Pro-active Corporate Social
Responsibility
A study on how SME’s use sustainable supplier partnerships to increase their
Corporate Social Responsibility performance
Master thesis
Clarice Belle
Student number: 10504060
M.Sc. Business Studies: International Business
First supervisor: Daniel van den Buuse
Content
Chapter 1: Introduction ... 6
Chapter 2: Literature Review ... 9
2.1. CSR Foundations ... 9
2.2. Management Tools ... 11
2.2.1. Codes of conduct and monitoring ... 11
2.2.2. Supply Chain Partnerships ... 13
2.3. Sustainable supply chain ... 15
2.3.1. The Triple Bottom Line ... 16
2.3.2. Effect on CSR and economic performance ... 17
2.3.3. Supporting factors of SSCM ... 19
2.4. Drivers and barriers ... 20
2.4.1. Drivers ... 22
2.4.2. Barriers ... 23
2.5. Conceptual research model ... 24
3. Methodology ... 26
3.1. Philosophy of research ... 26
3.1.1. Ontology ... 27
3.1.2. Epistemology ... 27
3.2. Multiple Case Study ... 28
3.3 Design ... 29
3.3.1. Case selection ... 30
3.3.2. Data collection ... 31
3.3.3. Analysis ... 35
3.3.4. Validity and Reliability of the research ... 35
4. Results and Analysis ... 37
4.1. Within Case Analaysis ... 37
Within case analysis Alchemist: ... 37
Within case analysis O My Bag: ... 42
Within case analysis Return to Sender: ... 47
Within case analysis Otentic: ... 52
Within case analysis Fair Trade Original: ... 56
4.2. Cross case analysis ... 62
5. Discussion and Conclusions ... 65
References ... 71
Appendix ... 77
Table B: Data Analysis O My Bag ... 88
Table C: Data Analysis Return to Sender ... 100
Table D: Data Analysis Otentic ... 122
Abstract
This research studied how SMEs increase CSR performance through a partnership with suppliers in
developing countries. This is studied by researching working propositions that study internal
influences, the buyer-supplier sustainable supply chain partnership and external influences.
Findings show that internal influences come from the organization’s motivation that is effected by
philanthropic responsibilities, drivers and barriers caused by management and organization and
financial resources. Results were found that sustainable supply chain partnerships and monitoring
increased supplier’s CSR performance and that SMEs integrated economic, environmental and social
responsibilities in all their sustainable supply chain partnerships activities. According to the triple
bottom line model, this integration ensures the organization to be sustainable in long term. SMEs
furthermore integrate strategy, transparency, organizational culture and risk management in their
sustainable supply chain partnership. External influences were indicated to come from drivers and
barriers in the SME’s supply network.
Acknowledgements
I would like to dedicate this thesis to my father, who passed away in the summer of 2012 and will not
be able to witness me graduating from the University of Amsterdam. I will truly miss him when this
moment comes and would like to thank him through this way for all his support and guidance that
caused me to finish my studies. I will pop the cork with you in mind! Furthermore, I would like to
thank my friends and family that supported me throughout my studies and simply made them more
fun. Mostly, I would like to thank my supervisor Daniel van den Buuse, who always kept faith in me
and saw potential in my master thesis. This always motivated me during times I was struggling, as it
give me more confidence in my own abilities of finishing this big project. Lastly, I would like to thank
all respondents that try to make the world a better place, one step at the time and contributed to this
study.
Chapter 1: Introduction
Globalization has changed the world. Nowadays companies can produce their products on the other
side of the world and benefit from low cost labor. Developing countries benefit from this through
knowledge spill-overs, investment injections, employment in developing countries and access to
international markets (Bardy e.a. 2012, Locke e.a. 2007). Although this creation of a global supply
chain brings a lot of benefits for companies and developing countries, producing in developing
countries can also bring some complications. Buyers do not always know what is going on in their
supplier's factories. Are the working circumstances healthy and safe, are people paid decent for their
work, do they make normal hours, are employees treated fair? Companies can be agents of
exploitation and take advantage from the host countries low wages, weak regulation and produce
cheap products at the expense of the local employees welfare (Locke e.a. 2007). This moral and ethical
dilemma increasingly forces companies to develop a corporate social responsibility (CSR) policy to
prevent or tackle these social issues. CSR is not only a big topic in managerial and social discussions,
but also highly ranked on the research agenda's (Lindgreen and Swaen, 2010).
There are many definitions of CSR, and competing, overlapping and complementary concepts
like sustainability, corporate citizenship, business ethics and stakeholder management (Carrol and
Shabana, 2010). A frequently used definition is Watts’ e.a. (1999) who define CSR as a “continuing
commitment of an organization to behave in an ethical matter, improve economic development,
concern about their employees welfare, the local society and the society at large.” Sethi (1975, 1979)
made the distinction in the CSR concept between social obligation, social responsibility and social
responsiveness. These distinctions are based on the company's involvement in their CSR policy. The
most passive form is social obligation, where the organization's only concern is compliance to
regulation and market forces. Social responsibility is the compliance of companies to the norms,
values and expectations of society. Social responsiveness is not based on responding to social
pressures as is seen with social responsibility, but is concerned about preventing social problems on a
long term basis and thus is actively involved. Angelo et al (2012) believes that the evolution of CSR
management is seen in these three categories. A company starts with complying to the rules and
regulations, obliged to meet the social obligation (passive involvement). As a second step, the
company will voluntarily participate in social responsibility and will later be involved with social
responsiveness (active involvement) (Angelo e.a., 2012).
Social responsiveness is increasingly gaining popularity as companies see it as an opportunity
to gain economic and financial benefits that flows from CSR activities and initiatives (Carroll and
Shabana, 2010). McWilliams and Siegel (2001) say that there is strong evidence that many consumers
value CSR attributes, improving the company’s reputation, creating consumer goodwill and positive
employee behavior. CSR can therefore be used as a strategy by a company to differentiate themselves
and gain a competitive advantage (Lindgreen & Swaen, 2010). Using CSR strategically for economic
and financial benefits is seen in the concept of the business case for CSR. The business case gives
rational arguments why a company should be involved with CSR. It is based on win-win situations
that will not only benefit the community, but also the company itself.
Another reason for social responsiveness, thus active involvement in CSR, could be that it is
more and more believed that social obligation and social responsibility is not adequate enough to
tackle poor CSR performance. Monitoring suppliers for instance does not improve the CSR
performance according to Locke (2007) and moreover, Esbenshade (2004) states that monitoring by
companies is not designed to protect labor rights or improve working conditions at supplier’s plants,
but are mostly to prevent scandals that could damage their reputation and decrease the legal liability of
MNEs. Ciliberti et al. (2008) say that in order for companies to be effective in CSR, they need to act
responsible and be actively involved throughout their supply chain. “The economic, social and
environmental benefits achieved when adopting socially responsible behaviors go beyond the
boundaries of a single firm and involve wider communities” (Ciliberti e.a., 2008). In this perspective
active involvement between the company and the supplier would be a better way than monitoring in
order to improve CSR performance.
Meqdadi et al. (2012) say that SMEs are critical for sustainable development, but that their
role is frequently underestimated. CSR has been mainly studied from the perspective of large firms,
however the relationship between CSR and SMEs is largely unexplored (Ayuso et al., 2013; Brown
and King, 1982; Wilson, 1980). However, 99% of the European Business constitutes of Small and
Medium sized Enterprises (SMEs) (Spence et al., 2003, Popa, 2012) and around 70% of pollution is
contributed to SMEs according to Hillary (2004). There is a need to acquire more insight in the
CSR-SME relationship and academic literature therefore recommends future research how CSR-SMEs can be
actively involved in CSR as sustainability is no longer only within a company’s domain, but expanded
to its whole supply chain (Halldorsson e.a., 2009). As Andersen and Skjoett-Larsen (2009) put it,
companies are held responsible for their supplier’s sustainability performance even if they do not have
influence on their suppliers or are located in the geographical area. Moreover, companies cannot
achieve sustainability goals without involving their supply chain, since suppliers can use harmful
materials or produce in a harmful way (Rao and Holt, 2005). However, most companies do not know
how to be actively involved with their suppliers. They have less resources and bargaining power than
big MNEs and find it difficult to be actively involved with their supplier’s CSR performance (Ciliberti
et al., 2008). The academic literature recommends future research in how companies can use
partnerships with their suppliers to improve CSR performance (Ayuso et al., 2013, Meqdadi et al.,
2012). Furthermore, future research is recommended about the role of SMEs in CSR as buyers from
upstream suppliers and their socially responsible behaviors in this position (Ciliberti et al., 2008).
Although there is some research done about the role of SMEs in CSR as a supplier (Ayuso e.a., 2013;
Ciliberti e.a., 2008), not much is known yet in their role as buyers.
with their supplier as a strategy to improve CSR performance and how SMEs can be actively involved
in CSR. This research will analyze the practices adopted and the difficulties that are experienced by
SMEs that have partnerships with suppliers in developing countries in order to improve CSR
performance. This multiple case study will show best practices from several SMEs located in The
Netherlands, that have a sustainable supply chain partnership with suppliers in developed countries in
order to improve CSR performance. The following research question will be answered:
“How do SMEs increase CSR performance through a sustainable supply chain partnership with
suppliers in developing countries?”
Important themes within this thesis are internal influences, the partnership between buyer and supplier
and external influences. These themes will form an overlap of the studied working propositions and
will be used in analyzing the data. This research will add to the academic literature by investigating
how sustainable supply chain partnerships can affect the CSR performance of the buyer and supplier
and give insight in best practices of SMEs. Moreover, it can discover why SMEs are reluctant to
partake a more pro-active approach in their CSR activities or stimulate SMEs to take a pro-active
approach in their CSR activities. This can contribute to companies having more social responsiveness,
which can result in more social development in developing countries. This research is necessary,
because the focus is on MNEs improving their CSR performance. However, 99% of the European
Business constitutes of Small and Medium sized Enterprises (SME’s) (Spence e.a., 2003, Popa, 2012).
There can only be an improvement in CSR performance, if SMEs will be more social responsible. The
European Expert Group on CSR and SMEs stated in 2007:
“…there is a need for more research across different EU countries regarding the nature, extent and
real impact of CSR buyer requirements on SME suppliers. There is also a need for more research into
when and how SMEs themselves make CSR requirements on their suppliers, and how this can best be
encouraged bearing in mind the capacities of SMEs” (European Commission, 2007).
Moreover, Ayuso et al. (2013) believe that SMEs can be transmitters throughout the supply chain by
influencing their CSR behavior. SMEs can have a very important role in improving CSR behavior in
other companies. However, at the moment SMEs are not taking the change to improve this. This
research can stimulate SMEs to be more actively involved and give the academic literature more
insight in how SMEs can improve CSR performance throughout the supply chain.
The remainder of this paper will have the following structure. Chapter 2 will discuss the
theoretical foundations and will give a literature review about CSR foundations, management tools,
sustainable supply chains, drivers and barriers and the conceptual research model. Chapter 3 will
discuss the methodology and touch the study’s philosophy of research, the multiple case study and the
study’s design. Chapter 4 will discuss the results through a within case and a cross case analysis.
Chapter 5 will show the study’s key findings, limitations and recommendations for future research.
Chapter 2: Literature Review
This chapter will discuss the theoretical foundations that are needed for this research, starting with a
theoretical background of CSR and how CSR can be used strategically in the first paragraph.
Paragraph 2 will discuss sustainable supply chain partnerships which is a strategy within CSR. The
triple bottom line model and the effect of SSCM on economic and financial performance will give
more insight in the drivers for a company to do sustainable supply chain partnerships.
In paragraph 3 the link between SMEs and sustainable supply chain partnerships will be discussed and
what SMEs perceive as barriers and drivers to engage in sustainable initiatives. This will give insight
in why SMEs engage or should engage in sustainability initiatives or why they are not participating in
sustainability initiatives. Drivers and barriers are important for understanding why companies
participate and how companies can be stimulated to participate. Paragraph 4 will give more
information about management tools a SME can use in order to transfer responsible behavior to their
supplier. This will give more information how companies use monitoring, formulating codes of
conduct or sustainable supply chain partnerships to improve CSR performance.
2.1. CSR Foundations
CSR is largely a post-World War II phenomenon that has continued to grow in importance and
significance over the decades (Carroll and Shabana, 2010). The literature about CSR is abundant and
there are many definitions and theories. Critics say that the CSR concept still lacks a generally
accepted definition. However, in this paper the definition of Watts’ e.a. (1999) will be used that is also
seen in chapter 1. They define CSR as a “continuing commitment of an organization to behave in an
ethical matter, improve economic development, concern about their employees welfare, the local
society and the society at large.”
Howard Bowen (1953) is thought by many to be one of the founders of the CSR movement.
He wrote the article ‘Social Responsibilities of the Businessman’, which saw corporate social
responsibility as an obligation to society (Murphy and Schlegelmilch, 2013). Carroll (1979; 1991)
made four categories of social responsibilities: economic, legal, ethical, and philanthropic. Economic
responsibilities are the company's obligation to be profitable and make products or services that
consumers need or want. Legal responsibilities is the obligation that an organization has to obey the
law. Ethical responsibility is the company's obligation to comply to societies norms, values and
expectations. Philanthropic responsibility is going beyond complying to society's norms, values and
expectations and is philanthropic in nature. Carroll states that these four categories can be formed into
a pyramid, where the economic responsibilities form the bottom layer. There can be argued if
economic responsibility is part of CSR, but according to Carroll “economic viability is something
business does for society as well” (Carroll, 1999). Sethi’s (1975; 1979) distinctions of social
responsibility which were discussed in the introduction, are also seen in Carroll’s four categories
(1979; 1991). Social obligation is seen in Carroll’s (1979; 1991) categories economic and legal. The
social responsibility in the category ethical and social responsiveness in the category discretionary.
Like Sethi's (1975; 1979) distinctions (social obligation, social responsibility, social responsiveness),
Carroll's pyramid also reflects the company's engagement in CSR, where the bottom layer is the most
passive and the top layer the most active form.
Source: Carroll, 1991
This passive and active involvement in CSR is also seen in Maignan and Ralston’s (2002) three
motivations for companies to do CSR: the economic perspective; the negative duty view; the positive
duty view. The economic perspective is that social responsibility activities are used to achieve
corporate goals, Lantos’ (2002) social obligation. The negative duty view is that the company does
CSR activities solely to conform to the social norms, values and expectations of society. This is seen in
Lantos’ (2002) social responsibility. The positive duty view is doing CSR activities that are beyond
expectations of society, the company is self-motivated to partake in CSR initiatives and promotes
social interests. The positive duty can been seen as Lantos’ (2002) social responsiveness, the most
active form of involvement in CSR. The economic perspective and the negative duty view suggest that
CSR can be used to influence the stakeholder's perception of the company, hence is used strategically.
The reasons for a company’s engagement in CSR, might reflect a mixture of economic responsibilities,
social responsibilities and responsiveness to create a win-win situation for both society and company
(Smith, 2003, as is cited in Branco et al., 2007).
These win-win situations are also presented in the business case of CSR. The business case
has strong arguments how CSR can benefit a company and gives rational arguments why a company
should be involved with CSR. It is based on win-win situations that will not only benefit the
community, but also the company itself. In this perspective, CSR is used as strategy to gain the
company benefits.
Zadek (2000) states that companies use strategic CSR to defend their reputations, justify benefits over
costs, integrate with their broader strategies, learn to innovate and manage risk. Kurucz et al. (2008)
found four overlapping arguments why a company should use the business case for CSR. These
arguments are built on the idea that CSR can create value in four ways. CSR involvement can reduce
cost and risks, strengthen legitimacy and reputation, build competitive advantage and create win-win
situations through synergistic value creation.
However, when Carrol’s theory (1991) is combined with Lantos’ theory (2002) and Maignan
and Ralston’s (2002) theory it can be said that companies that are very active involved in sustainability
are triggered by philanthropic responsibilities and not so much by strategic reasons. According to
Carrol (1991) and Maignan and Ralstan (2002) these companies go beyond the expectations of society
and are self-motivated to partake in CSR initiatives and promote social interests. They try to be social
responsive through contributing resources to society while improving the quality of life. In this case
the society seems to be more important than financial performance. It can therefore be proposed that:
Working proposition 1: Companies that are actively involved in sustainability are triggered by
philanthropic responsibilities and not so much because of strategic or economic reasons.
2.2. Management Tools
Ciliberti et al. (2008) identified three management tools companies can use to be involved in
sustainability: 1.) formulating a code of conduct, 2.) monitoring, 3.) sustainable supply chain
partnerships. It is believed that large firms and SMEs have different approaches to their CSR strategy
due to their characteristics. Russo et al. (2010) argue that large firms use a stakeholder approach, while
SMEs have a more social capital notion. Therefore, Russo et al. (2010) argue that it should not be
assumed that SMEs should use the same CSR strategies and managerial tools as large firms, because
they have different responsible behaviours. SMEs are in general “independent, internally financed and
cash-limited, multitasking and flexible, largely local, and based on informal relationships inside and
outside the firm” (Russo et al., 2010). The characteristics of a large firm are almost opposite as Russo
et al. (2010) define them as “externally financed, diversified, with a rigid organisational structure
made up of formalised processes and transactions inside and outside the firm, and generally oriented
toward internationalisation”. The next paragraph will discuss the several management tools a
company can use to transfer their socially responsible behaviours to their supply chain partners, their
effectiveness and how this differs for large firms and SMEs.
2.2.1. Codes of conduct and monitoring
Currently developing and monitoring a codes of conducts is the most regular CSR policy NGOs and
MNEs use to tackle poor working conditions in supply chains (Locke et al. 2007). Some companies
demand that their suppliers adopt a sustainability certification as a pre-condition before doing business
and develop a relationship with the supplier (Delmas and Montiel, 2009). Sustainability certification
programs are often organized by independent third parties, for example the Rainforest Alliance or
SA8000. Through these certifications, companies are outsourcing the monitoring of their suppliers’
CSR performance to these third parties. Some companies develop their own codes of conduct where
they demand their suppliers to comply with. These codes of conduct serve to push sustainability along
the supply chain and are monitored by the buying company or third parties to check supplier’s
compliance.
SMEs in general operate in an environment build on trust that is less structured and where
informality and networking are important factors (Russo et al., 2010). They improve their operations
through exploiting strong relationships that are built on trust, reputation and legitimacy with local
community, customers, competitors and suppliers. According to Russo et al. (2010) SMEs are unable
to formalise this social capital through management tools like a code of conduct, reports and
operational procedures. A code of conduct is therefore in general not part of the SMEs’ management
tools in their CSR strategy. However, this formalisation of their social capital could improve their
value creation in the long term as it can help to manage their social capital more effectively. Russo et
al. (2010) believe that this will enhance the SMEs’ reputation, professional image and an increase in
confidence and loyalty. Russo et al. (2010) argue that monitoring by SMEs are mostly done through
strong relationships that are built on trust and that they have problems implementing a specific CSR
program, like the SA8000 certification. Improvements that are made in the production processes of the
SMEs’ supplier are made because of improved relationships, since SMEs have limited financial
resources. The following working proposition will therefore be studied:
Working proposition 2: SMEs improve operations through building strong relationships based on trust
and barely formalize these relationships.
Studies furthermore suggest that monitoring both has advantages as disadvantages. Nadvi et al. (2004)
and Bartley (2005) believe that monitoring could help the supplier's country to enforce the law and
increase their capacity and resources to do factory inspections on a regular basis. However, Locke et
al. (2007) analyzed audit reports of Nike and found that after years of monitoring by Nike, some
improvements are made in the working conditions at suppliers, but many others did not improve or the
conditions even worsened. These outcomes suggest that monitoring alone does not improve labor
standards as much as most hope for. Gallear’s study (2012) agreed with these outcomes and also did
not find an effect between monitoring and company performance. This suggests that monitoring is not
adequate enough on itself. Esbenshade (2004) argues that monitoring suppliers is not designed to
protect labor rights or improve working conditions, but are mostly to prevent scandals that could
damage the buying company’s reputation and decrease their legal liability. Also, monitoring could
stand in the way of governments and unions taking action in improving and enforcing labor regulation.
Another debate about monitoring is if the audits are reliable and accurate enough. Audits can have
mixed quality, depending on the skills, experience and integrity of an inspector. Inspectors can be
corrupted and reports do not always reflect the true findings of an audit. Different parties that are
involved in this monitoring can have a lot of conflicts of interest (Rodriguez-Garavito, 2005) with
their clients, the buyers and the suppliers who pay them for their services.. Buyers and suppliers could
want to hide human rights abuse to prevent their reputation from damaging. NGOs could help in
monitoring, since they are a third party without these interests. However, critics wonder if NGOs have
the capability of assessing technical issues like air quality. The third debate about monitoring concerns
the increasing number of codes of conduct and auditing procedures. The codes of conduct have
different goals and audits have different ways of measuring, which leads to different outcomes. This
can be very problematic, confusing and inefficient for suppliers when they supply several companies.
A more integrated approach is needed to tackle poor working conditions, because there has
been no proof of improvements by monitoring. They can stand in the way of governments and unions
to take action and enforce labor regulation. Furthermore, audits are not always reliable and accurate
enough. Moreover, SMEs rarely make use of third party monitoring since their resources are lacking.
2.2.2. Supply Chain Partnerships
The third management tool of transferring social responsible behaviours to the supplier through a
partnership between buyer and supplier. Gallear et al. (2012) says that CSR facilitates the development
of relationships with stakeholders, increase sharing of information and encourage innovation. This
suggests that companies that are doing CSR activities, would have relationships based on a
partnership. Mohr and Spekman (1994) define partnerships as “purposive strategic relationships
between independent firms who share compatible goals, strive for mutual benefit, and acknowledge a
high level of mutual interdependence”.
Drivers for supplier and buyer to collaborate with each other, is that both parties achieve goals,
that they could not have done easily by themselves (Mohr and Spekman, 1994). Whereas large firms
do not lack resources, Moore and Manring (2009) say that SMEs can overcome lack of resources by
networking and making coalitions with other SMEs. Access to the partner’s resources will improve the
company’s competitive position (Beekman and Robinson, 2004). This position can also be
strengthened through collaboration, as it can gain the company legitimacy and knowledge (Arend,
2006; Moore and Manring, 2009). Another reason for a company to have a partnership between
company and supplier, is that closer relationships maximize operational efficiency and effectiveness
(Szwejczewski et al., 2005). However, the most important driver is thought to be pressure by
customers that expects the company to be social responsible. Not only is the company expected to be
social responsible within their own internal operations, but companies are also held responsible for
their suppliers and need to be involved with their suppliers to achieve sustainability throughout their
supply chain (Darnall et al., 2008). Companies therefore need synergy and cooperation with suppliers
to improve sustainability initiatives (Darnall et al., 2008).
Sustainable supply chain partnerships between buyer and supplier can improve CSR
performance, as suppliers will have more compliance with the code of conduct (Locke et al., 2007).
Suppliers have more face-to-face contact with the company which lead to more initiatives improving
processes and quality (TQM) to increase efficiency. These initiatives were improvements in
production line and in training employees. This had positive effects on spill-over effects on the labor
conditions. The suppliers improve their quality and efficiency, which result in less over hours and an
increase in wages. Also, their high skilled employees received better treatment since they became
more valuable for the supplier.
Squire et al. (2009) distinguished two types of relationships between buyer and supplier:
adversarial and cooperative. The adversarial relationship is “based on high levels of competition, price
bargaining and continuity of supply are achieved through having a large number of suppliers and this
approach is suitable where low value or low risk parts are required” (Squire et al., 2009, as is cited in
Gallear et al., 2012). Cooperative relationships are considered to be strategic supply chain
relationships. This type of relationship is preferred when the supplier's goods are important for the
buyer or when they are complex in the supply market, because of limited sources or because supply is
at risk (Squire et al., 2009, as is cited in Gallear et al., 2012). Cooperative relationships can be
contractually or non-contractually based. Contractual relationships are strategic alliances and joint
ventures. These relationships are explicit agreements on deliverables and expectations and sometimes
share revenue. (Chauhan and Proth, 2005) However, sustainable supply chain partnerships are usually
not contract based relationships (Lambert et al., 1996) and rarely involve FDI (Stuart, 1997). Large
companies usually have formalized contracts with their suppliers, but SMEs mostly base their
relationships with their supplier on trust (Russo et al., 2010).
Gallear et al., (2012) found that sustainable supply chain partnerships between buyers and
their suppliers were developed based on monitoring and creating internal awareness. Monitoring is
important for examining how well the supplier is performing. Also, it makes the supplier aware that
the company's supplier selection is based on their attitude towards CSR and can stimulate the buyer to
establish long term relationships with the supplier. Creating internal awareness in the buyer’s
organization leads to an awareness about the company's ethical behavior, which leads to a CSR policy
and internal training programs. This signals corporate responsible behavior and can attract suppliers.
The debates about monitoring and the outcomes of Locke's (2007) research state that monitoring is not
suffice. However as is said before, this is the main way companies try to prevent or tackle human
rights abuse. It can therefore be concluded that currently most CSR policies of buyers are not suffice
in tackling social issues and increase social development. However, when monitoring is combined
with sustainable supply chain partnership, it increases the company’s CSR performance. The supplier
also benefits from the partnership, by gaining more knowledge, producing more efficient and improve
their CSR performance.
As is seen in the previous paragraph, studies say SMEs are unable to formalise code of
conducts and do not have the resources for third party monitoring. SMEs monitor through strong
relationships based on trust without a formalised code of conduct. However, studies also recommend
that supplier-buyer partnerships should be combined with monitoring a code of conduct, as it is the
most efficient form to transfer a company’s socially responsible behaviours to their supply chain
partners and increase the company’s social performance. We therefore propose that supplier-buyer
partnerships should be combined with monitoring a code of conduct in order to increase the
company’s social performance.
Working proposition 3: Supplier-buyer partnerships combined with monitoring a code of conduct
increases the supplier’s CSR performance.
2.3. Sustainable supply chain
Recent studies show that government, stakeholder groups and customers pressure companies to
incorporate sustainability into their supply chain management (Gold et al., 2010). Therefore pushing
companies to collaborate with suppliers and being actively involved with improving CSR
performance. The supplier benefits from the collaboration, by gaining more knowledge, producing
more efficient and corporate responsible. However, the company itself can benefit from the partnership
with the supplier too by using the partnership as a strategy (Szwejczewski et al., 2005).
This win-win situation can be seen in sustainable supply chain partnerships. They can be the
key to improve CSR performance and be used as a CSR strategy by a company, without losing sight
on the company’s economic responsibilities. However, literature on this sustainable supply chain
management (SSCM) is still limited (Gold et al., 2010).
Partnerships can have advantages for both buyer and supplier as they can result in achieving
goals, that they could not have done easily by themselves. Another reason for a buyer-supplier
partnership, is that closer relationships maximize operational efficiency and effectiveness
(Szwejczewski et al., 2005). This is the idea behind SSCM, using partnerships to maximize
operational efficiency and effectiveness in a sustainable matter. Sustainable supply chain partnerships
will therefore cause benefits for both buyer and supplier through an increase of social and economic
performance.
Carter and Rogers (2008) defined SSCM as, “the strategic, transparent integration and
achievement of an organization’s social, environmental, and economic goals in the systemic
coordination of key inter-organizational business processes for improving the long term economic
performance of the individual company and its supply chains”. This definition shows that SSCM is
used as a strategy to improve CSR performance as well as economic performance of the company and
its supply chain. There can be argued if economic responsibility is part of CSR, but according to
Carroll “economic viability is something business does for society as well” (Carroll, 1999).
Sustainable refers to an integration of different pillars of CSR: social, environmental and economic
responsibilities (Carter and Rogers, 2008). Sustainability is defined by the Brundtland Commission
(World Commission on Environment and Development, 1987, p. 8) as the “development that meets the
needs of the present without compromising the ability of future generations to meet their needs.”
Dyllick and Hockerts (2002) define corporate sustainability as “meeting the needs of a firm’s direct
and indirect stakeholders (such as shareholders, employees, clients, pressure groups, communities
etc), without compromising its ability to meet the needs of future stakeholders as well.” Sustainable
supply chain partnerships therefore must entail environmental, social and economic goals and improve
its performance on long term basis.
2.3.1. The Triple Bottom Line
These three goals (environmental, economic and social) that is essential for SSCM is based on the
triple bottom line model of Elkington (1998).
Figure 1: Sustainable Supply Chain Management Source: Carter and Rogers, 2008
This model implies that the social, environmental and economic areas intersect with each other,
creating activities where all three pillars are represented. This intersection and therefore integration of
all pillars, makes it sustainable. Not only does the company improve social and environmental
advantage. The company has found a viable way for social responsiveness, being actively involved in
improving CSR performance and being a long term player in the competitive market. The triple
bottom line model advises managers to identify the activities where there is an integration between
environmental, economic and social performance and avoid the activities that are not in this
intersection between these three performances. Only the activities that fall within environmental,
social and economic performance will be sustainable. Carter and Rogers (2008) give examples of
activities that fall within the triple bottom line, where economic, social and environmental
responsibilities meet. These examples are cost savings due to recycling or different packaging; lower
health and safety costs due to safer warehousing, transportation and improved working conditions;
reduced labor costs because of more motivated personnel, higher productivity and less absenteeism
due to improved working conditions; lower costs resulting from implementing ISO 14000; improved
reputation, which makes the company more attractive for customers and suppliers to buy products or
services from.
It can be concluded that companies can only be sustainable if all of their activities are
economic, environmental and social responsible. Therefore it can be proposed that sustainable supply
chain partnerships integrate economic, environmental and social responsibilities in their activities.
Working proposition 4: Sustainable supply chain partnerships integrate economic, environmental and
social responsibilities in their activities.
2.3.2. Effect on CSR and economic performance
Locke et al., (2007) found that SSCM can have a positive effect on CSR performance. They found that
suppliers who had a sustainable supply chain partnership with the buying company had more
compliance with the code of conduct. These suppliers had more face-to-face contact with MNE which
lead to more initiatives improving processes and quality (TQM) to increase efficiency. These
initiatives were improvements in production line and in training employees. This had a positive impact
on spill-over effects on the labor conditions. The suppliers improved their quality and efficiency,
which resulted in less over hours and an increase in wages. Also, their high skilled employees received
better treatment since they became more valuable for the supplier.
Lim and Phillips (2008) also found support that sustainable supply chain partnerships can
improve CSR performance if they meet certain standards. Suppliers are given security of a certain
amount of future placed orders and technical improvements by the buyer in exchange that the supplier
complies to the buyer’s code of conduct and cooperates with the improvements. They found that
suppliers had more compliance to the code of conduct, because they had the risk of losing the partner
buyer if they did not comply and because of the buyer’s investment in technical improvements and
training. Not only were the suppliers afraid of losing the buyer, but this structure also caused more
trust of the supplier to invest in compliance. Lim and Phillips (2008) found that suppliers stayed
complying to the buyer’s code of conduct during the contract between buyer and supplier, even after
the sustainable supply chain partnership.
It can be concluded that sustainable supply chain partnerships can cause the supplier to
comply more to the code of conduct and can lead to more initiatives in the supplier’s production that
improves processes and quality (TQM) to increase efficiency. It is therefore proposed that sustainable
supply chain partnerships improve the CSR performance of the supplier.
Working proposition 5: Sustainable supply chain Partnerships improve the CSR performance of the
supplier.
Zhu and Sarkis (2004) found that sustainable supply chain partnerships lead to decreased waste
treatment costs, thus having a positive effect on their CSR performance and economic performance.
SSCM is not only about improving CSR performance, but can also enhance the economic performance
while doing so. Rugntusanatham et al. (2003) states that a company’s supply chain partnerships are a
resource that can cause a temporary competitive advantage, or a sustainable advantage were the
company continuously protects the resource’s value, rareness and imperfect transferability and
imperfect imitability. In this perspective, SSCM can lead to inter-organizational competitive
advantage.
However, it should also be kept in mind that investment in sustainability can be costly (Min
and Galle, 2001; Seuring and Müller, 2008, Wycherley, 1999) and recycling activities can have
uneconomic benefits (Min and Galle, 2001). Zhu and Sarkis (2004) found that green investment can
have a negative effect on economic performance measures. Environmental management can
financially burden SMEs too much (Revell and Blackburn, 2007) as it can be costly to implement
sustainability improvements and change. Also, existing investments and information systems can be
too costly to change (Wycherley, 2001). Moreover, the financial benefits of sustainability is rarely seen
by SMEs according to studies by Smith and Kemp (1998) and Petts et al. (1999). Moreover, SMEs can
have a negative perception of environmental reform costs and found that it would take too much
investment in time and effort to make the change (Revell and Blackburn, 2007).
There are mixed perceptions about the economic return of investment in sustainability. It can
be concluded that sustainable supply chain partnerships can either lead to competitive advantage and
therefore improve the company’s economic performance or it can have a negative impact on economic
performance measures. However, companies that are active involved in sustainability are usually
driven by philanthropic responsibilities as is seen in chapter 2.1. Therefore it can be proposed that
companies that have a sustainable supply chain partnership are not seeking growth in their economic
performance, but in their CSR performance. They will probably invest in costly programs, which will
have a negative effect on their short term economic performance. However, these investments can pay
off long term, as it gives them a competitive advantage.
2.3.3. Supporting factors of SSCM
Supporting factors of SSCM, which are also shown in figure 1, are identified by Carter and Rogers
(2008) as: risk management; strategy; organizational culture; transparency.
They define risk management “as the ability of a firm to understand and manage its economic,
environmental, and social risks in the supply chain”. Risk management within the context of
sustainability is seen by Shrivastava (1995) as managing financial results and risk factors that could
cause harm to products, environment, employee and the public safety. Spekman and Davis (2004) also
suggest that risk management can prevent supply chain members’ reputation and image to be tainted.
Ways to manage risks are through contingency planning and by building a stable, flexible and resilient
supply chain. Carter and Rogers (2008) second supporting factor, strategy, is seen as that the
company’s core business strategy should be integrated with their sustainability strategy. This will
cause the company to be committed, sustainable activities to be long term oriented and maximize the
company’s impact on sustainability. Another supporting factor of SSCM is organizational culture.
Sustainable companies have certain mindsets and company cultures that positively affect sustainability
initiatives (Savitz and Weber, 2006). Carter and Jennings (2004) found that the company culture of a
sustainability minded company is supportive, fair and considers the welfare of others.
Last, transparency is increasingly needed, because local communities and external stakeholders
demand corporate activities to become more visible in order to build reputation and maintaining
legitimacy (Hart, 1995). If a company’s social or environmental performance is bad, it is very difficult
to hide and extremely risky, because it could ruin their reputation if the public would find out.
Transparency can be achieved by engaging stakeholders and visibility of the company’s activities.
Examples are vertical coordination in a supply chain and horizontal coordination between networks
(Carter and Rogers, 2008). More collaboration between companies that use the supplier’s services,
could cause more sharing of monitoring information and decrease the pressure of audits towards to
supplier (Carter and Rogers, 2008).
The supporting factors strategy, transparency, organizational culture and risk management are
not stand-a-lones, but have interrelationships between them. Carter and Rogers (2008) advise that all
supporting factors should be integrated in all SSCM activities. Activities that can support SSCM are
technology development in the value chain, sustainable procurement by suppliers, trading with local
owned suppliers, ensuring safety and good working conditions at the suppliers’ factory and
participation in design for reuse and recycling of the product (Carter and Jennings, 2004).
It is proposed that the best practice cases that are analyzed in this research will have integrated
the supporting factors strategy, transparency, organizational culture and risk management in their
SSCM activities.
transparency, organizational culture and risk management in their activities.
When looking more externally, governments and NGOs can also play a very important and supporting
role in SSCM. They can influence companies with their political and social power. Political power is
characterized by governmental intervention through regulatory instruments and economic instruments,
like subsidies, fees and penalties for regulatory non-compliance (Parsons, 1963; Mouffe, 2005).
NGOs can use their social power by using direct (protests and demonstrations) and indirect actions
(periodic monitoring and assessment of a company’s CSR performance) (French et al., 1959; Mann,
1993). When a company doesn’t meet the improvements the NGOs demands, it will have a negative
impact on the company’s reputation and brand image (Shue, 2014).
Shue (2014) found that third party power intervention by either NGOs or governments can
have a positive effect on smoothening the power asymmetry between the supplier and buyer. The
reason for this, is that the buyer is more dependent on the supplier for meeting the standards
governments or NGOs set. Furthermore, NGOs and governments involvement can cause the supplier
to invest which improves their channel power and therefore increasing the buyer’s dependence.
Moreover, Shue (2014) found that the involvement of NGOs and governments cause interdependence,
which reduces the power asymmetry between supplier and its buyer. Supplier and buyer are forced to
work together in order to response to the increased uncertainty that governments or NGOs caused.
This interdependence strengthens the collaborative relationship between a supplier and its buyer. They
have to work together since they are highly dependent on how their partners perform. This is even
more strengthened by power asymmetry reduction. The development of mutual trust and commitment
can resolve relational risks that can flow from power asymmetry reduction. This will improve the
closeness of the collaborative relationship and improve the joint performance between the supplier and
its buyer when NGOs of governments are involved.
It can be concluded that NGOs and government power intervention can have a positive effect
on smoothening the power asymmetry between supplier and buyer. Reasons for this can be that
supplier’s investments improves their channel power and that supplier and buyer become more
interdependence.
2.4. Drivers and barriers
Meqdadi et al. (2012) summarized several drivers and barriers identified in the academic literature that
affect SMEs involvement in sustainability, which are seen in table 1. They categorized these drivers
and barriers in ‘SME capabilities’ and ‘Supply Network’. The category SME capabilities is divided in
‘Management & Organization’ and ‘Financial resources’. This category holds internal capabilities that
are SME dependent, while the supply network are external influences on the SME.
Table 1: Drivers and Barriers of SMEs sustainability involvement
Source: Meqdadi e.a. (2012)
Drivers/barriers – SME capabilities Drivers/Barriers – Supply Network
Management & Organization Financial Resources Supply Network
Drivers:
• Commitment
• Values and beliefs of the top management • Genuine concern &
compassion of the management to the welfare of its employees • Existence of
environmental awareness • Response to stakeholders • Teamwork & knowledge
sharing between employees • Skills & expertise • Increasing staff
motivation
Drivers:
• Cost savings and economic benefits • Availability of financial &
technical resources • Availability of
infrastructure
• Fear of reputation loss • Complying with
environmental standards for tendering purposes • Seeking competitive advantage & differentiation in the market • Developing competitive advantage by building a positive image in the market
Drivers:
• Pressure from customers • Green supply chain
practices of the customers • Responding to
regulations, laws & local authority pressure • Responsing to
environment & social pressure groups • Trust in long term
relationship
Barriers:
• Lack of top management commitment
• Lack of management time • Culture & attitude toward environment and change • Lack of environmental
awareness
• SMEs’ perception that their impacts on environment is minimal • SMEs are heterogeneous
& operate in different contexts
• SME firm is famility oriented • Prevalence of self-interest • Perception of no benefits from improving environmental performance • Perception of environmental management as financial burden
• Lack of human resources • Lack of skills, know-how
& technical expertise • Shortage of information Barriers: • Lack of financial resources • High cost of environmental programs • Uneconomic benefits of recycling activities • Unavailability of capital for investment in environmental initiatives • Existing investments &
information systems which are costly to change
Barriers:
• Lack of buyer & supplier awareness toward environment • Lack of supply chain
pressure
• Lack of bargaining power of SMEs
• Negative reaction from other actors in the supply chain • Mistrust & confindentiality between partners • Insufficient or missing communication in the supply chain • Lack or loose of governmental regulations • Improper communication
between government & SMEs
• Lack of awareness of existing environmental regulations
• Lack of standards & auditing programs
2.4.1. Drivers
Drivers that fall in the first category, SME capabilities and Management & Organization, are
management and organizational characteristics that can influence the company into sustainability
engagement. Identified drivers are values and beliefs of the top management (Cambra-Fierro et al,
2008) commitment (Darnall et al, 2008) and a genuine concern and compassion of the management to
the welfare of its employees (Baden et al., 2009). SMEs can have the skills and expertise (Darnall et
al., 2008) and the awareness of environmental issues (Lee, 2008; Lee and Klassen, 2008; Wycherley,
1999). Teamwork and knowledge sharing between employees can affect sustainability initiatives.
SMEs can also engage in sustainability as a response to stakeholders (Seuring and Müller, 2008) or to
increase their staff’s motivation (Baden et al., 2009).
Drivers that fall in the first category of ‘SME capabilities’ and ‘financial resources’ are cost
savings and economic benefits (Cambra-Fierro et al., 2008; Williamson et al., 2006; Wycherley, 1999).
Sustainability initiatives can bring the company competitive advantage and differentiate them in the
market (Baden et al., 2009). This competitive advantage can be developed by building a positive
image in the market (Cambra-Fierro et al., 2008). Other drivers for SMEs to engage in sustainability
can be the fear of reputation loss (Seuring and Müller, 2008); availability of financial and technical
resources (Lee, 2008; Lee and Klassen, 2008); availability of infrastructure (Wycherley, 1999);
complying with environmental standards for tendering purposes (Baden et al., 2009).
Drivers that are external pressures can come from customers (Darnall et al., 2008; Lee, 2008;
Lee and Klassen, 2008; Seuring and Müller, 2008; Willamson et al., 2006), government, regulations
and laws (Seuring and Müller, 2008) and NGOs like environment and social pressure groups (Seuring
and Müller, 2008). Another driver of sustainability engagement could be trust in long-term
relationships (Wycherley, 1999).
In sum, SMEs can deal with drivers that are caused by their management and organization,
financial resources or supply network. Management and organization drivers lie mostly in their own
culture, values and beliefs. Financial resources are also very important, as this can be a requisite for
being actively involved with sustainability. External influences can also have a big impact on SMEs,
as they can pressure and stimulate them to be actively involved with sustainability. It can therefore be
proposed that SMEs face drivers in terms of management and organization; financial resources and
from their supply network.
Propostion 7: SMEs face drivers from:
a. management and organization for being actively involved with sustainability;
b. financial factors to motivate them for being actively involved with sustainability;
c. supply network pressure that drives them to be actively involved with sustainability.
2.4.2. Barriers
Barriers of engagement in sustainability can come from management and organization; financial
resources and supply network. Barriers that are influenced by the SMEs’ management and
organization can be that they generally lack formal management structures. The owner’s opinion and
values affect the company’s CSR policy, which can prevent sustainability engagement when there is
lack of commitment in the top management (Min and Galle, 2001; Revell and Blackburn, 2007). This
can be caused by a lack of culture that is pro sustainability and attitude that is toward environment and
change (Hitchens et al., 2003; Revell and Blackburn, 2007; Wooi and Zailani, 2010; Wycherley, 1999).
Also, some SMEs are not environmentally aware (Wooi and Zailani, 2010; Zhu et al., 2008) and have
the perception that their impact on environment is minimal (Simpson et al., 2004). SMEs can also
have the perception that improving environmental performance will not benefit them (Merritt, 1998;
Revell and Blackburn, 2007) and that their self-interest is more important (Wycherley, 1999).
However, SMEs can also have a lack of resources to be involved with sustainability. Barriers could be
that the SME lack management time (Hitchens e.a., 2003; Simpson e.a., 2004), human resources
(Simpson e.a., 2004) and knowledge. SMEs can lack skills, know-how, technical expertise (Hitchens
e.a., 2003; Lee, 2008; Lee and Klassen, 2008; Revell and Blackburn, 2007; Wooi and Zailani, 2010)
and information (Lee, 2008; Lee and Klassen, 2008; Wycherley, 1999) in order to engage in
sustainability. Other barriers that were identified are that SMEs are heterogeneous and operate in
different contexts, which makes it difficult to predict market forces and market intervention’s effect
(Merritt, 1998). Moreover, SMEs are generally family oriented companies and can therefore be more
risk adverse as they can jeopardise their family’s financial income. Therefore the family oriented
company is more reluctant to change and to adopt a green supply chain initiative (Wooi and Zailani,
2010).
Barriers that economically prevent SMEs from taking sustainability initiatives are seen in the
category SMEs capabilities and financial resources. SMEs can lack financial resources (Lee, 2008;
Lee and Klassen, 2008; Simpson e.a., 2004; Wooi and Zailani, 2010) and can deal with capital
unavailability for investments in environmental initiatives (Hitchens e.a., 2003). Environmental
programs can have too high costs (Min and Galle, 2001; Seuring and Müller, 2008, Wycherley, 1999)
and recycling activities can have uneconomic benefits (Min and Galle, 2001). Also, existing
investments and information systems can be too costly to change (Wycherley, 2001).
Barriers that are externally influencing and can prevent the SME of engaging in sustainability
can come from their supply chain, government, partners and a lack of standards and auditing programs
(Min and Galle, 2001). SMEs can deal with a lack of buyer-supplier awareness towards environment
(Min and Galle, 2001) and not enough pressure in the supply chain (Revell and Blackburn, 2007).
Other barriers in the supply chain are a lack of bargaining power of SMEs, negative reactions from
other actors in the supply chain and insufficient or missing communication in the supply chain
(Seuring and Müller, 2008). The government can cause barriers by improper communication between
government and SMEs (Merritt, 1998) which can also cause a lack of awareness by SMEs of existing
environmental regulations (Revell and Blackburn, 2007; Simpson e.a., 2004). However, SMEs can
also deal with loose or a lack of governmental regulations (Min and Galle, 2001; Wycherley, 1999)
which will not give them enough ground to make improvements. Last, there can be mistrust and a lack
of confidentiality between partners (Wycherley, 1999) which can prevent SMEs of sustainability
engagement.
In sum, SMEs can deal with barriers that lay in their management and organization; financial
resources or supply network. Management and organization barriers lay mostly in their own culture,
values and beliefs. Financial resources are also very important, as this can prohibit SMEs from being
actively involved with sustainability. External influences can also have a big impact on SMEs, as they
can discourage or prevent them to be actively involved in sustainability. Therefore, it can be proposed
that SMEs face barriers in terms of management and organization; financial resources and from their
supply chain network.
Propostion 8: SMEs face barriers from:
a. their own management and organization;
b. financial factors that can prevent them from being actively involved with sustainability;
c. supply network that can prevent them from being actively involved with sustainability.
2.5. Conceptual research model
The working propositions that will be studied are presented in the table below. The working
propositions will give an insight in what moves the company to start a sustainable supply chain
partnership (WP1). This can be economic, legal, ethical, and philanthropic responsibilities that trigger
the company to be involved with sustainability. Moreover it will explore what factors supports a
company in this path, or creates a barrier ( WP7, WP8). Supporting factors can be that the buyer is
sustainable by integrating economic, environmental and social responsibilities throughout their
sustainable supply chain partnership activities (WP4). This can furthermore be supported when the
buyer integrates strategy, transparency, organizational culture and risk management in their SSCM
activities (WP6). Drivers and barriers can come from management and organization, financial
resources or supply network (WP7, WP8). Furthermore, it will give insight in the management and
organization of the sustainable supply chain partnership and the buying company (WP2, WP3, WP4,
WP5, WP6). Buying companies can use several management tools like codes of conduct, monitoring
and sustainable supply chain partnerships. It is proposed that SMEs improve operations through
building strong relationships suppliers based on trust and are less formalized in their code of conduct
and monitoring (WP2). The management tool supply chain partnerships is thought to be the most
effective way when it is combined with monitoring a code of conduct that the supplier should comply
to (P3). Furthermore the buying company should integrate economic, environmental and social
responsibilities in all their activities in order to be sustainable. Last, it will explore the effect of a
sustainable supply chain partnership on CSR performance (P5) .
Internal influences
WP1
Companies that have sustainable supply chain partnerships are triggered by philanthropic
responsibilities and not so much because of strategic reasons.
WP7a SMEs face drivers from management and organization for being actively involved with
sustainability.
WP7b SMEs face financial drivers to motivate them for being actively involved with sustainability
WP8a SMEs face barriers from their own management and organization.
WP8b SMEs face financial barriers that can prevent them from being actively involved with
sustainability
Partnerships buyer-supplier(s)
WP2
SMEs improve operations through building strong relationships based on trust and barely
formalize these relationships.
WP3
Supplier-buyer partnerships combined with monitoring a code of conduct increases the
supplier’s CSR performance.
WP4
Sustainable supply chain partnerships integrate economic, environmental and social
responsibilities in their activities.
WP5
Sustainable supply chain partnerships improve the CSR performance of the supplier.
WP6
Sustainable supply chain partnerships will have integrated strategy, transparency,
organizational culture and risk management in their activities.
External influences
WP7c
SMEs face supply network pressure that drives them to be actively involved with
sustainability.
WP8c
SMEs face supply network barriers that can prevent them from being actively involved with
sustainability
In order to research these working propositions in a reliable and valid way, the next chapter will
explain the methodology that will be used in this research. This chapter will also show why certain
research choices are made.
3. Methodology
This research will be a qualitative, multiple case study. The methodology that is used, will be
explained in this chapter. First, the philosophy of the research will be discussed that will touch the
principles of ontology and epistemology. In paragraph 3.2. the research design will be explained by
discussing qualitative research, multiple case study, the case selection and why these choices were
made for this research. In chapter 3.4. and 3.5. it will be discussed how the data will be collected and
analyzed. Furthermore the research choices will be explained in 3.5. and how the researcher will come
to valid and reliable results. The structure of the methodology that will be used is seen in figure 3.
Figure 3: Methodology structure
Source: Pachena Madokwenyu, 2013
