Abstract
This article develops a supplier-centered approach to corporate social responsibility (CSR) in global value chains (GVCs) by answering the research question: why are suppliers in the Global South that are integrated into GVCs often highly skeptical of CSR? As CSR constitutes a vague and contested term, we undertake a short review of some of the most dominant CSR conceptions that have emerged in the last 20 years. We argue that these CSR definitions are often framed and promoted by key actors in the Global North, the home of many lead firms, in ways that overlook the unique challenges and broader circumstances faced by suppliers and countries in the Global South. We conclude by combining the key considerations of local suppliers in a more consolidated supplier perspective on CSR in GVCs.
Introduction
The eruption of COVID-19 has fundamentally affected the functioning of global value chains (GVCs) (OECD, 2020). In the global garment industry, for instance, as outlet stores were forced to temporarily close in Europe and the United States in the spring of 2020, some brands and retailers either cancelled their orders, sought to renegotiate lower prices with their suppliers, or deferred payments for goods already delivered (Anner, 2020). In certain countries, such as Bangladesh, these developments led to a severe squeeze on supplier profitability, and the possible closure of thousands of factories with millions of workers at risk of losing their jobs. In fact, losing their income overnight, some of these garment workers were reported to be at the point of starvation (Leitheiser et al., 2020).
These dramatic developments highlighted the interconnectedness of GVCs and led to a questioning of what corporate social responsibility (CSR) actually implies in such chains. Prior to COVID-19, some economic geographers and development studies scholars had already begun to focus on the role played by CSR in GVCs (Lund-Thomsen and Coe; 2015; Ruwanpura and Wrigley, 2011). Some of this work reported that suppliers struggled to navigate the competing demands of price pressures, shortened lead times, and social compliance demands from their buyers (Khan et al., 2020; Raj-Reichert, 2013; Ruwanpura and Wrigley, 2011). The journal Global Networks also dedicated a special issue to CSR in GVCs in 2015 (Bair and Palpacuer, 2015). The special issue contained papers devoted to a diversity of topics, such as corporate codes of conduct; NGOs and social movements in GVCs; global framework agreements; and global carbon chains, and firms’ “social license to operate” in GVCs (Bartley and Egels-Zandén, 2015; Böhm et al., 2015; Fichter and McCallum, 2015; Mayes, 2015; Nickow, 2015). Moreover, a special issue of the Journal of Business Ethics on CSR in industrial clusters in the Global South included several articles by GVC scholars that dealt with CSR in industrial clusters, with foci on social upgrading (Gereffi and Lee, 2016), human rights (Giuliani, 2016), and CSR in “rising power” economies (Knorringa and Nadvi, 2016).
Yet, few contributions in economic geography and development studies have unpacked what ‘CSR’ means in the context of GVCs. For instance, Bair and Palpacuer (2015) helpfully draw a distinction between industrial governance (coordination of actors that participate directly in GVCs) and global governance (actions of non-state actors in managing transnational processes, including norms and rules regarding global production), but do not undertake a thorough examination of how CSR is perceived by different value chain actors. Lund-Thomsen and Lindgreen (2020) also examined CSR in the GVC literature, but mainly from a buyer perspective that does not take into account how suppliers perceive CSR (Khan and Lund-Thomsen, 2011).
Furthermore, CSR definitions are not in themselves neutral. Underlying CSR definitions are particular interests of business, government, NGOs, and other stakeholders. The CSR definitions adopted by these organizations thus reflect a particular understanding of what social responsibility means in GVCs, implicitly embodying the views of some stakeholders in the value chain, while the economic, social, and environmental objectives of other stakeholders either may be overlooked or simply ignored (Blowfield and Frynas, 2005). For example, if suppliers understand CSR in different ways or perceive it as a manifestation of economic or cultural imperialism (Jammulamadaka, 2015), the misaligned expectations and intentions between buyers and suppliers likely create problems, including a risk that suppliers claim code compliance, but maintain substandard working conditions (Barrientos, 2019). Accordingly, we require a better sense of how suppliers understand CSR, and the alignment between this understanding and buyers’ views as encapsulated in buyers’ codes of conduct (Bae et al., 2020).
In the following, we take a supplier-centered approach to answer the following research question: why are suppliers in the Global South that are integrated into GVCs often highly skeptical of CSR? We argue that CSR initiatives are frequently framed and promoted by key actors in the Global North – the home markets of global lead firms, often with little regard for the unique challenges faced by suppliers and the broader circumstances of countries in the Global South in which actual production of these goods takes place. As an alternative we set out to develop a ‘supplier centered view of CSR in GVCs’ by briefly reviewing and critiquing some key influential CSR definitions from the viewpoint of these suppliers. These are CSR definitions that have emerged in the last twenty years – a period marked by an ever-growing scholarly and media interest in labor issues in GVCs. They include the European Commission’s 2001 and 2011 definitions of CSR; Porter and Kramer’s notion of “shared value”; political CSR; CSR as imperialism; and, finally, CSR as “greenwashing”. Based on this review, we combine key considerations of local suppliers into a brief, consolidated supplier perspective on CSR in GVCs. In this way, we seek to bridge the embryonic literature on CSR in GVCs in economy geography and development studies with key insights from the CSR/business ethics literatures.
European commission definitions of CSR
CSR definitions have developed over time, and no general consensus exists of what the term means (Rasche et al., 2017). Nevertheless, it would be fair to assert that past and current conceptualizations of CSR – as related to GVCs – have largely failed to consider the concerns of weaker value chain actors, such as suppliers and workers (Khan and Lund-Thomsen, 2011). Indeed, they have assumed that the economic, social, and environmental norms and values held by value chain actors in the Global North are fully shared by actors that either directly take part in GVCs (suppliers) or that influence the functioning of these chains in the Global South (e.g., trade unions, local NGOs, governmental actors). In order to develop this line of argument, we first analyze a number of influential CSR conceptions that have emerged in the last 20 years.
We begin by examining the European Commission’s well-known (2001) definition of CSR as “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis” (European Commission, 2001: 8). Given that economic considerations are critical to core business operations, we would expect the definition of CSR to include a concern with “integrating economic, social, and environmental concerns” into key business practices. However, the implicit assumption in this definition is that business actors operate in free, open markets where supply and demand meet through the mechanism of price. In reality, as the GVC literature clearly shows, power relations among various actors along value chains are often markedly imbalanced (Dallas et al., 2019). This means that large buyers are frequently in a position to require social and environmental improvements from suppliers that involve the latter to carry extra financial burdens (Goger, 2013; Ponte, 2019). Typically, global buyers demand year-on-year price decreases in labor-intensive value chains, such as garments, textiles, footwear, and football manufacturing (Lund-Thomsen and Nadvi, 2010). The same buyers also demand ever-shorter lead times and tend not to be willing to share the financial burden of investing in CSR upgrading of factories in the Global South. As a consequence, in the EC definition, there is no pressure on buyers to provide financial incentives for CSR improvements by their suppliers. Instead, CSR requirements commonly become added financial burdens for suppliers at the base of GVCs (Khan et al., 2020) in ways that legitimate retailers’ social and environmental record (Lebaron and Lister, 2015), but have very uneven impacts on labor issues in the Global South (Locke, 2013).
From a supplier perspective, a second concern with this approach is that companies integrate social and environmental concerns on a voluntary basis. However, for many suppliers, compliance with CSR codes of conduct is actually de facto mandatory if they wish to participate in GVCs and sell their products to large buyers, such as Nike, Adidas, Ikea, and H&M. In fact, compliance with corporate codes of conduct is a prerequisite for entering into trade relationships with these brands (Lund-Thomsen and Lindgreen, 2020). Of course, suppliers can choose not to sell their products or services to buyers that wield such power, but to assume that complying with CSR requirements when trading with these global buyers is voluntary is highly unrealistic.
We do recognize that, within the European Union, CSR debates have evolved since 2001. Indeed, in 2011, the European Union introduced a revised CSR definition, which, among other things, states, “CSR is the responsibility of enterprises for their impacts on society”. This involves “maximising the creation of shared value for their owners/shareholders and for their other stakeholders and society at large”. At the same time, corporations should aim at “identifying, preventing and mitigating their possible adverse impacts” (European Commission, 2011: 6).
From a supplier perspective, defining CSR as the responsibility of enterprises for their impacts on society may be auspicious, as many suppliers in GVCs can rightfully claim that they have been negatively affected by the purchasing practices of global brands. As previously mentioned, yearly price declines tend to limit the possibilities of suppliers paying their workers living wages and providing other benefits, such as job security, pensions, and unemployment insurance (Amengual et al., 2020). Ever shorter lead times tend to push suppliers to make their workers perform overtime or engage in subcontracting to lower-tier suppliers in order to be able to meet production orders on time. Moreover, seasonal production orders make it difficult for suppliers to hire workers on longer-term contracts (Anner et al., 2013). After all, suppliers are profit-making enterprises and having workers idle on job-sites for parts of the year during the low season generates costs that they often cannot sustain. As a result, suppliers are sometimes compelled to engage in practices of labor casualization, which increase employee turnover and make it difficult for the temporary workers to have a stable income and all of the other benefits that follow from having permanent contracts (Khan et al., 2020).
The second part of the definition, which introduces Porter and Kramer’s (2011) notion of “shared value”, seems to imply a positive impact on suppliers and their workers, as both buyers and suppliers, as well as society (which remains undefined in Porter and Kramer’s work), gain something from their GVC participation. From a supplier perspective, however, it could be argued that this “shared value” should be more equally distributed along value chains. For instance, in the production of a football, the retail price for a match ball in Europe may be approximately EUR 100. Out of this amount, a supplier in Pakistan or China is likely to receive approximately 5–8 EUR (Khan and Lund-Thomsen, 2011). In such situations, it is more accurate to claim the existence of “unequally distributed” rather than “shared” value.
Some global buyers have attempted to systematically address the negative effects of their purchasing practices on local suppliers (Amengual et al., 2020). This includes efforts at working with fewer suppliers in strategic partnerships, engaging in longer-term forecasting of demand, providing better financial incentives for engaging in CSR, and working collaboratively in training of management and workers in supplier factories (Lund-Thomsen and Lindgreen, 2020). These efforts, however, have also led the same global buyers to increasingly engage in risk management strategies, with a primary emphasis on making sure that particular human rights violations, such as the worst forms of child labor, human trafficking and forced labor, do not take place along their value chains (Buhman et al., 2019). Such strategies often seem to be aimed at protecting the reputation of global brands (Mitkidis et al., 2019), in what New York Times language expert, William Safire, terms the CYA (“cover-your-ass”) principle: “the bureaucratic technique of averting future accusations of policy error or wrongdoing by deflecting responsibility in advance” (Safire, 2008: 163). the definition’s emphasis on “identifying, preventing and mitigating their possible adverse impacts” seems to imply a more risk-averse approach. In other words, brands might become pre-occupied with “looking good” rather than “doing good” for the suppliers, workers, and communities in which they are engaged in various production sites around the world – instead of taking long-term responsibility for improving the economic, social, and/or environmental conditions of production in the Global South (Lund-Thomsen, 2008).
Political CSR
More recently, a fourth perspective on CSR – the political perspective – has gained ground. This views firms’ motivation as related to their increasingly becoming political actors that need to manage a new set of responsibilities (Rasche et al., 2017), including their role in governing GVCs (Scherer et al., 2014). According to Rasche et al. (2017: 276), political CSR (PCSR) is concerned with corporations striving to shape public debates and decision-making processes in a more socially and environmentally responsible manner. In particular, the political CSR perspective sees corporations as providers of public goods – frequently in the Global South – where the state has been unable or unwilling to provide these goods. Accordingly, corporations may contribute to the provision of public goods in different areas, such as public health, infrastructure, the enforcement of social and environmental standards along the value chain, or participate in the struggle against global warning, corruption, discrimination, or inequality. In political CSR, corporations are regarded as contributing to the effective resolution of such public issues, not only due to economic motivations, but also with the wider aim of enhancing social welfare (“it is the right thing to do”).
While PCSR may be perceived as a normative view of what the role of multinational companies should be in global society (including in the regulation of GVCs), it seems quite removed from present-day de facto realities of CSR in GVCs as experienced by many suppliers in the Global South. First, while multinational companies are often involved in collective decision-making related to the enforcement of social and environmental standards (e.g., through multi-stakeholder initiatives) in cooperation with NGOs and other civil society stakeholders, these standards have rarely been developed with substantial inputs from suppliers (or governments) in the Global South (De Bakker et al., 2019). Consequently, suppliers are often de facto excluded from collective decision-making processes in such fora. Even in instances in which they might be included, decision-making structures and the use of participatory facilitation techniques tend to only legitimate particular points of view and ways of deliberating, leading to the (unintentional) exclusion of the interests and voices of value chain participants (including those of suppliers) from the Global South (Cheyns, 2014).
Second, the idea that European and North American multinational companies should be in a position to contribute to the “effective resolution of public issues in a legitimate manner” is likely to be regarded uneasily by many suppliers and governments in the Global South. From a supplier perspective, “public issues” tend to refer to those issues that are of immediate interest to Western consumers (e.g., the eradication of child labor) and not those of interest to suppliers and/or workers, such as increasing business volume, offering better prices, creating additional jobs, and/or improving worker incomes and skills training (Khan and Lund-Thomsen, 2011).
Moreover, the legitimacy of multinational companies in the “effective resolution of public issues” may also be called into question. In the 1990s, governments – along with some trade unions - from the Global South refused to have labor standards incorporated as part of the World Trade Organization’s mandate. As a result, many European and North American activists began focusing on multinational companies, pressuring them to include social and environmental standards in their GVCs. From the supplier perspective, this could be perceived as European and North American CSR activists bypassing governments in the Global South, and using GVCs as a way of ‘sneaking in’ labor and environmental standards through the backdoor of interfirm linkages that include large transnational firms and local suppliers (Knight and Greenberg, 2002).
CSR as imperialism and greenwashing
Such views of CSR are by no means unique amongst manufacturers in the Global South. In fact, suppliers in the Global South sometimes contend that CSR is a thinly veiled attempt at re-introducing age-old colonialist ideals, and economic and cultural imperialism of yesteryear (Jammulamadaka, 2015). Essentially, the definition of CSR as imperialism understands CSR as a process through which “economic resources are extracted from local manufacturers while their perceptions of what constitutes socially responsible behaviour are delegitimized” (Khan and Lund-Thomsen, 2011: 73). This viewpoint, i.e., ‘CSR as imperialism’, is vividly related in a quote from Ali Khan’s (2007) book, Representing Children, in which an exporter from the Sialkot football manufacturing cluster describes his experience with international buyers that are keen to eliminate child labor from the industry:
“The West has huge double standards. All these programmes for children, it is all one big tamasha (performance). They have managed to develop their own nations, but when it comes to us, they want to keep us in chains. The U.S. is a nation with a history of genocide and slavery and they suddenly feel sympathy for the children of Pakistan. Now they are champions of peoples’ rights. But when I ask my buyers to make concessions over the rates they will pay, they refuse.” (A Sialkot Soccer Ball Exporter)
It is critical to note that our argument here is in no way in favor of child labor or exploitation of any sort to justify economic development. On the contrary, our argument is that exploitation and other severely deleterious practices at the supply level are tightly connected to the commercial practices of global buyers in the North (see also Barrientos, 2019).
From a supplier perspective, global buyers are also thought to be pushing CSR along value chains to enroll producers in “greenwashing” of their global sourcing operations. Corpwatch, a critical NGO, defines greenwashing as “the phenomenon of socially and environmentally destructive corporations attempting to preserve and expand their markets by posing as friends of the environment and leaders in the struggle against poverty.” (Corpwatch, 2020). Here, global buyers will emphasize the detection of violations of minimum standards related to wages, work hours, and occupational health and safety, since this focus provides them with legitimacy and serves as a shield against the reputational risks created by advocacy campaigns. Simultaneously, however, these buyers will often deemphasize the rights of workers to form independent trade unions and engage in collective bargaining, as this diminishes managerial control of the GVC and provides few reputational benefits (Anner, 2012). However, from a supplier perspective, if multinational companies were truly concerned about ensuring better labor and environmental conditions in their value chains, they would source products or establish factories in their home countries, where wages are much higher and where the enforcement of labor legislation is likely to be far stricter than it is in countries, such as India or Pakistan.
For many suppliers, global buyers spend a lot of time and energy on their commitments to CSR in discursive terms, but in practice outsource much of their production to low wage countries in order to be able to reap larger profits on their own. Indeed, it is the case that the labor and environmental costs of operating such factories in European or North American contexts would likely be so high that they would be financially unviable.
A supplier perspective on CSR in GVCs
Drawing on this brief review of recent CSR definitions, we can now combine some of these supplier considerations in a more consolidated supplier perspective on CSR in GVCs. This supplier perspective on CSR in GVCs implies that power imbalances in GVCs between buyers and suppliers place severe constraints on what suppliers can do in relation to integrating social and environmental concerns in their business operations and interaction with their stakeholders (cf. European Commission, 2001 definition of CSR). Price declines, seasonal demand changes, shorter lead times, payment delays, and buyer unwillingness to co-finance CSR upgradation leave suppliers in a very tight financial situation if they want to address CSR concerns at the factory level. Yet, if they are selling into high-value markets in Europe and North America, they are nevertheless compelled to comply with buyer-driven CSR demands. At the same time, even if suppliers can identify the “possible adverse impacts” (cf. European Commission, 2011 CSR definition) of their business activities (e.g., overtime and subcontracting into the informal economy), it becomes highly challenging for suppliers to mitigate and address these impacts, which are to a large extent driven by buyer purchasing practices.
In the supplier perspective on CSR in GVCs, there is thus little “shared value” (cf. Porter and Kramer, 2011, notion), as CSR mainly appears to bring reputational benefits to brands/retailers, but few economic, social, or environmental benefits to suppliers. From the supplier perspective, CSR may thus not only constitute a kind of economic imperialism, as retailers and brands extract profits from suppliers and workers at the base of the GVC, but their CSR demands are often perceived as a kind of cultural imperialism by suppliers (cf. Khan and Lund-Thomsen, 2011, definition). For instance, if retailers/brands demand that young workers between the ages of 15 and 17 must not labor in export-oriented industries, this might prevent these workers from learning a new skill and entering an occupation, such as football stitching. This could, in turn, lead to labor shortages over time, threatening the future viability of an industry, such as football manufacturing, in Pakistan or India (Lund-Thomsen, 2008).
Furthermore, if the intention behind CSR activities is to help to provide public goods in areas, such as Decent Work, where states in the Global South have not been able to (cf. political CSR definition), suppliers are not only severely financially constrained in their ability to do so, but they may also wind up, for instance, in order not to be seen as employing child workers, engaging in interventions that leave these workers worse off. An example of this would be firing child workers in garment factories, who are then relegated to working in much worse occupations, such as child prostitution (Husselbee, 2000).
From the supplier perspective on CSR in GVCs, addressing these challenges calls for equal sharing of the profits generated through the sales of the products that they manufacture for end markets in the Global North. This necessitates a reform of trading relations that secure long-term cooperation between buyers and suppliers, more stable production forecasting and planning, avoidance of last minute orders, increasing lead times for production, incorporating the costs of CSR upgradation in product prices, and ensuring that particular CSR requirements are made with due reference to local socio-economic and socio-cultural realities. This should be done in order to ensure that CSR requirements do not create unintended negative consequences for the local workforce and the environment in the Global South.
Conclusion
In this article, we argued that CSR definitions are often articulated and advocated by actors in the Global North in ways that ignore the unique challenges and circumstances faced by suppliers and countries in the Global South. Instead, we suggest that CSR in GVCs must be understood in relation to what stage in the GVC it is applied, and the institutional context in which it is embedded. For instance, the role of trade unions in CSR will differ between countries, such as India, where some trade unions are linked directly to different political parties (e.g., Congress and the Communist party), and China, where the Communist-party-backed All China Federation of Trade Unions is the country’s sole legally mandated trade union.
In doing so, we are not arguing that we are in agreement with what we have described here as a supplier-centered perspective on CSR in GVCs. In fact, suppliers have sometimes engaged in irresponsible practices, such as breaking up trade unions, or employing forced labor or prison labor in GVCs. Instead, at a time when almost all large multinational companies claim to work with CSR in GVCs, our intervention should be seen as a caution against the Eurocentric domination of CSR conceptions, and the assumption that it makes sense for Global North corporations and governments to define what CSR is from their point of view and then seek to implement that through GVCs in ways that lead to the reinforcement of highly unequal distributions of trading relations. Indeed, we now need to go beyond poorly conceived imaginations of what might be socially relevant ways of addressing labor rights and environmental issues in the Global South.
Footnotes
Declaration of conflicting interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.
