CSR as Supply Chain management

One area where CSR stakeholder engagement/management has been very effective is in managing corporate supply chains. For most businesses but especially for retail, the supply chain can be very comprehensive and might include several tiers before arriving at the primary supplier (Halldorson et al, 2007:286). In a CSR context the supply chain represent a unique set of challenges as it stretches the moral responsibility of the corporation outside its direct sphere of influence. It has been proven time and time again that even though the company might not have direct management control they are still held accountable for the decisions made in their supply chain both up and downstream (Austin & Reavis, 2004, Baron et al, 2004).

Effective supply chain management encompasses much more than just CSR issues but the idea of sustainable supplier relationships are becoming increasingly important. Where time, quality and price used to be the drivers for the logistics chains more and more companies are finding out that the “how” of production and transportation is on the “radar”. The question of how goods are produced and transported becomes most salient when companies start to source into areas where different management cultures, labour laws or governance practices are in place. Issues that companies in one part of the world take for granted is something that people need to fight for in other places. The challenge then becomes how to manage this diversity over a string of different supplier and customer relationships. A common approach adopted to manage supply chain is using Code of Conduct to gain some form of control over the suppliers (Vogel, 2008). Even though it is far from a foolproof system it does present a platform from which the company can get an overview and thereby a possibility to manage its organisational risks in its supply chain. For retail businesses a systematic system of information gathering, risk analysis and auditing is essential and will always have to be a cornerstone of CSR efforts.

A.P. Moller-Maersk and strategic philantrophy

A. P. Moller-Maersk Group

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The Danish oil, shipping, airline and retail giant A.P. Moller-Maersk (APM) donates free transportation to victims of the earthquake in Japan. It is not the first time that APM steps up and helps out using its core capabilities in line with strategic CSR.

Senior Consultant in APMs CSR department Jens Munch Lund-Nielsen was quoted by Reuters to say that the offer of free transport is sent out via diplomatic channels from the Danish Embassy in Japan. The beneficiaries are governments and organizations.

“We have allocated one million U.S. dollars for relief ship transport. So far we have received response from the UN and an Eastern European country that will send emergency relief. In this situation we can do what we do best” says Jens Munch Lund-Nielsen.

The donation follows A.P. Moller-Maersk same line as the flood disaster in Pakistan last year and the earthquake in Haiti, where it also sailed with free emergency assistance. At the same time the Danish Red Cross can look forward to a nice cash donation from APM and the many thousands of employees in more than 130 countries.

“We have started a collection among the staff through the Danish Red Cross. It runs until 15 April. The sum of this collection among the staff is being doubled up by the company” says Jens Munch Lund-Nielsen.

APM have for several years have been lacking on the CSR front but one of the things that the company always have done well it is to use it resources and knowledge as strategic philanthropy.

With the company ideally situated as the biggest freight forwarder in the world it can use it ships and terminals to help at a fraction of the expense that other companies would have to pay for a similar service. While APM have plenty of other issues that it have to deal with around the world especially related to Human and Labour rights this is one instance were the company really does things well.

Wal-Mart is “Slimming” its supply chain

Street sign for Wal*Mart Drive, south of Gordo...

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Wal-mart has announced a plan to introduce more health food into it shops. If this effort has the same effect as we saw with when they greened their supply chain there is good reason to think that they will drive a global trend.

The plan is to lower its products content of unhealthy salts, fats and sugars, and to drop prices on fruits and vegetables. In addition will the Wal-mart work to reduce prices on products made from whole grain.

While the costs associated with a lower price on fruits and vegetables will come out of the Wal-marts own revenue and will not be transformed into supplier pressure or so the company claims at least. “This is not about asking the farmers to accept less for their crops,” says Leslie Dach, Wal-Mart’s executive vice president for corporate affairs.

The changes in purchasing and supplier relations will be introduced over a period of five years, to give the company time to overcome technical hurdles and to give consumers time to adjust to foods’ new taste, Mr. Dach said. “It doesn’t do you any good to have healthy food if people don’t eat it.”

Changing Wal-mart purchasing strategy is not something that will be an easy fix but with a five year implementation span it just might happen. The plan which has the support of Michelle Obama is composed of five elements:

  1. Reformulating thousands of everyday packaged food items by 2015 by reducing sodium 25 percent and added sugars 10 percent, and by removing all remaining industrially produced trans fats. The company will work with suppliers to improve the nutritional quality of national food brands and its Great Value private brand in key product categories to complete the reformulations;
  2. Making healthier choices more affordable, saving customers approximately $1 billion per year on fresh fruits and vegetables through a variety of sourcing, pricing, and transportation and logistics initiatives that will drive unnecessary costs out of the supply chain. Walmart will also dramatically reduce or eliminate the price premium on key “better-for-you” items, such as reduced sodium, sugar or fat products;
  3. Developing strong criteria for a simple front-of-package seal that will help consumers instantly identify truly healthier food options such as whole grain cereal, whole wheat pasta or unsweetened canned fruit;
  4. Providing solutions to address food deserts by building stores in underserved communities that are in need of fresh and affordable groceries; and
  5. Increasing charitable support for nutrition programs that help educate consumers about healthier food solutions and choices.

One can always argue if Wal-mart is doing enough or if it is just taking one step back from the ten steps it took forward when it sold unhealthy food in the first place. It is well known that obesity is one top health hazards in the US so even the most rudimentary steps towards more health food is welcomed.

The question that remains is what the impact could be on the rest of the world. Wal-Mart is by far the biggest “consumer” on the planet so will they be able to drag the rest of the world supermarkets with them to the altar?

If the lessons from the efforts to green the supply chain are to be used as a guide the answer would be a big YES? Today I have a significant bigger range of different ecological, fair-trade and low carbon emission product to choose from in my local supermarket than I had before and at a price which I can afford. Of cause I can’t say that this is all due to the actions taken by the company. But their actions put “green” on the world map told producers around the world that there was a market if they wanted to produce in a more sustainable way. Supermarket chains in the UK, Germany and Scandinavia that I know of has at least to my knowledge done a huge effort to offer a variety of sustainable products in the product line.  

Before you go off and get real upset about my promotion of Wal-Mart as the big savior of the world from obesity. I would like to remind you that the companies do fail on other key issues related to good governance and labour rights as documented by the NGO Wal-Mart watch. There is no doubt that the company has a long way to go in ways of improving its relations with its own employees and the communities that the stores are part of.