Giorgio Armani said "Fashion design requires consumers to consume, but we can do our bit for society by running our companies in a socially responsible way, and by creating products that promote respect for social and environmental issues." In this decade, a variety of stakeholders such as customers, non-government organization, shareholders, public authorities are increasing the interest of social and environmental issues related to business. There is universal phenomenon that organizations consider the corporate social responsibility as one of the most significant elements in their daily business. Meanwhile, Based on Anderson and Larsen's research (2009), with development of society, increasing number of companies have transformed from companies manufacturing with wholly owned facilities to companies taking part in supply chain and suppliers based manufacturing across the countries. Therefore supply chain management can be seen as the key business process focus on planning and management of all activities involved in sourcing, procurement, conversion and all logistics management as well as coordination and collaboration with stakeholders (CSCMP, 2006). There is general acknowledge that Corporate social responsibilities can be adopted by organizations in supply chain for reaching economic, environmental and social advantages. On the other side, lack of corporate social responsibility in supply chain will lead to some serious drawbacks. This paper will illustrate that how will the corporate social responsibility influences supply chain management and related issues as well as analysis of corporate social responsibility practices in the supply chain though IKEA case.
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Firstly, firms in supply chain doing businesses without social responsibilities can be defined as unethical supply chain which is able to result in some major issues. One of common business risks in supply chain is supplier generated ethics scandal. Most of firms buy unfinished inputs involved raw materials, materials, intermediate components from other organizations before processing them and delivering final goods or services to customers. In the supply chain the ethics problems that could be costumers always accuse buyer for ethical lapses that are actually committed further upstream by suppliers. Blame attaches to the purchasing firms even though their suppliers are legally distinct and independent organizations. (Levin, 2008)The mistake could be made by a designer, a raw material supplier, an intermediate component manufacturer, a distributor or even a retailer but the scapegoat will always be the company with biggest reputation to protect. For example in 2007 Toshiba faced a scandal that more than 1 million their laptops have been recalled because of batteries posing fire hazard from overheating (Keizer, 2007). It seems that Toshiba need to take most of pressures related this scandal. However, the fact is that Toshiba did not build the flammable batteries in its laptops. Their laptop batteries are made and supplied by SONY. This is real example that a leading brand need to take hit for its supplier who is truly responsible for faulty and risky product. It may not be fair but it really indicates that how ethics works in supply chain.
Secondly, in terms of above Toshiba case, being an ethical company is not enough anymore. There is current situation that socially responsible behavior is not only multinational companies' work but the work of their all business partners such as supplier, distributor and intermediary. All of these organizations are responsible for contributing socially and environmentally to an ethical supply chain. To make sure having ethical supply chain which can make benefits for organizations, companies need to identify ethics and risk management framework as key point of business. The Corporate social responsibility can be used to support and develop the ethics and risk management framework by implementing following actions (Spence & Bourlakis, 2009):
Making company's value statement and comprehensive rule that manages staffs' behavior.
Developing a current case for explaining environmental and social problems.
Generating indicators of performance which can be measured and checked.
Facilitate the acceptance of internationally endorsed process and performance criteria.
By creating a new program to increase the awareness and support for company, consumers and suppliers.
By using leadership and coordination across every important functions of a firm to help the establishing and managing of a comprehensive ethical supplier program.
CSR generated ethical framework enables company getting management focus, ability and essential rules for handling adverse behavior which can affect economic viability, operations and reputation of every company negatively. According to Valentino (2007), "Taking responsibility for the management of an ethical supply chain that extends to a corporation's supplier community is an important shift in thinking that has great importance to companies and to the global economy because it is innovative mindset for current society". Nowadays all companies do have a supply chain in some form that involves some form of social or environmental impact (Valentino, 2007). All of them must actively manage not only their own social, environmental and ethical policies but also their suppliers' policies to create an ethical supply chain. Modern firms need to establish an ethical supply chain with the purpose of protect reputation, decrease risk, achieve stated values, improve the productivity of suppliers and reduce social and environmental impacts.
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Thirdly, as people know that IKEA is famous worldwide home furnishing retail chain selling low priced goods. In terms of statistics (2010), the IKEA's global turnover increased to â‚¬ 23.1 billion and net profit is â‚¬ 2.7 billion. It totally has 280 stores and over 127000 employees all over the world. As IKEA has only a few factories of is own. Most of IKEA products are produced by 1500 IKEA suppliers in 55 counties. Nearly two third of their supplier locate in Europe and one third located in ASIA. Only 3% suppliers are from North America. Thus, IKEA will be a good example for analyzing corporate social responsibility practices. In the past, IKEA was required their suppliers producing products with consideration of quality, environment, social responsibility and price. But in end of 1990s, the IKEA management realized that they need to actively work on environmental and social states of suppliers because IKEA's reputation would be destroyed by its suppliers' negative publicity about social and environmental conditions. Therefore, IKEA established a code of conduct which called IWAY---IKEA way on purchasing home furnishing product. Up to now over 1000 IKEA staffs are hired for purchasing. All of them are divided into 43 trading offices charges in the 33 different countries. Every single trading service office has a purchasing team for each material sourced. All aspects of materials and processes of productions by suppliers are monitored by this team under the direction of IWAY. According to the IWAY, the supplier are able to find what the IKEA provide to them and what they are required to do for IKEA related to working conditions, child labor, environment and forestry management. (Andersen & Larsen) specifically by IWAY, the suppliers need to comply with regulations, national laws and with international conventions on the protection of the outside environment, labor working condition and child labor.
In conclusion, this paper focused on corporate social responsibility vitally influences supply chain management. Supply chain is not an extension of the firm and as such, the purchasing firm should not bear any responsibilities for the practices of its suppliers. Suppliers, as firms, should bear responsibility for their actions. (Amaeshi, Osuji & Nnodim, 2008) However, it not means that a company does not need to consider the social and environmental problems of its suppliers. Either a manufacture or its supplier doing business without CSR behavior in supply chain will turn themselves to serious situation which would damage day to day business operating as well as their reputation. Moreover, it is important to say that a company which has biggest reputation to protect will take more pressures than its supplier even though its suppliers did mistakes. So, all organizations in supply chain management are responsible to operate their business through social responsibility consideration.