defenders that is widely prevalent in its supply chains for palm and other commodities.”

Understanding and Tackling Societal Grand Challenges through SCM Research

The Academy of Management Journal’s previous editorial team defined its term with a thematic emphasis on “grand challenges”, and called for research through editorials on a wide array of topics that explored global problems including climate change, aging societies, natural resources, societal resilience, digital workforce, digital money, and gender inequality among others, as well as methodological approaches with which to tackle them. They defined a grand challenge as “specific critical barrier(s) that, if removed, would help solve an important societal problem with a high likelihood of global impact through widespread implementation”. Certainly the most widely adopted grand challenges are the Sustainable Development Goals (SDGs) of the United Nations. Another example, not mentioned by the editors, are the planetary boundaries identified by Steffen et al. (2015). Following their emphasis, what could our discipline do to better understand and tackle societal grand challenges and maybe also in a more systematic way? Do we need to renovate our thematic and methodological portfolios? Some of these AMJ editorials can certainly be an inspiration for SCM research.

George, G., Howard-Grenville, J., Joshi, A., & Tihanyi, L. (2016). Understanding and Tackling Societal Grand Challenges through Management Research. Academy of Management Journal, 59 (6), 1880-1895. https://doi.org/10.5465/amj.2016.4007

The Cost of a Five-Dollar Dress

Social responsibility has after the Rana Plaza collapse become an integral part of many supply chain management courses across the globe. However, workers’ rights in textile supply chains, or a lack thereof, are actually an old story, maybe as old as modern textile supply chains. This is evidenced by an article from 1933, titled The Cost of a Five-Dollar Dress. The article argues: “If your clothes’ budget has been cut down and you buy bargain dresses, it is only fair you should know who pays part of your bill—the women who made the dress.” It seems that, by moving from one location to another, the social problem of the textile industry has acted like a nomad. Apart from the location – then New York City, now Dhaka – not much seems to have changed within the last century. Still today, the real cost of a five-dollar dress is paid not in dollars or euros, but by the workers upstream in the supply chain with their safety and health condition.

Apple & Foxconn: Financialization across the Pacific

It is always inspirational to find articles that, at first glance, fall out of our discipline, but, at second glance, change the way we think about supply chain phenomena. One of these articles is Froud et al. (2014): Financialization across the Pacific: Manufacturing Cost Ratios, Supply Chains and Power. This article argues “that thirty years ago favourable cost conditions helped build productive power in Asia, whereas now US financial power drives and benefits from low labour costs in China, using the very different supply chain positions of Apple Inc. and Foxconn International Holdings (FIH) as examples”. The article concludes by “observing that the rise of the post-national corporate player changes the alignment between large corporate interests and the US economy where Apple hoards its cash surplus and the success for the stockholders does not align with the broader needs of the US economy and society”. The perspective taken by the authors could be a very interesting complement to contemporary SCM courses.

Froud, J., Johal, S., Leaver, A., & William, K. (2014). Financialization across the Pacific: Manufacturing Cost Ratios, Supply Chains and Power. Critical Perspectives on Accounting, 25 (1), 46-57 https://doi.org/10.1016/j.cpa.2012.07.007

The Dark Secret of the Chocolate Supply Chain

We cannot spare our students the dark secrets of supply chain management. As future decision makers, they need to understand the social and ecological consequences their decisions might have somewhere else on this planet. The chocolate supply chain is a perfect illustration of the complex relationships between consumerism, supply chain management, value creation, and ethical consequences. I have been using this example in my SCM courses for years. So, what is the impact of chocolate? The environmental group Mighty Earth has recently published an investigation into deforestation caused by chocolate: Chocolate’s Dark Secret. Their team visited several protected areas inside Ivory Coast and found that illegal cocoa production has entirely overtaken areas that had been covered by rain forests in the past. Particularly, they found that the world’s largest chocolate companies are connected to cocoa from sources linked to illegal deforestation. The report illustrates how cocoa moves through the supply chain and how value is created in the chocolate industry.

Implications from the Rana Plaza Disaster (Guest Post by Brian Jacobs and Vinod Singhal)

Today’s guest post comes from Brian Jacobs and Vinod Singhal, who present the results of their recent research on social issues in global textile supply chains.

Rana Plaza, an eight-story building in Bangladesh that housed garment factories employing approximately 5000 workers, collapsed on April 24, 2013. The resulting fatalities (over 1100) and injuries (over 2400) made it one of the worst industrial accidents in history. The scale of this tragedy increased awareness of the risks and costs of sourcing from low-cost countries. Such risks and costs are often assumed to be sufficient to motivate firms to source production in developed, high-cost countries rather than developing, low-cost countries. To examine this assumption, we studied the stock market reaction to 39 global apparel retailers with significant sourcing in Bangladesh. We found that although stock market reaction to retailers on the day of the Rana Plaza disaster was negative, its magnitude and significance dissipated by the following day. Our research shows that capital market forces alone are insufficient to prevent tragedies such as the Rana Plaza disaster, or to motivate large scale changes in sourcing patterns. In fact, garment exports from Bangladesh have increased since 2013 even though substandard working conditions persist. While managers should weigh ethics and their moral obligation in addition to financial considerations, it is doubtful that firms can affect the needed changes without participation by non-market forces such as NGOs and policymakers. For full details of our research, please see our article The Effect of the Rana Plaza Disaster on Shareholder Wealth of Retailers: Implications for Sourcing Strategies and Supply Chain Governance, forthcoming in Journal of Operations Management.

Vinod Singhal is a Professor of Operations Management and holds the Charles W. Brady Chair at the Scheller College of Business, Georgia Institute of Technology, Atlanta, Georgia. Brian Jacobs is an Associate Professor of Supply Chain Management at the Eli Broad College of Business, Michigan State University, East Lansing, Michigan.

Jacobs, B., & Singhal, V. (2017). The Effect of the Rana Plaza Disaster on Shareholder Wealth of Retailers: Implications for Sourcing Strategies and Supply Chain Governance. Journal of Operations Management DOI: 10.1016/j.jom.2017.01.002

The Refugees Who Make Our Clothes

Syrian refugee children “have been making clothes for British shoppers”, a BBC investigation has found. “All the brands say they carefully monitor their supply chains and do not tolerate the exploitation of refugees or children.” However, it seems that some brands do not have improved supply chain transparency much after the tragic Rana Plaza building collapse.

How Many Slaves Work For You?

When we buy our new shirt, phone or coffee, we rarely think about slavery in the global supply chains of these products. Slavery? In the 21st century? Isn’t slavery a thing of the past? Well, it might surprise us, but slavery still exists and it exists in almost every global supply chain. It has been estimated that 200,000 child slaves work in Ivory Coast alone, that a large proportion of coltan that is used for the capacitors of our phones is mined by slaves, and that the cotton we need for our clothes is often picked by children. The Slavery Footprint online tool answers the following question: “How many slaves work for you?” Based on research data and the data you enter in a short survey, the tool estimates the answer for you. After having taken the survey, you will most likely be quite surprised about how many slaves are involved in the supply chains of your products.

Empowering Responsible Value Chains

The Rana Plaza factory collapse in Bangladesh in 2013 has opened the eyes of many supply chain managers: Implementing a socially responsible supply chain has, indeed, become an imperative for global corporations and the supply chain management discipline might be in the middle of a paradigm shift. A World Economic Forum report, Beyond Supply Chains: Empowering Responsible Value Chains (pdf; prepared in collaboration with Accenture), examines how companies strive for what the authors call “the triple supply chain advantage” – realizing societal, environmental and business benefits at the same time – and looks at how they intend to achieve it. The authors present a comprehensive set of 31 practices “that provide guidance for companies looking to codify their own specific portfolio of triple advantage improvement measures”. For each of these practices a detailed value assessment and good practices from companies are provided. This report is a good start when implementing a socially responsible supply chain.

The Ethical Shopper: A Myth?

It has often been assumed that one of the characteristics of SCM philosophy is “a customer focus to create unique and individualized sources of customer value, leading to customer satisfaction” (Mentzer et al., 2001). This assumption has led to business models like Primark, which aim to satisfy customer needs for fashion by making incredibly cheap garments available – so cheap that many teenagers nowadays are used to throw them away after just two weeks. Part of the truth is that such customer needs are not only satisfied by these businesses, but also created by the marketing experts that are part of the system. But to what extend can we expect that customers critically reflect the way they consume? A very interesting article by Michael Hobbes argues: “We’re still trying to eliminate sweatshops and child labor by buying right. But that’s not how the world works in 2015.” Hobbes’ article is titled The Myth of the Ethical Shopper. See also: Supply Chain Management and Corporate Social Responsibility.