Corporate Social Responsibility Implications of Global Supply Chains

The Rise of Global Supply Chains

With the advent of globalization and the concomitant emergence of offshoring, Western Multinationals started to locate their manufacturing facilities worldwide in countries such as China and their back office and IT (Information Technology) services in countries such as India.

For instance, Apple which is the maker of the legendary iPhones uses the facilities of Foxconn, which is a Chinese firm that specializes in manufacturing parts of the iPhones, wherein Chinese workers are engaged in this activity.

Further, the bestselling Nike brand of shoes and apparel are made in factories in Bangladesh and Vietnam.

As for IT and software, many Western Multinationals such as Google and Microsoft locate facilities in India as well as outsource their IT requirements. While these instances of offshoring and outsourcing have resulted in major cost savings for these firms as labor is cheap in China and India, they have also given rise to complex global supply chains wherein the design and Research and Development is done in one country, the manufacturing is done in other regions, and the actual sales are done back home.

This means that global firms have come to rely on globalized supply chains that necessitate much deft and astute management dealing with complexity and volatility.

CSR Violations in Offshore Facilities and the Outcry against the same

Having said that, these global supply chains have also given rise to concerns over the CSR or Corporate Social Responsibility aspects wherein activists and other stakeholders are increasingly taking these global firms to account for the poor working conditions in China and India, the exploitation of the workers, and the unsafe facilities where industrial accidents and lax construction standards often result in the workers losing their lives.

Indeed, in recent years, the Foxconn facilities in China, the facilities in Bangladesh where global apparel makers such as Nike outsource their production are being blamed for the rising deaths from suicides and building collapses which have led to a global uproar.

Further, the exploitation of workers in offshore facilities is not restricted to China alone since even the services back offices in India have come under scrutiny for the way in which issues such as safety of employees are concerned.

This has resulted in severe criticism by the Western as well as Global media in addition to activists worldwide taking these global firms to task for their business practices in other parts of the world.

This barrage of criticism has placed the spotlight on firms such as Nike and Apple that are being forced to answer for their flouting of CSR norms.

Globalization also Benefits the Poor

On the other hand, it can also be argued that by offshoring and outsourcing manufacturing and services, these global firms are creating opportunities for the less privileged workers in developing countries wherein without these means of employment, they would have been worse off and poorer as a result.

Indeed, the fact that globalization is a “tide that lifts all boats” has been used as a rationale for the offshoring wherein Western consumers benefit from cheaper goods and services, and the workers in Asian countries benefit from the means of employment that they otherwise would not have had.

Apart from that, the fact that globalization has resulted in almost a Billion people being lifted out of poverty worldwide is also used to justify the offshoring and outsourcing of manufacturing and services.

In addition, many activists also claim that American and European consumers benefit from cheaper goods and services and hence, in a way, the workers of the poorer countries are “subsidizing the lifestyles of the richer consumers in the West”.

Thus, the debate continues wherein each side sticks to their points without much common ground.

The Emergence of the Eco-Chic Consumer

However, it is certainly not the case that there are no solutions to this problem. Indeed, with some effort and patience from all stakeholders, there can be a win-win situation that entails the workers in Asian countries with better wages, improved working conditions, and safe business practices.

Of course, what this means is that the Western consumers would have to pay higher prices for the goods and services as well as take some hit in the form of restrained consumption.

Already, the rise of the Eco-Chic consumers who buy goods only if they are assured that such goods and services have complied with CSR norms means that at least some Western consumers are willing to make sacrifices for the greater good.

Moreover, the regulators in the United States and Europe are paying more attention to the way global supply chains operate and whether they are in compliance with the CSR norms.

A key pressure point for global firms is the way in which sections of the media have been unremittingly highlighting the CSR violations in global supply chains, and hence, it is indeed the case that if some effort is taken by all stakeholders, then the problem of ethics and CSR norms can be addressed.

A New Narrative is Needed

Thus, what is needed is a new narrative wherein there is a new direction to the globalization process where the original aims of everyone benefiting from it are addressed.

In other words, globalization and offshoring coupled with adherence to Western standards of CSR would result in gains all around. Note the term Western standards as what is needed is an effort by all stakeholders to ensure that global supply chains conform to global CSR norms and not take cover in saying that “things work differently there”.

To conclude, harmonization of CSR norms would be the best course of action to address the concerns of all stakeholders.

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Corporate Social Responsibility