Corporate social responsibility (CSR) policies have received much attention for their potential to improve societal conditions while creating value for companies. However, this latest study from Grenoble Ecole de Management highlights the fact that CSR policies may not be suited to our globalized markets.
From the article
Sharing the shared value : a transaction cost perspective on strategic CSR policies in global value chains
The Journal of Business Ethics - DOI 10.1007/s10551-015-2820-0
Aurélien Acquier, Bertrand Valiorgue, Thibault Daudigeos, 2016
In addition to their ethical benefits, CSR policies are designed to provide companies with added value on the basis that customers are willing to pay a premium for ethical products. While it is quite simple to identify the benefits of CSR policies within a single organization, it is much harder to identify and share the added value created by implementing CSR policies across a global network of actors.
Who pays for global CSR policies?
The authors of this latest study note that in today's competitive international markets, companies have developed global value chains (GVCs) that involve a multitude of independent businesses. In such cases, the economic interest behind CSR policies is no longer so easy to understand.
Take for example a global clothing industry brand whose customers wish to purchase goods that meet certain ethical standards. Providing customers with goods produced in ethical working conditions requires the brand to convince numerous independent suppliers and subcontractors to respect new standards. Such changes can involve anything from rewriting existing contracts to implementing monitoring mechanisms or investing in new technology. The cost of these changes is spread out amongst the brand, its suppliers, manufacturers and other partners. Negotiating who foots the bill can also be a cost in and of itself.
Who benefits from CSR policies?
One of the key motivations behind creating global networks of subcontractors and suppliers lies in the fact that companies in the value chain are in constant competition. This competition is part of what makes GVCs economically profitable. Yet such competition also makes it inherently difficult to share the benefits reaped by a market premium for ethical goods. When brands require subcontractors or suppliers to respect certain standards, but at the same time demand competitive pricing, it can be hard to find the economic incentive for socially responsible behavior.
Global CSR policies create costly partnerships
Changing standards within a single organization can already be a difficult task. However, the costs of changing standards across a multitude of organizations can simply be prohibitive. In addition, implementing policies across borders forces companies to interact with governments, NGOs and other organizations. While these interactions are built around shared goals and values, they fall outside a company's usual business relationships and, as a result, often include hidden costs.
While there are many obstacles to global CSR policies, the authors of the study highlight that companies can reduce certain costs by using pre-established standards to reduce initial investments. Some companies, such as those in the coffee, clothing and diamond industries, have also created multi-stakeholder initiatives (MSI) to collaborate on and share any new added value.
- Corporate social responsibility (CSR) policies do not necessarily create added value for companies involved in global value chains (GVC).
- Implementing CSR policies in a global context can require heavy investments and provide uncertain benefits.
- Standards, labels and multi-stakeholder platforms help mitigate the costs of implementing global CSR policies.