Addis Ababa University

School of Business and Economics

M.sc in International Business /Import-Export/

Global Value Chain Management /MGMT 6051/

Group Note making Assignment

Prepare by:

1. Belayneh Kassahun GSE 5747/13

2. Chernet Ashenafi GSE 0349/13
3. Danat Engida GSE 6968/13
4. Emnet Fikre GSE 5190/13

Submittedto:- Dr. Zelalem G./Tsadik/PHD/

Date: July 18, 2021

Addis Ababa, Ethiopia.

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 Sustainability and Corporate social
responsibility(CSR) in supply chain

Sustainability: - meeting the needs of the present without compromising the ability of
future generations to meet their needs.
Sustainable in supply chain management is the management of supply chains in a way that
integrates the sustainability objectives and requirements defined by the firm, suppliers,
customers, and external stakeholders (e.g., consumers, policy-makers, associations).
Sustainability has presented more of a challenge when it requires efforts that do not provide
obvious return on investment for a company. In fact, customers themselves have not always
backed up their words about the importance of sustainability with a willingness to pay more for
sustainable products or make more of an effort to support sustainability.
Supply chain sustainability usually centers around societal contributions, climate change, and
driving positive business results.
The factors driving an increased focus on supply chain sustainability can be divided into three
distinct categories:
1. Reducing risk and improving the financial performance of the supply chain
2. Community pressures and government mandates
3. Attracting customers that value sustainability

Sustainability is often broken into three intertwined categories: social sustainability, economic
sustainability, and environmental sustainability. Together, these three forms of sustainability are
known as the "three pillars of sustainability." The three pillars of sustainability provide a
framework for applying a solutions-oriented approach to complicated sustainability issues like
fisheries management.

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The triple Bottom line;
 3 P’s
o People
o Planet
o Profit

There are three pillars on sustainability:

1. Social(people): - it is the ability to address issues that are important for its workforce,
customers, and society. Workforce-related factors include employment quality, health
and safety, training and development, and diversity and opportunity. Customer-related
factors include accurate product information and labeling, along with the impact of the
product on the customer’s health and safety. Social issues include human rights and the
impact on local communities.

Social sustainability includes environmental justice, human health, resource security, and
education, among other important social elements of society.

Efforts to increase social sustainability can also benefit the environment. For example, people's
diet choices can have a substantial impact on both human health and the health of the
environment, therefore advocacy for healthier eating can benefit the environment, too.

2. Environmental(planet): -

Environmental sustainability focuses on the well-being of the environment. On this pillar water
quality, air quality, and reduction of environmental stressors, such as greenhouse gas emissions.
Human health depends greatly on the quality of a person's environment, inextricably linking
human health and the state of the environment.

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The environment also provides natural resources necessary to foster economic sustainability.
Companies rely on the extraction of natural resources to be economically sustainable. Efforts to
extract resources at levels that are sustainable for the environment will also provide economic
sustainability through the continued availability of resources.

3. Economic(profit): - social and environmental sustainability do not exist without

economic sustainability.

Economic sustainability includes job creation, profitability, and proper accounting of ecosystem
services for optimal cost-benefit analyses.

Economic sustainability refers to how companies remain in business. Staying in business

requires making investments, and investments require making profits. Though profits may be
relatively easy to determine, other measures can also be used to gauge economic sustainability.
The alternative measures that point to a successful business include risk profile, intellectual
property, employee morale, and company valuation. To support economic sustainability, firms
may supplement standard financial accounting and reporting with some version of social
accounting. Social accounting can include brand equity, management talent, human capital
development and benefits, research and development, productivity, philanthropy, and taxes paid.

Efforts to be more environmentally sustainable can also benefit the economic sustainability of an
organization. For example, recycling valuable materials, such as electronic waste and textile
waste, can lower operating costs and reduce the intensity of resource extraction required to
sustain businesses.

There types of sustainable supply chain driver: -

I. Inventory; - it focusses on raw materials, work in process, and finished goods

inventory. Although this form of inventory is viewed as an asset and included in the
financials, few firms even consider the inventory sitting in a typical landfill.
II. Transportation: - is another driver with which firms are likely to find several positive
cash flow opportunities that improve environmental performance through resource as
well as emission reduction. Any supply chain design innovation that lowers
transportation costs also tends to reduce fuel consumption, as well as emissions and waste
generated from transportation. As fuel costs increase in the future, firms are likely to
restructure their products and supply chains to reduce transportation costs.
III. Sourcing: - the greatest social and environmental impact occurs in the extended supply
chain outside their own enterprise. This impact has grown as firms have increased their
global sourcing, especially from low-cost countries. Thus, to truly have an impact on
sustainability, powerful players must look at the extended supply chain and work with
their suppliers to improve performance.
IV. Pricing: - For individuals and firms to focus on sustainability, it is crucial that they
internalize the “monetary value” of the social or environmental cost of their actions.

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 Firms are structured to naturally account for all factors that they have to pay for. Every
effort is put into place to reduce these costs

Why is it Important to Have a Sustainable Supply Chain

Management System?
The importance of sustainability in a supply chain extends beyond going green. A supply chain
built on a sustainable platform creates more partnership opportunities because environmental
responsibility is a crucial focal point in today’s industry. Practicing eco-awareness in every
aspect of your business improves your reputation and further legitimizes your organization.

A sustainable supply chain also helps improve productivity while saving money at the same
time. By using sustainable techniques and resources, you increase the efficiency of buildings,
vehicles and machinery at a significant cost savings.
Example: - Nike is a prime example of sustainability at work. The world’s number one shoe
manufacturer changed how it makes some of its shoes and reduced labor costs by up to 50
percent and material use by 20 percent. The result was a 0.25 percent increase in margins.

Implementing a sustainable supply chain

There are four steps to implement a sustainable supply chain

I. Identify the sustainability goals and objectives, and then create a plan for how to achieve
them. Be sure to include the supply chain because it plays a big role in the company’s
environmental, social, and economic impact.

II. Create a sustainability policy for the suppliers and customers.

III. Evaluate the supply chain from top to bottom

IV. Take the appropriate action to make the supply chain more sustainable.

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 Corporate Social Responsibility

Concepts of social responsibility and sustainable development have been developed separately
and social responsibility mainly focuses on social issues as human rights while sustainable
development mainly focuses on social issues as human rights while sustainable development
mainly focuses on environmental issues.
In 1970, Milton Friedman stated that ‘‘there is one and only one social responsibility of
business—to use its resources and engage in activities designed to increase its profits so long as
it stays within the rules of the game, which is to say, engages in open and free competition
without deception or fraud’’ (Friedman 1970 and 1977), thus originating the idea of strategic
CSR.
So ‘‘responsibility as social purpose consists of the research of profit and CSR activities are a
consequence of incentives coming from the markets (goods, work, capital), where the firm is
located’’ (Sacco and Viviani 2005). Therefore, Friedman’s idea of strategic CSR is based on the
conceit that firms are not altruistic at all; on the contrary they look only at the increasing of
profits.
CSR products can be defined as the goods produced by undertaking CSR activities; ceteris
paribus—all other things remaining equal—those products are more desirable than traditional
goods. This means that CSR increases consumers’ demand and firms strengthen their market
shares if engaging in CSR activities.
This sequence is often called ‘‘bottom up pressure’’, underlining that CSR starts from
consumers’ initiative in appreciating it. In other words, consumers keep being sensitive to social
responsibility before firms do. Firms incorporate this fact in their profit maximization
calculation. The bottom up pressure principle can be formalized introducing CSR in the demand
function, which obviously influences the process of profit maximization.
Further, consumers are more demanding not only in terms of price and quality but also of a
firm’s CSR effort. Accordingly, today’s marketplace is characterized by steady increases in
competition, product parity and consumer expectations. companies would enjoy the benefits of
building/differentiating their brands, improving their corporate image and publicity, improving
employee morale, and increasing sales revenue.
The important issue is that CSR practices are mainly based on the principle of volunteering. That
is why those practices should be carried out by participation of relevant stakeholders.

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The main area of corporate social responsibility in the supply chains: -

Relevant CSR Areas Sample Practices

Organizational Practices
• Determining CSR goals for purchasing
function
• Determining and defining roles and
responsibilities of human resources related to
CSR in logistics
• Providing relevant training in CSR to the
suppliers
• Sharing of CSR activities and practices with
all relevant stakeholders
• Implementing a mechanism to receive
feedback from stakeholders regarding CSR
practices

Ethical Practices • Not accepting gifts, free services, etc. from

suppliers (especially during supplier selection
process)
• Not creating illegitimate pressures on
suppliers
• Not sharing price and service information
about suppliers with other irrelevant
stakeholders
• Not favoring any particular supplier just
because of managers’ preferences and
assuring a fair selection process
• Assuring all departments meet ethical
standards in independent purchasing process
• Not creating illegitimate advantage in
competition by using contract items
• Not giving out wrong information on
purpose
• Not using specific items pointing out
specific suppliers in contracts
Practices of human rights and working • Not keeping some suppliers out of cycle,
conditions just because they have managers from
different backgrounds
• Having procedures and also having
mechanisms to monitor providing equal
opportunity for each employee working in all

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Practices of occupational health and safety
Practices to establish relationship with society • Developing and carrying out programs for
Environmental Practices
supplier companies
• Having appropriate procedures in place to
assure that all employees can benefit from all
their legal rights, are working in accordance
with rules, regulations and national/
international standards
• Assuring that physical and psychological
working conditions comply with all rules and
regulations in place
• Having appropriate procedures in place to
assure that working conditions do not
jeopardize human health and safety
• Assuring that all safety, security and
protection measures are in place for all
activities
• Having procedures in place to assure that
sensitive and delicate products are stored
under appropriate conditions
training and development of local suppliers
• Actively participating into and organizing
non-for-profit social activities, such as
volunteer work, charities, public auctions, etc.
• Supporting sport activities and public
education
• Purchasing and using recycled materials for
packaging
• Supporting and encouraging suppliers on
reducing waste (especially hazardous waste)
• Putting special emphasis on producing
recyclable and reversible materials in
production and design
• Meeting standards for protecting
environment in the processes of lifecycle
management, production, packaging and
storing
• Supporting suppliers to implement processes
that are appropriate for sustainable
environmental protection

Table 1.
Examples of CSR applications in supply chain management

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Among those aforementioned activities, ensuring that all activities and functions comply with
national or international rules, regulations and standards and working with suppliers that fulfill
same requirements constitute the most important factors for CSR in supply chains. This issue is
important to stay competitive in market and to have a sustainable growth in terms of strategic
perspective.

CSR in the process of supply chain

A. Procurement and purchasing: - Performing all purchasing activities in accordance with
CSR principles and taking into consideration CSR principles in the decision-making
process.
B. Production: - It takes place both in forward and reverse supply chain management
activities. To implement the systematic mechanism reducing the amount of waste and to
dispose the waste without giving any hazard to the nature. To asses each phases of the
product life-cycle in order to determine the possibilities of re-production, re-usage and re-
cycling of the materials used in production process.
C. Distribution and transportation: - giving opportunities to local transportation
companies, carefully monitoring that the traffic rules and regulations are followed all the
time, implementing mechanisms increasing safety and security performance in
transportation.
D. Packaging: - there are several activities to be considered, such as storage,
warehousing, protection of the product against deterioration. Throughout those processes,
CSR in packaging requires the usage of recycled and non-hazardous material, reduction
of waste, reduction of energy consumption and design the process in such a way that does
not harm the ecosystem
E. Warehousing: - choosing the location of warehouses by taking into consideration all
relevant environmental and social issues.

Examples of CSR on business: - Apple declined to participate in the Carbon Disclosure Project
(CDP), an independent global system for companies to measure, disclose, manage and share
climate change and water information. While more than 3,700 companies worldwide participate
in the CDP, Apple does not (making it the largest IT company in the world to not participate).
Having cultivated a cachet with the counterculture for decades, Apple's nondisclosure was
viewed as a thumb in the eye to many of its adherents, especially after The New York Times
criticized the company for effectively turning a blind eye toward the substandard labor practices
of Foxconn, a Taiwan-based electronics manufacturer that assembles many of Apple's most
popular products (iPads, iPhones, iPods, etc.).

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Conclusion

Sustainability: - As supply chains have globalized and emerging countries have grown, it
has become increasingly clear that the world’s resources and environment will not be able to
support this growth unless supply chains become more sustainable. Many actions that improve
sustainability of a supply chain impose costs that are local (to an individual, a firm, supply chain,
or country) but provide common benefits that are more global. Supply chain sustainability can be
evaluated in terms of social, environmental, and economic impacts. If a firm wants to be viable
and competitive, it must have a strategy for corporate social responsibility and sustainability.
Operations and supply-chain managers understand that they have a critical role in a firm’s
sustainability objectives

CSR: - can be defines as companies’ voluntary integration of social and environmental

concerns in their business process and in their relationships with other companies and
stakeholders. They can achieve economic benefits by reducing costs, increasing productivity and
profits, enhancing corporate image and reputation. However, for supply chains to be successful
in terms of CSR, companies, including all suppliers and manufacturers in the chain, need to
increase their own awareness and act in a socially and environmentally responsible manner.

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 References

Jay Heizer, Barry Render, Chuck Munson. Sustainability and supply chain management 10th
edition.
Lee, Hau L., and Chung-Yee Lee. Building Supply Chain Excellence in Emerging Economies.
Secaucus, NJ: Springer, 2007.
Eser Kayhan Tekin, Alper Erturk, Hakanu Tozna. Corporate social responsibility in supply
chain. 2015.
Sunil Chopra, Peter Meindl, Dharamvir Kalra. supply chain management 6th edition.
Font, X and Tapper, R and Schwartz, K and Kornilaki, M (2008) Sustainable supply chain
management in tourism.
Bettignies, H. C., & Lepineux, F. (2009). Finance for a better world: The shift toward
sustainability (pp. 124–125), Palgrave Macmillan.
Moskowitz, M. (1972). Choosing socially responsible stocks. Business and Society Review,
1(1), 71–75.

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