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TRANSCRIPT
2015 Fall – Section 01
Professor Martha Wilson
2015, October 28
EXPLORATORY RESEARCH: IMPORTANCE OF
COMMUNICATING CODE OF ETHICS THROUGHOUT
THE SUPPLY CHAIN
Researchers:
Alexander L. Hess
Coby Macaluso
Sergey Vorobets
TABLE OF CONTENTS
Abstract .......................................................................................................................................... 3
1. Purpose of Our Research ......................................................................................................... 4
2. Methodology .............................................................................................................................. 5
3. Analysis ...................................................................................................................................... 6
3.1. Financial Impact of a Strong Code of Ethics ....................................................................... 6
3.1.1. Case Studies ................................................................................................................. 6
3.2. CSR Effects on Modern Trends ......................................................................................... 10
3.2.1. Millenials Care about CSR ........................................................................................ 10
3.2.2. Globalization.............................................................................................................. 12
3.2.3. Internet and Transparency ......................................................................................... 13
3.2.4. Modern Trends Wrap-Up ........................................................................................... 14
4. Interpretation .......................................................................................................................... 15
4.1. Effects of CSR .................................................................................................................... 15
4.1.1. Stakeholder Theory .................................................................................................... 15
4.1.2. Michael Porter’s Social Prgress Index ...................................................................... 15
4.2. GRI & Auditing Implementation into the Supply Chain ................................................... 16
4.2.1. Importance of GRI ..................................................................................................... 16
4.2.2. GRI’s International Results ....................................................................................... 17
4.2.3. Overview of GRI’s Evaluation Process ..................................................................... 18
4.2.4. GRI & Intigrated Systems Management: Key Benefits .............................................. 20
5. Conclusion ............................................................................................................................... 23
References .................................................................................................................................... 24
ABSTRACT
This project explores the effects of communicating a company’s code of ethics throughout the
supply chain. We analyze the effects of Corporate Social Responsibility (CSR) on a traditional
financial bottom line, as well as the triple bottom line to review sustainability efforts. Global
trend analysis provides this research preemptive suggestions for companies who are skeptical of
CSR. We repeatedly divulge the superiority of a Socially Responsible Supply Chain Orientation
(SRSCO) based on scholarly reviews of financial gains. We also characterize the financial loss
that is applicable to companies who have an inferior code of ethics through a review of case
studies. Ethics scholars posit that social capital is becoming increasingly important, due to the
relevance of CSR for Millennials, and the transparency of internal corporate information
following the Internet revolution. This project recommends that a firm utilize International ethics
auditing standards to harmonize communications across the various channels in the supply chain.
We hypothesize, by implanting a consistent auditing standard, a firm may expose their
weaknesses, and implement problem resolutions. As we conclude, a firm’s ethical standards, and
ethical auditing standards should emulate the transparency of yearly financial auditing.
1. PURPOSE OF OUR RESEARCH
Drawing on growing global concern for businesses to operate in socially, and ecologically
sustainable methods, we have devised our research to investigate how a company can yield
greater returns through an integrated supply chain that adheres to Global Reporting Initiative
(GRI) standards. The goal of this research is to discover how companies can create a competitive
advantage through a socially responsible supply chain orientation (SRSCO), and how to maintain
that advantage through consistent communication, and ethics auditing. If our research is
successful, we may create a model for firms to operate in a way that creates greater social
capital, yielding higher profit margins. The purpose of business is to create positive value for
society through providing a positive exchange in value. To optimize business value, we have
embarked on investigating practical application of moral theory in business operations. With
backgrounds in philosophy, and business, our research team wants to save lives while
bequeathing firms enhanced control over their supply chain. We hope that our model can be
implemented into modern businesses who are skeptical of investing in international partnerships:
due to an absence of universal ethics criterions. If we can successfully define how companies can
foster a “mutual understanding of the code of ethics” through harmonization of the supply chain
communication, and auditing standards, we will achieve our goal of providing solutions to
corporate sustainability; as well, we will posit solutions for multinational business to harmonize
ethical standards (Park-Poaps, & Rees, 2010, p.307).
2. METHODOLOGY
Our research team conducted extensive research into mediating factors that explained the
tendency for corporations with strong codes of ethics to be profitable. Due to the nonexistence
of funding for our research, and time pressures, we were incapable of conducting primary
research. Our exploratory suppositions were derived from numerous secondary sources: literary
reviews, Internet sources, scholarly journals, Google scholar, and business textbooks. The
predominant amount of our sources emanated from One Search: a library source engine through
California State University, Sacramento’s digital archive. The minority of our sources within the
archive reviewed CSR trends in business, as well as documented the proliferation of ethics as a
subject in Supply Chain Management (SCM). However, the majority of sources that we utilized
from the College search engine emphasized the benefits of adopting a Socially Responsible
Supply Chain Orientation, as well as how to audit a firm’s code of ethics. Library, and scholarly
resources also identified the financial impact of company’s who did not incorporate CSR. The
authors in the scholarly journals, and Google scholar quantified the impact of ethics on corporate
sustainability, company image, and a functional supply chain. We stressed the contribution of
scholarly articles because they presented more efficacious theories, such as Michael Porter’s
value chain. To supplement missing data in scholarly sources concerning formal theories, we
used course textbooks. The Internet provided missing data in communications, and financial
impacts of poor communication; Macaluso used this data in the case study section. In addition,
the Internet provided information unavailable elsewhere, such as the Global Reporting Initiative
Council’s chronicled data. After compiling evidence from 31 sources, we were able to
sufficiently review academic theories that corroborated our initial hypothesis.
3. ANALYSIS
3.1. Financial Impact of a Strong Code of Ethics
The original view of business responsibility, as coined by Milton Friedman, was to maximize
returns for shareholders through optimization of a company’s resources. In Friedman’s view,
ethics was stipulated to be a waste of resources, and not essential to the functionality of business.
Then in 1991, Archie B. Carroll's contrasted the tradition view of business responsibility with a
platform referred to as Corporate Social Responsibility (CSR): A pyramid model that segmented
primary, and secondary business activities. Carroll’s model emphasized secondary activities,
such as ethical business conduct, and corporate philanthropy, provide a strategic advantage. Our
team found secondary evidence which supported Carroll’s theory. Haesun Park-Poaps, and
Kathleen Rees found that companies who did not utilize a Socially Responsible Supply Chain
Orientation (SRSCO) suffered harsher regulations, and fines. Additional resources demonstrated
financial bottom line benefits of CSR, with sources citing that adopting a code of ethics increase
a company’s earnings per share by a factor of 3.9 times. In context with this section, we review
corporations that improved their brand's value in the mind of the consumer by implementing
their ethics throughout the supply chain. We also show the devastating financial impact of poor
ethical management. Companies often look toward certainty and cost containment: the supply
chain can be the catalyst for achieving these desired results. In this section, our team illustrates
the fiscal importance of sustaining a company’s values throughout the supply chain.
3.3.1. Case Studies
During the 1980s and 1990s, companies began to outsource their supply chain to gain cost
efficiencies from lower cost labor, and form a beneficial currency exchange. Reduction in
global tariffs made it easier to accomplish outsourcing, and turn a higher profit. Companies
who took their supply chain overseas were more complacent on following Friedman’s tradition
view of business responsibility than ethics. During this period, companies began to forgo their
values in hope of substantiating larger profits. However, modern trends have pushed
companies to focus on a positive brand image, following a slew of poor business impressions
reducing many major companies industry share. In trying to get ahead, businesses are
establishing better relationships with their customers by communicating ethics in the heart of a
business's supply chain. There are lessons to be learned with unethical activities by companies
such as Nike, Apple, and Walmart. While there has been a big focus on the finances of these
companies, it must be known that profits, and ethics are positively correlated.
Nike – Nike is a primary example from the 90s, of poor communication of a firm’s code of
ethics throughout the supply chain. During their multinational supply chain expansion, Nike
was scrutinized for their workplace practices. Most of the bad press highlighted child labor
involved in hazardous product manufacturing; which lead the Firm to fall under international
aversion, and proposed fines by the UN. Their reputation crumbled, and in the fiscal year of
1998, demand became weak. In 1998, demand dropped by 69 % for Nike brand products,
which was positively correlated with international press for that year. Instead of
communicating ethics throughout the supply chain, Nike pushed back with a public statement
to writer, Debora L. Spar: “Without an in-house manufacturing plant the company simply
could not be held responsible for the actions of independent contractors.” Not until the mid-
2000s did Nike admitted their product had become synonymous with slave wages, forced
overtime, and arbitrary abuse. Communicating these ethical mishaps concerning their supply
chain operations was the first step for the firm to recover their tarnished image. After facing
the significant losses due to poor supply chain ethics communication, Nike now stands by
policies encouraging the monitoring of factories, and takes a more collaborative approach to
reforms, sharing workspace, and best in-industry practices. The Firm has seen annual
financial gains since altering their ethical oversight.
Walmart - Walmart is the example of unethical practices. With a total revenue of $421.8
billion in 2011 Walmart has a large supply chain to manage. The company has been known
for practicing unethical behavior, trying to manipulate their supply chain through coercion.
Walmart is connected to many cases involving deaths, and injury during supply chain
operations, mainly in countries where low-skill, low-wage manufacturing predominates.
During an incident in Bangladesh, harsh working conditions lead to a factory fire, killing 111
people and injuring 150 more. Poor fire prevention systems, and unmapped exits greatly
contributed to these deaths. Following the incident, the press reviewed the internal finances
of Walmart, which revealed the corporate CEO, Mike Duke, received a wage raise to $20.7
million while workers in Bangladesh complained of low-wages totaling just $37 a month.
There were many other unethical behaviors that affected various Walmart, most of which are
correlated with poor supplier communication. As analysists predict, Walmart would increase
their deteriorating brand reputation by ensuring their suppliers comply with their corporate
values through an ethical auditing process.
Walmart incident to stock price chart
Apple example – Another conglomerate which suffered image devastation form poor
communication of ethics in the Supply Chain was Apple. From 2010-2012, Apple was
charged with poor workplace safety, underage staff, and unfair wages at their Foxconn plant
in China. Foxconn manufactured Apple’s IPhone, and IPad; thus, the third party company
was substantially responsible for the fabrication of Apple’s most successful merchandise.
When distraught factory workers began launching themselves from the roof of Foxconn,
news station around the globe began picking up the story. Protests began amongst
consumers, and during this period, Apple’s saw the largest portion of brand switching
internationally. Apple prompted action by adding greater oversight programs into Foxconn’s
management staff. Throughout the period, Apple’s bottom line was only minimally affected
because of their quick actions.
3.2. CSR Effects on Modern Trends
Three large trends have developed over the past decades that have greatly impacted the
landscape in which businesses operate. Millennials are maturing and entering the workforce, the
internet is making communications more transparent, and globalization has made the world more
interconnected. In this section we review the three predominating trends.
3.2.1. Millennials Care more about CSR
Generation Y or, as their known, “Millennials” constitute the largest portion of America’s
population: Individuals born 1982-2002. As Millennials are coming of age, they are impacting
workplace standards, and consumer spending trends. They are the most group oriented
generation since the GIs, noted for valuing philanthropy, and a firm’s social reputation.
Behavioral researchers acknowledge that the key attributes of Millennials include optimism,
confidence, sensitivity, and truly caring about the world and their place in it — as noted, these
traits can be powerful tools towards improving altruistic performance. When these individuals
reach managerial positions, they have the capacity to reform the outlook of business’ place in
society. For current employers to retain a competitive workforce, employers will have to
modify their view of social responsibility to retain Gen Y workers. Human resource theorists
posit that multinational corporations will have to augment current employee benefits, extend
company values beyond the workplace through philanthropic programs, and ensure that
international partners uphold similar corporate values. Dissention from these recommendations
can result in ramifications, such as employee turnover, or a repudiated brand image.
As consumers, Millennials, are instigating businesses to align with their values regarding
civic global responsibility. The now global Occupy Wall Street movement was largely fueled
by Generation Y. Members of these protests viewed their campaign as a fight for their future;
which consequently aligns with over 70% of millennials sentiments. However, the majority of
Millennials push social change through the workforce, avoiding public outrage. These
individuals are part of a less dramatic but, perhaps, equally powerful movement.
Forbes Magazine highlighted statistics from Bentley University concerning Generation Y:
85% of millennials want to work for a socially responsible or ethical company.
95% of millennials say that a company’s reputation matters to them.
91% say that a company’s social impact efforts are important when they are considering
which companies to work for.
A majority of millennials (51%) have concerns and doubts about whether most businesses do
the right thing.
In addition, Forbes notes that work ethic is a key definer of Gen Y’s psychographic values; in
observed instances of strong work ethic, Corporate Social Responsibility (CSR) was posed as a
hedonic motive. As the article notes, retaining employees relies on communicating a clear code
of ethics within a brand’s image, employment meetings, and throughout the value creation
process. Firms with consistent values throughout the supply chain are predicted to have the
highest employee output ratios, due to obtaining the most desirable youth.
3.2.2. Globalization
Globalization has flattened the World, making it possible to maximize profits through
offshoring inexpensive labor resources. Traditionally, a move towards a global market was
viewed as fundamentally imperative by capitalist economics. Dating back to Adam Smith’s
Wealth of Nations, offshoring was posited as beneficial for all parties, as countries would
maximize their benefits through specializing in resources to which the nation had an absolute
advantage. With this view in mind, large corporations embraced the idea of spreading their
operations to other countries in hopes of augmenting returns. However, criticism has since
ensued, with the growing acknowledgement of economic inequality: stagnation in wealth
where the middle class shrinks as wealth shifts to those who already hold the largest share of
capital. Multinationals are now being accused of social injustice, unfair working conditions
(including slave labor, non-livable wages, and hazardous working quarters), as well as
environmental depredation. There is a plethora of NGOs fighting against this trend — unions
worried about competition from cheaper labor, environmentalists worried about the
outsourcing of polluting activities, consumer protection groups worried about unsafe imports,
labor rights groups worried about bad working conditions in other countries, and social groups
calling for regulation. Many of their concerns are warranted, as the derivation of many of these
issues stems from interorganizational secrecy. When companies alter their structure to become
multinationals, they often outsource manufacturing, and procurement to third party firms.
Many multinationals make this alteration to avoid the negative image associated with direct
involvement in human rights violations. However, as the globalization trend becomes
permanent, the consumer class has become more aware of NGOs’ trepidations. This trend has
forced companies to adhere to the concerns of their stakeholders, and in the case of Zappos,
internalize international operations. Like Zappos, many firms have become transparent about
their international connections, which has garnered greater brand identity.
3.2.3. Internet and Transparency
An additional criteria of a completely flattened world is the rise of global transparency; which
has been spurred by international digital interconnection (i.e. the Internet highway). The
Internet has largely been the arbiter of making tradition company secrets completely open for
scrutiny. Contrary to open internet is “E-Government”: ‘electronic governance.’ E-Governance
is a form of electronic oversight where information, and communication technologies (ICTs)
within the public sector are moderated by governments (Bedi, Singh and Srivastava, 2001;
Holmes, 2001; Okot-Uma, 2000). E-Governance spreads digitized information from citizens,
businesses, and other arms of government signals over Wide Area Networks (WAN), the
Internet, and mobile computing. These technologies can serve a variety of different ends: better
delivery of government services to citizens, improved interactions in business to business
markets, citizen empowerment through access to information, and more efficient government
management. Despite the government oversite, resulting benefits are less corruption, increased
transparency, greater convenience, revenue growth, and cost reductions. E-Governance
According to Keohane and Nye (2000),
“Governance implies the processes and institutions, both formal and informal, that guide
and restrain the collective activities of a group. Government is the subset that acts with
authority and creates formal obligations. Governance need not necessarily be conducted
exclusively by governments. Private firms, associations of firms, nongovernmental
organizations (NGOs), and associations of NGOs all engage in it, often in association with
governmental bodies, to create governance; sometimes without governmental authority.”
The internet, social media, and other technology have enabled an expedited process for
communication, and transparency on various different levels. The abundance of information
and the speed that it is disseminated enables formal governing institutions, such as government
agencies, to be more effective. The spread of the Internet, and openness to government
information allows consumers to self-regulate buying from a firm. If negative buzz increases to
tipping-point, then a brand can lose its respect in a matter of minutes through viral social
media, and blog posts. Corporations are now dealing with a new generation that holds CSR,
and ethics to a high standard. Additionally the Internet generation is highly informed, and will
communicate their distaste, and react within seconds of a negative visceral response.
3.2.4. Modern Trends Wrap-Up
Applying these trends to the supply chain exemplifies the concerns of NGOs. With the
proliferation of cheap labor in the name of profit, moral abomination begin to persist, relative
to the repugnancy of the Industrial Revolution. Factory fires killing hundreds, a Bangladesh
factory collapse killing 1200, unrealistic wages, subpar living conditions, and a lack of supplier
accountability, are far too parallel the devastation of the Industrial Revolution. These abhorrent
situations can now be seen instantaneously from a smartphone. The new generations are
holding the blame for all internal stakeholders involved in the product creation. This requisites
acting ethically to retain brand equity while deflecting an average of $1 million in litigation. As
the Fortune article mentioned formerly concedes, the only Firm’s with an optimistic future are
those who lead in Corporate Social Responsibility.
4. INTERPRETATION
4.1. Effects of CSR
4.1.1. Stakeholder Theory
The stakeholder theory, postulated by R. Edward Freeman, determines how an organization
can manage their ethical conduct to appease stakeholder desires. The stakeholder theory
addressed morals and values in managing an organization. Stakeholders are anyone who is
involved with a particular company. According to stakeholder theory, business are responsible
for their stakeholder’s perception of the firm because they demarcate the purpose for the
corporation's existence. Due to the proliferation of technology, and globalization, stakeholders
have more access to a company's internal processes, and external relationships. The more
socially conscious consumer population is forcing businesses to be more responsible, as
environmental data shows consumers will avoid companies with unethical internal or external
business practices. Companies who wish to admonish a strategic advantage will include
primary stakeholders from employees to the consumer into their decision making process, as
well as reputable NGOs. These partners can provide a firm with insight concerning a firm’s
brand image, and recommend actions that will augment their image.
4.1.2. Michael Porter’s Social Progress Index
Michael Porter, a respected Harvard graduate, speaks on the matter of social growth. He
stresses the importance of social growth because of its affect GDP of a nation down to
individual company. The Social Progress Index (SPI) measures how society is progressing
each year. Apart of the social progress index is a level of ethics and the way citizens are
treated. Porter notes when there are high levels of GDP for a country, but a low SPI rating,
countries are unbalanced and often in duress. This same principle can be applied with
individual business. The SPI shows how topics like communicating ethics in the work
environment can have a lasting impact. Companies who ensure that their primary actives
within the supply chain (inbound logistics, manufacturing, outbound logistics, marketing, and
services) meet high SPI standards increase social capital, and brand reputation.
4.2. GRI & Auditing Implementation into the Supply Chain
Our research into corporate sustainability uncovered universal auditing standards that are
successful at improving a company's bottom line. The two most commonly adopted
auditing methods are SA8000, which is supported under the United Nations Council for
Human Rights, and the Global Reporting Initiative (GRI), which has been incorporated in
the European Union’s (EU) sustainability disclosure regulations. SA 8000 was originally
created in 1997 by the Social Accountability International (SAI), as a means to monitor
the social impact of businesses. During the same year, the GRI was established, but this
reporting method went further to encompass all aspects of the triple bottom line. Our
research uncovered that businesses that were certified with SA8000 were also capable of
receiving moderate rankings under the GRI. Consequently, companies that scored a top
rating of A+ saw larger leaps in ROI than their lower ranking counterparts. For the extent
of this essay we recommend that a company be certified under SA8000, while also using
the GRI as a means to audit the efficacy of their supply chain.
4.2.1 Importance of GRI
Companies attempt to reduce operating overhead through outsourcing labor to third parties.
These companies provide employees non-livable wages, while working in harsh conditions.
Simultaneously, they try to maintain corporate image by allowing their supplier more
autonomy; which fosters a fermented partnership, and licenses a company to defer blame away
from corporate leadership. Consequently, a study by Mamic correlated lower transparency into
supplier labor conditions with worse lead time demand forecasts. His study also correlated
higher profit yields with greater labor monitoring reports (Mamic, 2014, p. 308). Operations
are most efficient when consumer demand matches product supplied. This requisites firms
initiate an interdependent relationship with oversight through a shared monitoring system. A
linked monitoring system would make operations more opaque, and offer real-time production
data. Companies could then benefit from increased flexibility, and could alter output in real-
time. Cost metrics would also be more accurate as new metrics could be observed; for example
employee idle time. The GRI system would also be useful to provide consistent values between
all parts, and would circumvent negative public image by allowing the immediate termination
of contracts for noncompliant parties.
4.2.2. GRI’s International Results
A 2012 Study by Alfred D. Massis, and Giovanna Campopiano recovered a report
from the GRI commission which stated 70% of non-family firms, and 38% of family
firms within the EU were compliant with reporting standards. The two researchers
concluded that the success of the GRI is undermined by the lack of adoption by North
American, and Continental Asian firms. A goal of the GRI is allowing more
transparency throughout a firm, and stronger protections for business, and society at
large through an integrated auditing standard. According to Stakeholder theory, if all of
the businesses in the world balanced the needs of the social, and ecological environment,
the overall median earnings of the world would be increased, as well as total GDP. In
fact, the average companies loses 5% of their Revenues to fraud regulation or litigation
each year. Even worse, certified CFA Robert T. Biskuit reports a lack of social
accountability standards results in an annual loss of $3.5 trillion in Gross World Product.
Economists from Ponemon institute found that companies with noncompliance
programs cost multinational corporations 2.65 times the cost of internal compliance
programs. In response, NGOs, and the GRI boards are trying to influence the adoption
of the G4 to combat global waste, and create a more humane supply chain. The GRI
commission has pointed to the findings that companies involved in the TPP will have
stronger oversight of the procurement, manufacturing, and logistics practices if they
adopt a form of compliance standards. Current regulations under the TPP set a lower
regulatory oversight of the practices involved in international trade than is necessary for
an international responsibility standard. International trade deals have prompted scholars
to suggest using the SA8000 or GRI as a universal taxonomy for sustainability policies.
The countries with the highest multinational sustainability compliance, Norway,
Sweden, Finland, Switzerland, and Denmark have also seen lower economic volatility,
and higher profit margins per capita. For companies in the US who have simply adopted
a code of ethics have seen 3.9 times more earnings per share due to increased employee
engagement. The culmination of compliance benefits both within the organization and
throughout the supply chain suggest that a company can create a competitive advantage
through harmonizing their code of ethics throughout the supply chain. Internationally,
Companies with higher employment of workers 35, and under tend to score higher on
the G4, and have a more clear code of ethics.
4.2.3. Overview of GRI’s Evaluation Process
As can be seen in Graph 2.G., an organization that follows the compliant standards of
G4, the most current standards of the GRI, will be graded on categories affecting
Economic, Environmental, and Social performance. Companies who commit to G4 will
have to submit annual reports, and will be graded on three criteria: level of effectiveness
in each category, the level of compliance between the company’s partners, and the
transparency in supplying information relevant to category grading. To receive a C to
C+ rating, a company must disclose 10 of the company’s methods for achieving
performance measures, but is precluded from mentioning supplier details. In order to
receive a B to B+ rating, a company must disclose managerial codes of ethics, and
indicate how they ranked intraorganizational affairs, and interorganizational affairs on at
least 20 performance indicators. In order to receive an A rating, a company must have
follow the same procedure of a B rating, as well as adopting best in industry practices,
and utilize more than 20 performance indicators.
4.2.4. GRI & Integrated Systems Management: Key Benefits
Through our research we found that companies who used the GRI standards to
audit their entire supply chain were able to increase their ROI, while reducing their total
costs. Adopting the GRI monitoring system into the supply chain garners five key
benefits: more market flexibility, volume flexibility, resource optimization, harmonized
communications, and improved brand reputation. In this section we will mention the
benefits of a Socially Responsible Supply Chain Orientation (SRSCO). All of the
benefits previously mentioned requisite the adoption of an Integrated Systems
Management (ISM) approach: an interorganizational software system that allows for the
collection, and exchange of information pertinent to all members within the supply
chain. With this system, a firm, and their partners can reliably ensure every member of
the business is working responsibly, with the added benefits of gathering real-time data
from all members. An ISM approach opens all resource management data for every
partner in the value creation process, and documents a company’s practices. Integrating
this form of technology is the best current method for companies to guarantee GRI
compliance, and monitor CSR management.
Market Flexibility - With greater oversight over the supply chain, a firm can alter the
production output more quickly as information is passed between every stakeholder
involved in product creation. This can reduce the inventory-on-hand ratio; thus
reducing waste cost by matching forecast volatility. This can also alert the supply
chain to either increase logistics spending to meet demand or reduce logistics
spending. A benefit to opening data to all partners is improved market data
aggregation, which can provide more statistically significant information. Companies
with transparent systems on average have more precise data mining techniques.
Volume Flexibility - Along with the capacity to alter supply to match demand, a firm
that can reach a manufacturing, and warehousing areas of the chain more readily can
alter production, and storage volume. The original supplier, or manufacturer cannot
suppress worker practices to avoid tarnishing a receiving Firm’s reputation with an
IMS; the ancillary benefit being a reduction in excess stock to meet receiver’s demand.
Instead, companies with transparent systems management can forecast better
employee hour requirements to variate production volumes. Firms can make greater
predictions about volume forecast trends by sharing all available data, which can help
reduce stock-out percentage, as well as reduce inventory cost. More accurate data
ultimately reduces total cost for all parties involved in value creation. By stressing the
importance of ecological data as well, firms using an IMS in conjunction with GRI
auditing can avoid natural disasters by adjusting more quickly.
Resource Optimization - With greater oversight into real time employee output data,
a firm can ensure that it is getting the highest efficiency value from employees. If
employees are provided the assurance they are treated in an ethically permissible way,
they will become more compliant with the mission of the company according to
Michael nastanski and Daniel tschopp. Companies within the value creation process
will be required to view employee management data to ensure that employees are
being provided the tools to produce products most efficiently. Management data also
provides the capacity to alter working hours to optimize employee output; for example
employees may produce manufacture a product more quickly if they work a 7 hour
shift from 7:00 a.m. – 2:30 p.m. (assuming a half hour lunch), as opposed to a 9 hour
shift from 9:00 a.m. – 6:30 p.m. In addition, GRI auditing documents financial
sustainability as well, which can document how efficiently space was utilized by
logistics; for instance, a firm using train as their logistics means can review the use of
space, which can help several member of the value chain reduce cost.
Harmonized Communication – An integrated systems management adoption within
the supply chain allows for a transparent flow of information. To meet top rating by
the GRI council, a firm’s communication must be transparent between suppliers,
distributors, and resellers. A firm with ascertainable evidence by every member of the
supply chain also permits more employee empowerment. Employees can verify that
their company is acting responsibility, which studies show increases employee
engagement. As ethical standards become reviewable for all members within the
supply chain, employees will have a stronger grasp of corporate values. This practice
allows for more open communication, and can help firms capitalize on
recommendations from staff, as well as ensure whistleblower rights.
Improved Brand Reputation – The open nature of an IMS ensures stakeholders that
a firm is responsible for their actions. Top ranking companies under the GRI also
benefit from publications boasting a firm sustainability procedures, which can amplify
social capital. Companies that notice their partners violate corporate values can either
correct their partners more quickly, or rescind contracts to invest in suppliers who will
honor a company’s values; this would allow a firm to maintain their reputation.
5. CONCLUSION
Our team concedes, there are heavy limitations to our study. Without primary
evidence, our research is unable to create causal connections between SRSCO, and
corporate performance. We recommend that our study be continued by collecting financial
data from firms who implement different CSR measures. Our data is also limited in
demarcating the most effective codes of ethics on the supply chain. More detailed data
will have to be collected to determine which ethical by-laws garner the most ROI.
However, our research did provide primary indicators of financial success when
incorporating a code of ethics throughout the supply chain. With the companies we
researched, a strong CSR approach ensured more sustainable organic growth. These firms
also ranked higher amongst Millennials, and were able to increase their margins due to
heightened social capital. We recommend using multivariate analysis in the future, once
more data has been collected, to quantify the precise impact of certain triple bottom line
factors on a corporations projected bottom line. However, scholarly journals exemplified
immediate enactment of ethical auditing through GRI. These journals presumed that the
future of business responsibility would be determined by universal auditing standards that
replicate the transparency of financial auditing. Companies who are early adopter of G4
will position themselves as having ethical prowess, capitulating higher margins.
REFERENCES
5 Most Publicized Ethics Violations By CEOs. (2013, February 5). Retrieved October 1, 2015,
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