The role of business in the social sustainability can be described from multiple perspectives. To grow, develop new products, and ensure profitability, companies should establish a long-term and beneficial relationship with various groups of stakeholders. Some of those stakeholders, i.e., clients, employees, suppliers, etc., are of great influence on companies’ conduct and have a fundamental significance for the organisational survival. Other interested parties, such as mass media, local communities, and so on, also have a multilateral impact on the business. Thus, the enterprise should be considerate of external influences and adjust to stakeholders’ interests in order to succeed.
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One of the definitions used to describe the organisational practices aimed to establish positive relations with diverse stakeholders and add values to business operations is Corporate Social Responsibility (CSR). It is the strategy that ensures the sustainable growth of the company based on the combination of efforts in the stimulation of economic growth, development of social infrastructure, improvement of the quality of life, and ecological state.
In this paper, the focus will be made on CSR issues and practices linked to supply chain management. Supply chain management supports both informational and physical flows within the firm. It includes sourcing, product development, delivery of the finished products, and so on. There are many reasons that encourage companies to integrate socially responsible, ethical, and environmental activities within the supply chain. It is possible to say that the main one is the achievement of maximum customer satisfaction which is directly related to positive financial outcomes.
Other important reasons may include mitigation of risks, opportunities to manage reputation issues, enforce laws and regulations while respecting and supporting international principles for sustainable business conduct. When seeking the improvement of environmental, social and economic efficiency, companies aim to meet their own interests, the interests of their stakeholders and the society as a whole.
This complexity associated with the implementation CSR in supply chain management points at the need to design an integrated and comprehensive managerial approach. Based on this, in the given paper, we will review the literature devoted to various aspects of CSR management related to supply chain operations, analyse distinct views, and make conclusions about potential benefits of CSR-related supply chain activities, as well as barriers to the integration of socially responsible behaviour.
Definition of CSR
Researchers define CSR as the responsibility of enterprises for their influence on the society (Lapiņa et al. 580). Socially responsible behaviour are usually manifested as respect for law and collective conventions which can be regarded as a premise for the compliance with the ethical model of conduct. To follow the CSR principles, companies should design and enable the mechanism for the systematic consideration of consumer, social, ecological, ethical, and legal issues at distinct operational levels.
The major purposes of this task are to create the maximum shared value for all involved stakeholders, to identify and mitigate potential negative consequences associated with the company’s conduct. The greatest number of benefits related to socially responsible behaviour can be generated when a comprehensive CSR strategy is implemented. The application of such a strategy means that the enterprise strives to become a good and responsible citizen that actively seeks opportunities to make a contribution to the improvement of the social condition by favourably impacting the quality of life.
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Many instruments used in the CSR framework are closely linked to the corporate culture and the overall profile of the company’s activities, including those related to supply chain management. The most common of them are the social campaigns and development of meaningful partnerships (Walters and Anagnostopoulos 418), cause-related and sustainable marketing (Fodness 10), development of ethical programs aimed to integrate shared values among employees (Lapiņa et al. 583), corporate governance including a set of practices used to control and coordination of shareholders’ behaviour and foster responsible investment, eco and social labeling of products (placement of additional ethically CSR-related information on packages), and some others.
CSR for Supply Chain Management
It can be seen from the definition of CSR that some of its elements are automatically included in the area of supply chain management, e.g., the appropriate labelling of products and conveyance of relevant information to consumers through packaging. For a long time, product development and marketing were two of the most important tasks of the organisational supply chain management as they ensure effective identification of goods and brands among diverse groups of consumers.
Thus, the adding of extra information offered within the CSR context is not that a big problem especially when many manufacturers use labels and packages to communicate with customers. However, the compliance with collective social agreements may be considered the major difficulty in the performance of socially responsible supply chain practices as it may require substantial changes in the organisational system and structure (Feng et al. 297).
Supply chain activities fulfil a regulatory and integrational function among different elements of the economic infrastructure in the organisation. The purpose of this area of management is to practice sustainable organisational growth (Feng et al. 297). Researchers also note that supply chain processes and logistics, in particular, were one of the fist spheres of organisational performance where ecological or green solutions that constitute and intrinsic part of CSR were incorporated – the concern regarding the deterioration of the ecological state motivated companies to realise logistics practices considering their influence on environment and society. (Feng et al. 297).
The present-day CSR in supply chain management is spread across all types of activities and is included in customer relationships, development of sound work environment, ecological management, and so on. For this reason, it is hard to discern CSR from the organisational conduct as a whole. However, to better understand the significance of CSR practices, we will review how they function in distinct parts of the company’s supply chain.
Transportation, Supply, and Distribution
Since the end of the 20th century, the emissions caused by the cross-national transportation have significantly increased, and it may be expected that the further expansion of international trade and industrial growth will provoke even greater deterioration of the ecological state. According to Marchet et al., the reduction of pollutant emissions and greenhouse gas is one of the principle goals for the efficient and environment-oriented supply chain management (797).
The researchers suggest that the changes in the organisational transportation system, i.e., the use of cleaner vehicles or alternative fuels, redesign of transport and distribution strategies, etc., is considered the most effective method for the achievement of desirable goals in CSR and supply chain management (Marchet et al. 799). The improvements in the vehicle utilisation are regarded as the optimal way to integrate ethical and ecological principles into the firm’s economic management because it is observed that the consideration of transportation modes leads to the effective utilisation of resources and consequent cost efficiency.
The incorporation of CSR into the supply chain activities also implies the fostering of acceptable factors required for the product development processes while minimising the load on the environment. While in traditional supply chain management models, managers primarily select partners and suppliers based on costs, time, and quality considerations, Homburg et al. recommend organisations to select suppliers and operational activities taking into account the environmental criteria and their overall stance on CSR.
It means that companies which desire to enforce more socially responsible behaviour will build partnerships only with those business actors who themselves conduct according to ethical and green principles, and will prefer to purchase ecological and more expensive materials rather than cheap and hazardous ones. Additionally, green logistics practices may include the management of reverse material streams and the purchase of ecologically acceptable packaging materials which can be reused and recycled multiple times (Gechevski et al. 63). It is worth mentioning that the distributional logistics is closely interrelated with marketing management.
Thus, to organise the distribution channels in a rational way, the management should carry out a multipurpose analysis of market conditions considering the ecologic preferences of customers (Gechevski et al. 63).
Despite the fact that the logistics operations can be regarded as the principal cause of environmental pollution, many companies continue to disregard CSR practices and often underestimate the positive impacts of the environmental initiatives. Marchet et al. distinguish several barriers to the implementation of the CSR strategy in supply chain management. They may be of both internal and external character. The primary internal inhibiting factor is the financial one. The management often considers that integration of socially responsible criteria in business operations is associated with the lack of economic benefits (Marchet et al. 801).
Moreover, the CSR endeavours require staff training and evaluation of internal organisational systems, and it is associated with additional expenses. At the same time, the major external inhibiting factors include the “reluctance towards innovation,” as well as insufficient supplier commitment, the lack of knowledge and necessary technology (Marchet et al. 801). To deal with these problems, the investment in the corporate knowledge management system is be required.
Corporate Knowledge Management
The identified barriers to the CSR practice reveal that the effectiveness of systematic, structural, and cultural changes in organisations, as well as a successful adoption of new environment and ethical management strategies, highly depends on the quality of human resources and availability of relevant knowledge. Researchers define knowledge as “the ability to sustain the coordinated deployment of assets and capabilities in a way that helps the firm achieve its goals” (Lapiņa et al. 578).
In the organisational context, knowledge refers to everything that is known about customers, operations, goods, risks, and success. Thus, knowledge management is meant to collect information and centralise different kinds of data which are disproportionally scattered across the company and, at the same time, increase the capability of knowledge generation and exploitation (Lapiņa et al. 579).
At the same time, the integration of knowledge management and CSR implies the advancement of employees’ competence and professional capabilities needed to facilitate organisational implementation of CSR endeavours; continual investigation of internal and external environments and stakeholders’ interests; and the maintenance of appropriate corporate culture.
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The efficiency of both knowledge management and CSR largely depend on such factors as staff qualification, motivation, and commitment (Lapiņa et al. 583). For this reason, HR management practices play an essential role in the integration of CSR principles into the corporate culture and supply chain management. Moreover, as stated by Lapiņa et al., HR and knowledge management are deeply interrelated phenomena as they both allow realising subordinates’ potential and support the increase in their productivity. A well-planned coordination of knowledge may also facilitate employees’ involvement and commitment to CSR practices. A high level of qualification, in-depth knowledge, and competence of personnel may thus be regarded as one of the crucial factors for the integration of CSR within the firm.
Socially Responsible Product Development and Marketing
The essence of the CSR marketing is in finding the balance between two primary goals of the organisation − increase in profitability and improvement of customer satisfaction. If in the past, companies strived to establish positive relations mainly with consumers, today, the situation requires them to consider the society as a whole. Nowadays, firms no longer can offer false and untrustworthy advertising campaigns and violate the rights of their legitimate stakeholders because such unethical practices are detrimental to their reputation and revenues. Conversely, it is suggested that by supporting the interested parties, the company may gain such benefits as customer loyalty and increased brand value.
The major practices involved in socially responsible and cause-related marketing are fair advertising, development of ethical and green products and services, good deeds marketing, and so on. Marketing of socially responsible products implies the demonstration of the corporate values to the public (Davis 136). It is the commercial activity based on the common interests. It is possible to say that the given approach is substantiated by the efficient consumer response (ECR) strategy based on the orientation towards the needs of final consumers. The ECR model implies that all parties involved in the process at different levels of supply chain management undertake measures to fulfil the current demand while focusing on the maximisation of the price for the demanded products (Hoffman and Mehra 366).
Transparency, marketing research and customer focus become intrinsic parts of the marketing of socially responsible products. In this framework, organisations and consumers are expected to collaborate without rejecting their own interests. Thus, the supply chain functioning in accordance with the ECR and CSR rules is integrated in terms of the multilateral information flow and orientation towards current consumer preferences. ECR strategy requires traders and suppliers to act in a way that the increase in the consumer costs is supported by the decrease in the production costs and the fair allocation of benefits among the business partners (Hoffman and Mehra 366).
Moreover, the gaps in the information flow should be reduced to a minimum in order to ensure the highest possible value of the final products. As stated by Davis, consumers with strong environmental and social motivations are not “particularly sensitive to price when buying green products,” and it is the brand’s CSR activities increase their willingness to buy products at higher prices (136). Therefore, the implementation of such an integrated production and marketing system is highly beneficial for enterprises. However, CSR marketing may not always be so efficient as it is expected. Although some research evidence suggests that CSR advertising may foster the positive attitude of consumers to brands, other researchers consider that CSR marketing may elicit scepticism and perception of insincerity that weakens the effect of an advertised message (Chu and Jhih-Syuan 46).
Moreover, Chu and Jhih-Syuan observe that consumers’ perception of CSR largely depends on the overall dominant culture in which individuals live. In this way, the efficiency of advertising of socially responsible products may be lower in individualistic cultures than in the collectivistic-oriented ones that are “outer-directed and more concerned with their social roles” (Chu and Jhih-Syuan 58).
Despite the concerns regarding the effectiveness of CSR advertising, it is possible to say that the establishment of partnerships with non-profit or charity organisations can be regarded one of the most effective ways for the firm to engage in CSR marketing and, at the same time, mitigate risks associated with consumers’ skepticism because the given strategy is characterized by a proactive approach and tangible results. Walters and Anagnostopoulos state that through partnerships, organisations can “gain access to additional resources,” foster flexibility, generate knowledge about issues “that would otherwise be beyond their reach,” e.g., social quality, and so on (418). Such partnerships support both the promotion of products and help to address most topical social problems.
The findings of the literature review revealed that despite potential difficulties associated with the integration of CSR in supply chain management, socially responsible behaviour can help organisations to generate various tangible and intangible benefits. The tangible effects of CSR endeavours are mainly related to the economic and financial indicators. From this viewpoint, the enforcement of responsible supply chain activities leads to the reduction of material costs and increased efficiency of resource consumption. The optimisation of organisational infrastructures may also be associated with long-term costs decrease that can compensate the short-term costs due to the investment in the integration of CSR within the company. Besides the financial benefits, compliance with CSR contributes to ecological improvement through the reduction of emissions, toxic materials consumption, industrial waste discharge, water and energy waste.
Potential intangible positive impacts of CSR in supply chain management include the enhancement of the organisational image, improvement of stakeholders’ quality of life, and raised public awareness of topical social and environmental problems. The corporate socially responsible behaviour may increase the organisation’s attractiveness to customers and suppliers, and develop their loyalty. Moreover, the integration of fair HR practices and ethical values into the organisational culture can make the company more attractive to talented and skilful employees and facilitate retention of human resources.
However, the research data related to the relationships between sustainable supply chain strategies and financial performance is under-represented, and the gaps in evidence pertaining to consumers’ perceptions of CSR may be regarded as one of the barriers to the universal implementation of socially responsible supply chain activities in enterprises.
The balance between the CSR endeavours and effectiveness of supply chain management is of significant importance. While the improvement of social and environmental quality in an attempt to meet the external pressures, demands and requirements increases costs, the companies need to find ways to sustain their financial capabilities and avoid economic declines. Although to achieve a right degree of balance may be difficult, the management still may create win-to-win situations, and it seems that formal strategic planning and proactive social behaviour are the major ways to integrate CSR without significant losses.
The successful implementation of CSR in any area of performance can be facilitated only through trial and error which allow gaining sufficient experience needed to maintain the socially responsible behaviour in the environment associated with uncertainty and continuously emerging wicked problems. Formal strategic planning and systematic monitoring of the environmental conditions may allow managers to mitigate problems which inevitably occur at the initial stage of CSR system integration and, at the same time, maximise benefits that can be generated with the aid of sustainable supply chain management.
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