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A supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to the end customer.
(Govil and Proth, 2002) supply chain can be defined as a system or network of people, activities, technology represented by stakeholders. They work together in order to improve the flow of goods and information between suppliers and customers at the maximum level of optimization to deliver the desired end-product.
Below is a small illustration of a company's Supply Chain
Figure 1: An illustration of a company's supply chain; the arrows stand for supplier-relationship management, internal SCM and customer-relationship management
The term "supply chain management" (SCM) first appeared in the late 80s and became more applicable in the 90s. Yet, and before applying SCM, the companies where just using some parts of the SCM like transportation and logistics.
So we will state below some definitions and sayings explaining the supply chain management process,
(Ganeshan, Ram, and Terry P. Harrison, 1995) define the supply chain as a network of facilities and distribution centers that coordinate between each other even across or inside country borders, in order to start with the procurement of raw materials, manufacturing or transforming them into semi-finished or finished products, warehousing, transportation and logistics, distribution to the retailers or end users.
(Chopra, Sunil, and Peter Meindl, 2001) explained that a supply chain includes all stages involved, directly or indirectly, in satisfying customer needs, it does not only include the manufacturer and the end user, but it also includes transporters, warehouses, retailers, and customers themselves".
(Lambert, 2008) gave a small and clear definition of SCM, describing it as "the integration of key business processes across the supply chain for the purpose of creating value for customers and stakeholders".
The below picture explains the SCM concept:
Figure 2: Overview of supply chain management (SCM) (Image courtesy of Chris Caplice.)
Activities and functions of SCM and the appearance of 3 PL
As stated before, SCM is a process applied by companies that starts with moving raw materials to industries, transferring or manufacturing into finished or semi-finished goods, and then transporting and warehousing in order to be sent to retailers or end users who requested those goods. And because manufacturers or even producers concentrate on their product in order to be more creative and flexible, they reduces their ownership of distribution channels and warehousing of big bulk of raw materials, so they started outsourcing transportation and logistics parts and which includes all the process of warehousing, distribution, etcâ€¦ in order to reduce cost and increase performance. So the term 3PL start emerging, so what will be 3PL? What are its types?
According to the Council of Supply Chain Management Professionals, 3PL is defined as "a firm that provides multiple logistics services for use by customers. Preferably, these services are integrated, or bundled together, by the provider. Among the services 3PLs provide are transportation, warehousing, cross-docking, inventory management, packaging, and freight forwarding."
So 3rd Party Logistics providers will be: freight forwarders, fast courier companies, and all corporations that contribute Transportation and Logistics services and solutions.
Based on the previous definition, it is essential to separate between the 3 PL and other party logistics providers such as 1PL, 2 PL, and 4 PL, so we will discuss below each function in order to show the difference.
Starting by 1PL which is represented by the actual shipper or consignee who will be responsible for shipping, logistics, or any supply chain function; as for the 2PL the shipping agent will be responsible for the logistics and shipping services; 4PL it consists of consulting companies specialized in supply chain management that will audit their supply chain process.
Recently, the term 5PL starts emerging which has used the new information technology systems such as online tracking and online requests and bookings in the logistics process and which is a step to develop e-business.
(Hertz and Alfredsson 2003) describe four categories of 3PL providers,
Standard 3PL provider: this is the most basic form of a 3PL provider. They would perform activities such as, pick and pack, warehousing, and distribution (business) - the most basic functions of logistics. For a majority of these firms, the 3PL function is not their main activity.
Service developer: this type of 3PL provider will offer their customers advanced value-added services such as: tracking and tracing, cross-docking, specific packaging, or providing a unique security system. A solid IT foundation and a focus on economies of scale and scope will enable this type of 3PL provider to perform these types of tasks.
The customer adapter: this type of 3PL provider comes in at the request of the customer and essentially takes over complete control of the company's logistics activities. The 3PL provider improves the logistics dramatically, but do not develop a new service. The customer base for this type of 3PL provider is typically quite small.
The customer developer: this is the highest level that a 3PL provider can attain with respect to its processes and activities. This occurs when the 3PL provider integrates itself with the customer and takes over their entire logistics function. These providers will have few customers, but will perform extensive and detailed tasks for them.
The result of 3PL is to expand the number of companies that focuses on customer satisfaction without involving themselves in the daily supply chain and logistics process especially on the tasks related to social responsibility and going green strategies. SCM aims to create and develop a partnership between all the parties' involved based on trust in order to facilitate the process and speed it.
Supply chain activities can be grouped into strategic, tactical, and operational levels:
The Strategic Level is a long term plan that consists on building strong relationships and partnerships sometimes with consumers, sellers, and distributors through that supply chain; in addition it contains strategic network optimization which studies the facilities locations, sizes etcâ€¦) plus the can advance the SC by using the information technology for data collection and sharing information between the different parties; in addition this level contains strategic
At that level, decisions are made based on studies of the market, environment, and competitors; so these decisions based on customer need include purchasing, production, warehousing, transportation, etcâ€¦
Here, decisions are made at an operational level which includes those daily operations in terms of production operations planning, resources planning, import and export operations, local distribution.
Due to globalization, competition is increasing in international affairs and obviously the SCM is a main part of those international affairs, therefore the need to improve two parts in the SCM: the customer service and the internal operating efficiency of the supply chain inside a company,
Customer service is the image of the company towards customers; this means reliable rates, on-time delivery commitments, a coordination between all the departments to get the needed feedback, and a close follow up and updates. Internal efficiency means that all the back office departments of the SC are working smoothly to insure that company commitments are on track and to minimize and avoid mistakes.
Each supply chain has its own service, challenges, market demand but the issues are still the same in almost all the models. Companies in any supply chain must make decisions individually and collectively regarding their actions in five areas:
1. Production: to study the products needed in the market, the deadlines to deliver those products and the quantity that the market can support; so this action contains the creation of master production schedules that take into account plant capacities, workload balancing, quality control, and equipment maintenance.
2. Inventory: a provision of the inventory that should be stocked in each phase of the SC, in order to reduce the cost of stocking and to act as a barrier for the doubt in supply chain.
3. Location: Which will study the locations of the facilities for production, inventory storage, and customer service facilities, and if these facilities needs to be redesigned or rebuilt.
4. Transportation: where companies will choose the mode of transportation (Air, Land, Sea) since as we know they are different in terms of cost and transit time.
5. Information: here companies will control the flow on information and how much this information is accurate because it affects the decision making for the above for actions.
The sum of these decisions will define the capabilities and effectiveness of a company's supply chain. The things a company can do and the ways that it can compete in its markets are all very much dependent on the effectiveness of its supply chain. If a company's strategy is to serve a mass market and compete on the basis of price, it had better have a supply chain that is optimized for low cost. If a company's strategy is to serve a market segment and compete on the basis of customer service and convenience, it had better have a supply chain optimized for responsiveness. Who a company is and what it can do is shaped by its supply chain and by the markets it serves.
So what is Corporate Social Responsibility?
Corporate social responsibility is the commitment of business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life." (Holme, R. and Watts P. 2000).
Below is a historical overview of CSR,
The term corporate social responsibility (CSR) has been in use since the early 1950s;
(Bowen 1953:6) denoted CSR as the commitment to pursue policies, to make decisions or to follow the lines of action which are desirable in terms of objectives and values in our society. Later on, (Ackerman 1975) also noted that financial results were the only concern of businesses, and they were ignoring social responsiveness as well. Others observed that companies' main goal was to make profits (Friedman, 1963 and 1970) and that they did not think about any responsibility so to "solve the world's problems" (Reinhardt, 1999: 53), especially as CSR is nothing more than the "voluntary restraint of profit maximization" (Andrews, 1989: 257).
(McDonald and Puxty 1979) on the other hand viewed CSR as a social obligation.
(Carroll 1979, 1991) shows the hierarchy of social responsibility that an organization should apply towards its environment as displayed in Figure 1, so he suggests that business have an economic responsibility to shareholders, in a higher level of social responsibility, companies are expected to conform to legal obligations set by governments and regulatory agencies (Carroll 1979, p.500). Ethical Responsibilities and which are considered as norms and morals applied by organizations towards their environment, these responsibilities are not laws. On the top of the pyramid, we will find the Discretionary Responsibilities that are guided by an organization's discretion rather than any legal or ethical norms.
Though, some authors stated that CSR shouldn't be considered as a social obligation from the point that it is biased that businesses should be responsible for the whole society, yet it should only take care of its closed environment or society affected directly or indirectly by the companies' activities (Donaldson and Preston, 1995; Jones, 1995; Wood and Jones, 1995).
Therefore, others have taken a different route and rather than specify particular responsibilities, have offered more general definitions that seek to include the different opinions on CSR that are evident across the literature. For instance, (Brown and Dacin 1997) define CSR as a company's 'status and activities with respect to its perceived societal or, at least, stakeholder obligations,' whilst (Matten and Moon 2004a) offer the following: 'CSR is a cluster concept which overlaps with such concepts as business ethics, corporate philanthropy, corporate citizenship, sustainability, and environmental responsibility.
What are the activities of Sustainable Supply Chain Management (SSCM)?
As already defined, the SSCM is the method applied when managing the SCM activities taking into consideration environmental, social, and environmental concerns in order to improve the company long-term performance.
We will discuss below the application of sustainability in Supply Chain different activities as shown in figure 4.
â€¢ Sustainable Design and Packaging:
We will start by developing sustainable strategies for the product and its package; we are talking here about creating products and packages abled for recycling and remanufacturing, by this step companies will eliminate product waste and diminish cost as well for a long term perspective. Baojuan states that sustainable design has an important impact on resources and environment. In addition sustainable design is an important factor to gain customers' respect and competitive advantages along with cost saving, and improve the quality of the product.
â€¢ Sustainable Production:
Maintaining sustainable production is an essential part in implementing SSCM. So to reach this sustainable production, corporations should use new materials and technologies that lead to decreasing the consumption of raw materials and power in order to hit low input, high output, with low pollution. Lean manufacturing method is the first production approach that takes care of environment; it is named also environmental production. This manufacturing technique consists of reducing waste, and improving the environmental performance, cellular manufacturing, continuous improvement, Just - In - Time manufacturing, standardization of work, and reverse logistics as shown in Figure 5, which consists of producing goods that can be recycled and remanufactured.
â€¢ Sustainable Marketing:
To reach sustainable marketing which is an important activity in implementing SSCM, corporations should use it in all their promotions and in all their sales meetings in order to improve their relationship with their customers and even their suppliers and partners. This activity is a competitive weapon for sales people especially with their relations with multinational companies as we will see in section 2.2.
â€¢ Sustainable Transportation:
Transportation activity is the core activity in SCM because it is the act of moving and delivering all the goods between partners inside and across borders, so for implementing sustainable SCM, companies should apply sustainable transportation by using environmental friendly vehicles, working with socially responsible transportation partners, and using an environmental friendly infrastructure (Kam, Christopherson, Walker, & Smyrnios) believe that these factors and the dynamics that connect them, "determine the environmental impact generated in the transportation logistics phase of the supply chain."
â€¢ Sustainable Purchasing:
As for purchasing which is based on the relation between the company and its supplier, companies willing to implement SSCM should use eco-friendly raw materials from well know suppliers having environmental friendly activities; this step leads to minimizing waste and pollution.
Figure 4: SSCM activities.
What are the factors that made the companies think responsibly and get more attached to the Social Responsibility?
As mentioned previously, due to globalization the role and responsibilities of companies is moving forward, (Ledgerwood 1997:11) illustrated that "dividing responsibilities between companies and community is continuously changing, with government taking on some of the enterprising characteristics and exercising wider social responsibilities". Nowadays, stakeholders request from companies to extend their social responsibilities in order to be responsible for their activities compared to the past.
Increasingly public concern is also raised concerning the implementation of CSR; which will be discussed in chapter 3, consequently to implement and control the CSR in the enterprises in the European Union (EU) writer voluntary some reports describing their social, environmental and economic performance in order to formalize the company's position in applying CSR in the EU (Perrini F., 2005)
Despite the long history of CSR, applications of CSR theories and models to supply chains have only appeared in the 21st century. So, sustainable SCM can be defined as the management of supply chains where all the three dimensions of sustainability, namely the economic, the environmental, and the social ones, are taken into account. Therefore, once companies implement SCM principles, they will be totally responsible for the impacts caused by their supply chain activities towards the environment and the society.
Furthermore, in developed countries, companies under shareholder and government pressures are requested to take responsibility to manage their supply chain systems. Yet in developing countries, shareholders will play the biggest role in pushing companies to manage their SC. To relocate supply chain partners socially responsible behaviors, companies can: set written supplier requirements, for example requesting from their suppliers to present written reports for their social and environmental activity, so they can observe their performance and make sure they are meeting their written requirements, providing suppliers with trainings on CSR in order to develop their consciousness.
Social and environmental issues do not end at the door of business entities. So, as the customers improved their understanding in the product they are buying and in the entire process when buying a product or service, they have understood that the problem is not with the end product that needs to be observed, yet they should monitor the whole process including the Supply Chain (Seuring and al, 2008), therefore companies are facing nowadays some internal and external pressures. Obviously, all the environmental impacts are caused by the SC activities, so the SC is the best area to apply sustainability due to all the emissions caused by its different functions; accordingly, old SC models were relying on outsourced supply chains in some stages of the process to reduce costs (Boyd, 2007). Yet, and due to globalization, all the companies were more or less obliged to take care of all the SC phases and which has become more complex and diverse (UN, 2011), thus it becomes essential to engage suppliers and consumers in the CSR agenda (Seuring et al, 2008). In addition, and to the pressures from the internal and external community, companies aimed to apply sustainability in the different parts of SC from the suppliers to the end users.
.Figure 5: Functional model of an organizational supply chain with environmentally influential practices
Figure 5 shows the main elements of Supply Chain: procurement, production, distribution and reverse logistics of the operational life cycle also called value chain of an organization and which are a strategic group of components that has affects upon the supply chain and the way it is managed. So the reverse logistics consists of the return of biodegradable products and materials in order to be reused, remanufactured, or even recycled depending on the product and thee company.
Therefore, implementing CSR inside companies doing supply chain is a need improve their social image on the trade world market and towards pressure groups.
1.2 Guidelines for Sustainable Supply Chain Management
This sector stands for an arrangement of environmental strategies with supply chain management strategies. Consequently it is important to find the environmental needs and problems that may jeopardize a company's environmental strategy; therefore an Environmental Demand can be resulted from customer demands (Carter and Jennings, 2004; Lewis and Harvey, 2001), the legal environment (Handfield et al., 2005) and the firm's competitive environment (Prakash, 2000; OECD, 2003). Although, depending on the type of the customer demand it can be resulted from stakeholder discussions and concerns, also it is related to legal concerns as well.
So what will be the steps used by corporations to turn into socially responsible?
To go further, corporations have to determine their environmental strategy to be directed either internally or towards different players in the supply chain also.
However when applying different forms of environmental strategies, they may face different kinds of simple resistance like environmental legislation set by the government and social environment and which will have different aims than those of the company, or even they can aim to study the market needs in order to distinguish their product or service and gain advantages on their competitors; these advantages are spread into different types like resources minimization in terms of diminishing the use of:
â€¢ Big bulk of raw materials that needs a lot of time and power in order to be manufactured, transported, and stacked, yet they can use secondary or semi-finished materials, here companies responsibility will be choosing environmental friendly suppliers and whom they share the same believes.
â€¢ Old machines that needs a huge energy and fuel capacity to run and to perform and which will results huge gas emissions, where they can use instead the environmental technologies which are environmental friendly and power savers.
â€¢ Uncontrolled transportation of goods and raw materials, yet they might use shipments consolidation in order to be shipped at one time as one shipment in order to minimize cost and pollution, and the use of environmental friendly transportation of 3 PL partners in order to act totally socially responsible.
So Differentiation advantages main goal is to develop the environmental reputation of the company.
This differentiation can be achieved through product development and diversification, supported by the company's management and decision makers, as creating environmentally friendly product lines.
On the other side, we have to mention the constraints on substitute environmental strategies, so it is essential to define the liability of a firm's supply chain, and this includes the risk calculation that may affects the supply chain and its procedures in rapport with the risks caused by suppliers, environment, and the stakeholders.
Moreover, (Boyd et al. 2005) propose the creation of corporate codes of conduct to be communicated internally by giving trainings in the different departments of the company along with culture change in order to be communicated to the customers and spread their culture that will fix their view regarding environmental standards to include their suppliers.
Those codes of conducts are directed towards different levels of the supply chain, in order to control the procedures and to standardize the process inside the supply chain of the company and to change its culture as already stated before, and to monitor this change in order to make on time modifications for the good of the company, and the environment.
The Danish Council of Corporate Social Responsibility also listed a set of guidelines and instructions for private and public enterprises that helps in implementing their SSCM.
In the Council's view, when a company follows these guidelines by setting a clear process that aims to reinforce and continuously develop its supply chain, it will definitely be following international high standards and best practices in this field.
As per the Danish Council, stakeholders play a unique role in guiding social, environmental, and ethical challenges that a company faces to be complied with international standards and norms; therefore corporations are commanded to set dialogues with their stakeholders in order to improve their social responsibility and give value to their business and environment. In addition, this council sees that sustainable supply chain is a significant part of CSR, so it has settled the below guidelines for sustainable supply chain management:
The Council on Corporate Social Responsibility recommends that:
1. Companies set a strategy for sustainable supply chain management to be followed by all employees involved in the process which should be communicated to those employees by training and interaction between each other and with their direct leader.
2. Company strategies are fixed in all its departments especially in the top management, operations including all its different steps, Information Technology, sales, and customer service
3. Companies develop their supply chain management based on an evaluation or study of the possibility of abuses of fundamental rights and principles in their supply chain, and invest and purchase in and from regions where those rights are abused and try to set their own values and social responsibility models.
4. Based on their risk assessment, companies request and establish a dialogue with their suppliers to create continuous improvement, including, if necessary, the monitoring of selected supplier activities, cooperation, and capacity building and/or training.
5. Companies discuss with their stakeholders their improvements in terms of socially and environmental advances by setting quarter meetings based on real data and by setting goals to achieve for the next quarter.
6. Companies should stop immediately their collaboration with companies on countries as customers or suppliers in case they will note any abuse of fundamental rights.
7. Companies share honestly and flexibly their achievements, plans, and efforts with their stakeholders who lead to an interaction and sharing their best practices in order to move towards better social responsibility.
On the other hand, and due to the indication of an increasing interest in addressing sustainability strategies, companies should make a recap on all the sustainability strategies in the supply chain, and which are grouped into elven steps as below,
1. The rules and regulations set by the country that push the corporations to move into environmental friendly observes, as an example we can talk about obliging big industries to use environmentally friendly materials and reducing customs amounts and taxes on those materials adding to this huge penalties for abusers like the case of all the European Union countries, USA, Japan and Scandinavian companies.
2. Companies have to set their profits of implementing sustainable supply chain, and they should develop this implementation to have best practices in this field taking into consideration the needs of their stakeholders and which we will talk about in Chapter 2.
3. Creating a relationship between the economic change and the sustainable supply chain development in order to minimize companies doubt towards any activity or investment willing to develop their sustainable supply chain
4. (Asgari, & Davarzani) Working to expand and empower the relationship between SCM partners in order to share the same believes and push forward the sustainable SCM
5. Raising awareness among consumers and suppliers is important to achieve benefits of implementing SSCM.
6. Stakeholders' interference that should carry on companies to apply sustainability in their supply chain, since they are the direct pressure group that can affect the corporation's decisions.
7. Assessment and monitoring programs where companies can detect errors that occur while applying their strategy and develop new tactics to keep the process and push it forward. Developing environmental systems will simplify the method of monitoring company's repetition since it will simplify the daily reports and implementation status reports as well.
8. (Baojuan) Companies should always use new technologies that will help reinforcing the appliance of sustainable supply chain. Those technologies will continuously give the companies a competitive advantage in the market when applying a new concept of sustainable supply chain.
9. (Liang & Chang) Corporations should oblige their suppliers and service providers to have an internal sustainable system and make sure that it is properly applied; in addition those companies should make sure to hold regular meetings with their suppliers to discuss their environment strategies, to share their concerns and ideas regarding the use of this strategy, to provide on-site recommendations. (F. Hines and R. Johns)
10. Font, Tapper, Schwartz, & Komilaki, provide three conditions that are necessary for developing SSCM: long term partnership, fair pricing and a consistent volume of operations.
11. (Carter & Easton and Carter and Rogers) creating corporations own environmental culture, which is based on morals on company loyalty and motivation where employees can apply the strategy, comment and launch their ideas.
The below figure summarizes the 11 steps already stated.
Figure 6: Summary of the framework for developing SSCM.
Applying sustainability is very critical and complex, therefore it has directed corporation to take more systematic approaches and management systems to these issues, in order to control and improve their quality and diminish their cost of production and supply chain taking into consideration the enhancement of green supply chain and sustainability. Plus, companies should take into consideration that this sustainability program has to keep on their customer satisfaction and loyalty, and maintain high performance.
Reputational risk especially child labour is now considered in applying SCM, consequently we can ask how SCM managers deal with such issues in some regions where they do not control this risk and what guarantees they can take from the government and NGOs in those countries?
As we all know that companies aim to purchase raw materials or even manufacture in some underdevelopment countries. Yet those companies do not have any control on some issues in those countries that may contradict with standards in applying sustainability and one of those issues is child labour. So, in order to control it, companies can take feedback from the below sources,
â€¢ Government: who can set rules and regulations forbidding child labour and controlling this issue, and they will be responsible for any violation. Plus government can enforce minimum age laws and identify the type of work that some ages can participate in.
â€¢ International Organizations: that aim to protect children from any abusing, can give data to companies about children labour in some countries or even can control this issue by forming pressure groups to stop this issue, we can take as an example the UNICEF and the International Labour Organization (ILO)
â€¢ Media focus: media plays a significant role in displaying some reports or investigations made by NGOs and journalists talking about this issue. So, these reports shows the global world this problem in order to push the government and the mistreat companies to end this issue and act socially responsible.
We can conclude that companies willing to apply sustainable supply chain have to abide with some guidelines set by companies or study centers that had some researches or best practices in this field. In addition, those corporations should always follow those guidelines and share them with their stakeholders and take their worries in order to correct or even control their activities in case of any problem.
Chapter 2: Growth of Supply Chain in different firms
2.1 Best Practices of Green Supply Chain around the world
Nowadays, companies on trade world market are moving to implementing green supply chain in their daily work and in their future plans, since most of world-class companies have succeeded in reengineering their supply chain in order to meet stakeholders' and environments' requirements. Actually, globalization, technological development, and huge competition are pushing companies to adopt high standards to stay in the market.
The term "best practice" started to emerge in the trade world in the 21st century where corporations found their selves striving to survive on the market yet they should create value or be distinctive in their operations.
Companies recently are benchmarking other companies' best practices, and they develop and implement them in order to complete customers' needs and satisfaction which will differentiate in their field, so corporations have to really locate their problems and compare them with other companies doing the same business so they can take best practices, follow them and fit them to their own values and operations.
D. Blanchard defined Best Practices in his book "Supply Chain Best Practices": "Best practices" don't just happen by throwing a lot of money at your supply chain problems. ... It takes money, but it also takes time, talent, energy, focus, commitment from senior management, and a lot of guts to pull off a supply chain transformation. Those are the qualities that the best-run companies in the world share and it's why they're on top".
In this part, we will be showing examples of leading companies and practices in implementing green supply chain and sustainability:
Procter & Gamble
Procter & Gamble (P&G) is an American multinational company that manufactures a wide range of well know consumer goods. Its headquarters are based in the USA yet it has plants, industries, warehouses, and retailers all over the world; therefore P&G is dealing with different cultures and customer groups which force it to monitor its daily activities especially manufacturing and supply chain. Consequently in end of 1990s they have started implementing environmental sustainability and social responsibility in all their affiliates and had distinguished experience which became a business model for lots of companies.
P&G sustainability purpose is to improve lives now and for generations to come.
P&G insured sustainability through the products and services they offer, so manufacturing these goods in an environmentally responsible mode that develop the way of living for all people around the globe aiming for it.
At P&G, sustainability is based on five sustainability strategies: products, operations, social responsibility, employee engagement, and stakeholders' engagement.
P&G believes that customers should have a profound understanding in the product and the sustainability meaning in order to get their outcome that fulfill their needs
At P&G, every sustainability innovation begins with a deep understanding of consumers. Because we are in touch with consumers' lives, we can make innovation decisions based on their needs. So customer's innovation is distributed between 2 sides, starting by niche customers that want to innovate and seek for sustainable products even if they have to sacrifice performance or value; yet on the other hand some consumers do not care about sustainability and how to develop it, so they just buy "basic living" goods for their families ignoring sustainability. Nevertheless the majority of those customers take the advantages of the 2 extreme sides of customer groups who change their purchasing decisions but keeping on performance and value, therefore P&G focuses their force on this main segment.
As a second key element to improving sustainability, P&G have created a Life Cycle Assessment thinking strategy (Figure 7) where they follow the whole process of manufacturing which started from purchasing raw materials to delivering goods to the end costumer, so they observe each step of the process (product life cycle) and they try to reduce its environmental impact by using new technologies.
We will take as an example the product Ariel which is a laundry detergent, P&G Life Cycle Assessment showed that once using the product by the end user in heating wash water it is consuming lots of energy comparing to all the other steps in the product life cycle. Therefore they have concentrated all their researches on this step in order to apply sustainability, so they have invented a preparation for this product to be used in cold water in order to avoid heat water when using it.
Figure 7: Life Cycle Assessment
On the other hand, changing the formulation in some items might be a solution for improving sustainability, yet P&G have found a new tactic which consists of making some changes on the package of the item in order to meet sustainability requirements.
Innovative design is applied to their products as well as their packaging. So P&G begun working on reducing the packing of the products since at the first phase it will reduce the energy waste to create a big package, and second it will reduce the shipping cost and space; in addition they have worked with suppliers that provide renewable packages such as sustainable sugarcane-derived plastic, Bamboo, and Bulrush. Furthermore, their new strategy for 2012 is to create packages 100% free of Polyvinyl Chloride (PVC) and which is a big challenge to replace it by another affordable material, knowing that nowadays PVC is used in around 1.5% of their product packaging.
In Gillette product for example, P&G have partnered with Be Green Packaging a modeled fiber supplier which offered advanced packages with reduced plastic for all Gillette products packages, the concept here is doing more with less.
Procter & Gamble focused on their supply chain operations in its all phases to include not only their factories, but also suppliers' engagement, and logistics operations in order to improve their environmental profile.
When manufacturing products, P&G's concerns are to reduce waste of water, energy, and CO2 emissions; therefore they have pushed all their manufacturing plants to use sustainable features such as energy-efficient systems, special and environmental friendly lighting equipment, solar and wind power energy.
When delivering the final product, P&G aims to select the most efficient transportation mode in compliance with the customer need of products, and the cost to be paid. They have aimed as well to remove additional costs and delays in loading and unloading goods along with empty returns for containers and trucks.
In May 2010, P&G have launched the Supplier Environmental Scorecard that targets to rate and improve the environmental assessment of their suppliers.
3. Social Responsibility
Social responsibility explains P&G goal to invest in the future generations and to improve their lives even in the countries where they do not operate.
So we will state below the main acts where P&G act socially responsible.
Live, Learn and Thrive is P&G's corporate cause, which concentrates on assuring education and developing life skills for children in need. Since 2007, P&G has improved the lives of over 315 million children. This cause varies based on the need of each country citizens, in Africa for example people are in need of secured hygiene life like nontoxic water, and medicaments; yet Asian and Latin people seek for educational opportunities etcâ€¦
As a part of P&G mission, employees around the world volunteer to share their beliefs, operational knowledge, and skills with children or youth in need, adding to this buying some materials that will help improving life for those people, therefore millions of US dollars are donated by employees for this purpose.
In times of natural disasters, P&G work in parallel with disaster relief partners in order to help the ruined countries to recover, for example their distinguished assistance in Haiti and Chile earthquakes in 2010.
4. Employee Engagement
Procter & Gamble sustainability strategy is based on Employees performance in and outside their workplace; therefore P&G designed programs that will enhance employees to apply sustainability in all their tasks.
On earth day, events are fixed for all P&G employees all over the globe alone or as a team called "Green Teams" will be asked to give their opinion on a certain subject related to sustainability and they will be taken into consideration in next year's plans.
By end of year 2005, P&G have started to operate in new innovative locations from their partnership with Jones Lang LaSalle where they will be responsible of energy, water, waste reductions, and managing printing by purchasing new printers from Xerox which will reduce paper waste (print two-sided, scanning, etcâ€¦); this will be accompanied by educating employees to deal with this new workplace and to act socially responsible.
5. Stakeholders Engagement
P&G acknowledge that their huge advancement couldn't be done without their different partnerships that developed their growth strategy into sustainability.
They have worked transparently with their stakeholders to allow them constant autonomy to innovate taking into consideration the environmental issues.
For example, they have created a new approach for sustainable packaging which aims to create a common language with their customers in order to collect their feedback and improve sustainability accordingly; this approach was first launched in June 2010.
Maersk Line is the leading shipping line and oil and gas exploration company which owns more than 600 vessels (container vessels, tankers, ferries, etcâ€¦) and a huge number of containers (around 3.9 million containers), it operates in around 135 countries all over the over the world.
Maersk Line started thinking socially responsible and environmental friendly in early 1980s when they started thinking about reducing CO2 emissions in order to reduce their fuel cost, which can be completed by reducing the vessels speed.
Due to the oil crisis in late 1980s and early 1990s, they felt threatened by this issue and begun thinking about reducing the energy waste, therefore they have created new vessels more environmental friendly and started implementing their sustainability practices with their partners and stakeholders.
At Maersk, they attempt to build a long-term value by balancing social and environmental responsibility by keeping and even enhancing their profitability.
So as a member of Clean Cargo Working Group who set a clear carbon performance so companies can measure their performance, Maersk studies their lines, routings, ships etcâ€¦
Maersk focuses on the below four areas as a part of their sustainability program.
1. Health and Safety
Maersk group aims to ensure health and safety to all their employees and assets worldwide, so employees doing business should always be protected in the oil field and the liner from piracy and from physical problems caused by their activities.
In order to reduce piracy which still the main maritime security concern for all operating liners, Maersk Group has invested heavily in reducing piracy (around USD 200 million in 2011) to protect their vessels and employees. They started using trained armed guards on board each vessel which are communicated with the relevant authorities; plus they informed all their captains to sail at a higher speed through piracy waters or conflict regions; and training courses were held to inform their crew how to deal with piracy activities and prevent them.
As a result, Maersk has improved maritime security to 50% in 2011, knowing that the piracy activities were still the same but the takeover achievement decreased.
On the other hand, to ensure employees protection at work place, they have put the safety concern as an important point on the agenda of their Executive Board meetings; in addition they have set a common goal towards increasing their safety performance which will be reached by a clear strategy controlled by a trained Safety Team who will present quarter and annual reports which will be took into consideration in the yearly assessment where the best team in applying continuous sustainable health and safety measures will be rewarded to keep them motivated.
2. Social Responsibility
At Maersk they have developed a modern style for social responsibility that focuses on labour, human rights, diversity, and community involvement.
Therefore they have protected all their employees all over the world by common labour principles took from international labour conventions and laws which aim to protect them, in addition they can give their feedback about their concerns by reporting to a dedicated department.
As a multinational company, Maersk follows diversity in terms of race, gender, religion, etcâ€¦ when recruiting employees, plus they treat all their employees equally and fairly; this diversity is a strong competitive advantage to the company and improve marker growth due to different talents and mentalities.
Starting 2011, Maersk Group takes action on the UN Guiding Principles on Business and Human Rights which manage the human responsibilities between companies and the countries operating in, so Maersk took them as standards especially in merging and acquisitions.
As a part of their social responsibility, Maersk are involved in the community where they operate and provide too many benefits like auditing and sharing best practices with small companies and even helping them in case of disasters.
3. Climate and Environment Change
Maersk knows that their operations have a major impact on the environment, therefore they goal to minimize those impacts in order to act environmental friendly, so they took the initiative to be ahead of the game and started thinking about 4 dimensions: reduce CO2 emissions, fighting pollution, protecting Biodiversity, and managing equipment lifecycles.
As result of these 4 dimensions, they have created in February 2011 the new ship class named Maersk Triple E class; Triple E stands for Economy of scale, Energy efficiency, and Environmentally improved. This vessel can move 18,000 Twenty Equivalent Unit (TEU) and which is 16% greater than Maersk Emma the world's largest container ship, its new design's able to carry more containers without enlarging the vessel dimensions comparing to Maersk Emma; this vessel is slower than other Maersk vessels due to the "slow-steaming" strategy that lowers 37% the fuel consumption and reduces to 50% the CO2 emissions per container. This vessel is 90% recyclable due to the materials used when building it.
4. Responsible Business
As a part of their sustainability program, Maersk are implementing main standards in their culture in order to act in a responsible way, so they started by fighting corruption inside Maersk premises and between employees and in their daily business and strategies with customer and suppliers and even stakeholders, yet in some cases, when dealing with governance employees in some countries staff is obliged to pay in order to facilitate their operations; employees can report every corruption case via their own new internal system. In addition, Maersk Group conduct yearly a huge number of purchases with various suppliers worldwide, yet Maersk aims to impose their own code of conduct to their suppliers in order to reduce the culture and mentality differences, and this code of conduct carries on Maersk's standards in terms of going green and working socially responsible, etcâ€¦
Maersk have set a perspective to sustainable shipping industry from 2012 to 2050.
In the freight forwarding industry, companies are acting as 3PL providers by completing all or some of the supply chain stages depending on their customer's demand; therefore they are the totally involved towards their stakeholders due to their daily huge activity considered as harmful to the environment. So we will show below the best practices applied by different multinational freight forwarders based in 3 different parts in the world.
DB Schenker the German freight forwarder and one of the Europe's leading freight forwarders, is working to reduce to CO2 emissions from their operations by using preferred carriers who used advanced fleet in sea, air, and land freight, and maximizing the use of rail transport due to their low emissions. The company's using new technologies in their facilities as energy saving lightings, air conditioners, and using wind power production. They are working to reduce noise especially the one caused by rail transport by collaborating with the International Union of Railways (UIC) to seek for new technologies that will reduce the noise caused by the rail operations.
Agility the Arab based freight forwarder and which has a good experience in implementing sustainability in their operations; so they started focusing their efforts on developing green supply chain that allow Agility and its stakeholders to share their energy concerns; so customers can present claims about Agility energy consumption, Greenhouse Gas and CO2 emissions over their website or in a mailbox at their facilities. As a next step, they are working to minimize energy and packaging waste by using recyclable packages, envelops, etcâ€¦ using new thin packages made to reduce shipment chargeable weight as a part of their economy of scale study.
Building a new facility inside Dubai Free Zone where they consolidate shipments coming from all over the world to be segregated and sent as one container to each destination, and this will be responsible to reduce cost and advance environmental responsibility. Installing fluorescent light bulbs, turning electricity off during off-peak hours, controlling air conditioner settings and conducting an employee awareness campaign.
Expeditors the leading US freight forwarding company reflects that sustainability is based on three main supports "people, planet, and profit" which are interconnected between each other where the main activity of the company is toward their planet their working on in order to make profits, knowing that this activity should provide reassurance and not harmful to their staff who run their activities; therefore they have started collecting information from all their offices all over the world separately from their employees, customers and suppliers, so they can meet their stakeholders recommendations. So, as a non-asset owning 3PL company, Expeditors are aiming to deal with airlines, shipping lines, or even train companies who have a new environmental friendly fleet, reducing paper use by a strong IT system, working on video conference which reduce travelling costs for employees whom need to attempt meetings or conferences in a specified country, increasing the use of biodegradable products and packages, investing in promotions that improve their image and encourage going green strategies.
2.2 Social Responsibility in different organizational contexts
Social Responsibility is nowadays adopted by different organizations that vary from the private sector, including multinational and local organizations, to the public sector and in different parts of the world like in developed and developing countries; therefore we will discover below these different contexts of applying social responsibility in these different areas and sectors and how they act together in order to keep a green planet and improve sustainability.
Social responsibility in the public sector
The government has played a unique role in enhancing social responsibility and assuring the needed environment for the companies to perform and apply their corporate social responsibility concepts by generating new ideas and policies responsible to reduce environmental and social costs whereas on the order hand to maximize profits.
So in order to facilitate the path towards applying CSR, The World Business Council for Sustainable Development in 2002 stated the that CSR is the obligation of all parties engaged in any business activity to lead to a more sustainable activity by working with the shareholders in order to create value and advance their quality of life.
What will be the role of the public sector in implementing CSR? And how do governments promote CSR?
Bell, D. V. J. 2002 have discussed the importance of the interference of the public sector in developing CSR, by implementing their own vision and goal towards CSR accomplished by the implementation of CSR in their facilities, adding to this a new fiscal policy, and setting sustainability standards.
So we will develop below the main roles of the public sector in implementing CSR,
The government plays a significant role in mandating private sector enterprises and which appears by defining minimum standards for business performance implanted within legal context; therefore public sector can set some standards for the industries to control their CO2 emissions by obliging them to use special environmental friendly equipment, plus pushing them to include this policy in their plans and objectives and developing the technological innovation.
In this part, the public sector will motivate the companies to apply CSR and improve their environmental performance, for example they can reduce taxes and customs on all green equipment (hybrid cars, filters to reduce waste, environmental friendly lights, printers, etcâ€¦), encourage companies to take loans with low interest rates on researches and innovations leading to social responsibility appliance.
Partnership is a must in the CSR program since it shares knowledge between public, private sector, and social society in solving environmental and social issues; therefore public sector may take private sector and social society advices and best practices in implementing CSR in their own offices and activities.
In this part, the public sector will support the companies in their speeches, policies, and even giving awards for companies who apply green supply chain and employment diversity like the case of the U.K. Government support in 2002 for the employee diversity.
These four roles may not always be followed by the governments, yet they may select the role that fits with their policies, or even merge between 2 or 3 roles that may develop their strategies like the case of the US government who merged Partnering and Endorsing, and Mandating in year 2000 by arranging for conferences between energy and nuclear public sectors and some leading enterprises in the private sector in order to set some standards that will be generated in the future.
Crane & Matten, (2007: 488-499) indicated that apart from combining CSR into their own operations, numerous government organizations also take initiatives in promoting CSR within their range of influence, therefore governments recognize well that they have to simply and create incentives to organizations since CSR is a voluntary work.
The United Nations also issued a set of rules and initiatives that were adopted by corporations and governments, for example the British Government has adapted many steps in order to help companies adopting CSR, like creating CSR academy able to teach people about CSR; Gardner, 2006 viewed that the European Union have started investing in CSR to compete the British-American experience towards social responsibility by adapting the CSR roles already discussed.
South Korean government in June 2012 and as step for promoting CSR has allowed all governmental and private sector employees to come to their daily work in summer time wearing shorts in order to avoid the high use of the Air Conditioner which will increase the energy consumption, and they recommended that only the employees having meetings and conferences to wear suits and neck ties during their meeting.
So after discussing the public sector role in implementing social responsibility, we will move closer to see how the different types of organization in the private sector implement CSR.
Social responsibility in the private sector
The private sector is made from large (or multinational) corporations and small and medium sized organizations (SMEs), therefore we will start by discussing below how company size affects in applying CSR.
Most of the people debate that applying CSR will be handled easily in large corporations formed by a board of directors and managers, so whose interest should those large companies consider when applying CSR? Should it be the interest of the stakeholders or those of the owners?
Big companies willing to act socially responsible will affect directly or even indirectly their environment, therefore they will be subject to observation and criticism comparing to the SMEs in case they will not meet their requirements which may lead to taking corrective actions by stakeholders that will negatively affect their activities and obviously their profit. As a result, those large companies should have a set of structured policies and standards which will be set by the responsible department and communicated to the employees by their direct managers as code of conducts that will be controlled and assessed by annual reports that will measure how much the company is meeting the prospects of their stakeholders.
Unlike large companies, in SMEs we will find a different situation showing that a little number of SMEs in the world is aiming to apply CSR comparing to the huge number of large companies adopting this process, and in case adopted the process will be totally different and un-formal.
SMEs are mainly owned and managed by one person or a small group of people who are responsible of CSR decisions which means that they will use their own standards without big plans and reports despite the case of large companies.
SMEs' CSR activities affect their very close environment or stakeholders whom will not create a wide pressure group in observing and controlling them.
(Spence & Schmidpeter, 2002) developed that constructing personal relations with their stakeholders are the main goal of using CSR in order to grow their market share.
CSR and civil society organizations
In addition to the role of private and public sectors, we should not ignore the important role of civil society organizations and nongovernmental organizations that first talked and energized the demand of social responsibility and sustainability such as child labor, thinking about the environment, applying diversity, safety workplace conditions, etcâ€¦
Therefore, that civil society organizations role will go beyond watching the activity of the organizations and writing reports to develop the consciousness of the community in order to reject any unsustainable activity, doing so they will create a pressure group that can punish the abusers.
Civil Society organizations has built partnerships with different companies so they can develop their socially responsible thinking by auditing their behavior and giving some advice due to their vast experience in implanting CSR, on the other hand companies should allocate a capital for this purpose.
As CSOs have set implementing corporate social responsibilities on their top priorities for the future, they have written their policies and best practices to be as standards for the companies in order to improve their social and environmental behavior. We will add to this the activities by some CSOs in providing free or paid training sessions to organizations having a limited knowledge or willing to update their knowledge in applying CSR and making conferences for people willing to increase their knowledge in this field.
CSR in different regions of the globe
After discussing the private and public sectors with NGOs actions towards implementing CSR, we will move to observe how do different countries around the globe deal with CSR strategies taking into consideration the different cultures and development of the economy of those countries.
CSR in developed countries
Due to the social and environmental anxieties that first appeared in the late 1960s and early 1970s, the US government created rules and regulations to control the concerns. The laws adopted included pollution and hazardous waste control (Federal Water Pollution Control Act, The Clean Air Act Amendments of 1977), the workplace (The Occupational Safety and Health Act of 1970, The Equal Employment Opportunity Act of 1972) and consumer protection (The Consumer Product Safety Act, The Federal Hazardous Substances Act). And which obliged corporations to follow the regulations stated by even the state where they operate or the national US government, knowing that the government did not accommodate any reporting on their performance to the public.
Obviously, CSR is originated from the US business who first thought about putting its standards, writing down their notes which lead to best practices that are applied and transmitted in most of their universities, and composed its language known as technical words or expressions. Therefore we can insure that this is related to the specific characteristics of the US business system (Matten & Moon, 2004b).
So, due to the American society policies based on capitalism, free markets, appreciation of self-skills, freedom, performance, adding to this the high income of risk takers and innovators, this has led to start thinking automatically about some social issues in order to carry on their markets and society for example education, security, safety, healthcare, and public venture that formed the CSR basics and starts expanding in order to meet the society and market requirements.
Yet, US companies started sharing their CSR reports voluntary with the public in 1990s in order to avoid criticism on some CSR issue, taking as example Nike after claims of mistreating child labour values in Asia. In addition, CSR reports are used lately in order to show the companies high standards in applying CSR and used obviously as a marketing weapon as well therefore CSR reporting is still unregulated.
However, the US companies are increasing their CSR reporting due to the following reasons: to manage the expectations of their stakeholders, which is explained in indicating theory, to communicate their values and standards to the public known as impression management theory, and to confirm that their activities are meeting the social standards. (Campbell, Craven, and Shrives, 2003).
To what level do companies in Europe and the U.S. discuss CSR in their web sites?
So in the USA, the government will not interfere in implementing corporate social responsibilities in their companies and society, therefore the companies will take action in promoting CSR on their websites and by CSR reports; yet in other developed countries, the government will take the action in issuing the rules and regulations related to social issues