Corporate Social Responsibility. The Implementation of Corporate Codes of Conduct in the Global Supply Chain.

Globalization and trade liberalization have altered the premises for international business operations and changed the sources for competitiveness and business success. It has become increasingly important for corporations to build deeper and strategic relationships with business partners, employees and customers, to develop a favorable reputation in social issues and to be trustworthy in the eyes of society. Multinational corporations (MNCs) increasingly focus on their core business competencies and outsource complementary operations. The result is a development of complex networks of MNCs, suppliers and subcontractors&semic a new business organization characterized by short-term and fast-changing relationships. MNCs are increasingly held legally, socially and economically accountable for inferior labor and human rights practices throughout the supply chain. The growing trend to require corporations to take greater social responsibility for their business operations has resulted in corporations formulating their own corporate codes of conduct in order to achieve better social performance in the global supply chain. This thesis examines the different barriers and challenges present in the current implementing system of voluntary corporate codes of conduct in the global supply chain. Corporate codes of conduct are principally voluntary initiatives undertaken by the private sector in order to address various social issues. In contrast to legislation the corporate code of conduct requires a positive commitment by the corporation before it applies. Corporations will not adopt codes and work for their implementation only for altruistic reasons. The corporation has to be convinced that being socially responsible makes not only sound ethical, social and legal sense but also business sense. The views whether there is a link between corporate social responsibility (CSR) and enhanced financial performance for the corporation (''the business case'') or not are parting. Mostly this is due to a lack of conclusive research and quantitative data. However, corporations increasingly respond to public pressure as if it has powerful financial impacts. Increasingly corporations are acting like they are convinced that being socially responsible means better financial performance for the corporation - in the long run. Statements declaring the importance of CSR by corporate executives and investors show a change in business thinking. Several factors, evoked by new social expectations and demands from society, indicate that ethical and social consciousness is good for business. Creating a reputation of being socially responsible has become crucial for competitiveness and market positioning of the corporation. Other potential benefits are related to customer satisfaction and loyalty, good investor relationships and access to capital, employee recruitment and decreased risk of litigation. If corporations realize ''the business case'' voluntary corporate codes of conduct have the potential to serve good social purpose. The adoption of corporate codes is relatively wide spread among corporations. The challenge today lies in how companies are to formulate and implement the codes. For corporate codes of conduct to be effectively implemented in the global supply chain it is important to look beyond monitoring procedures. The voluntary corporate code is a flexible tool to address social concerns, which have no ''one-size-fits-all'' solutions. The code offers the corporation a means to form solutions to the special needs and public concerns of the individual corporation and its stakeholders. However, there are substantial flaws with the inherent system of code development and implementation. The codes are predominantly formulated and applied unilaterally by the MNC authoring the code. Suppliers and their workers need to be more involved in the development and implementation of the codes. Furthermore there is a need for harmonization of codes and increased consensus regarding its application procedures. The multitude of codes imposed on suppliers from different MNCs are also likely to be inconsistent as to their code content and standards. Duplication of codes may cause inefficiency on behalf of the supplier as multiple auditing and inconsistent auditing procedures, management requirements and remedial processes increase transaction costs. The source of many of the difficulties associated with effective implementation of corporate codes of conduct in the global supply chain is to be found in the structure of the industry. Long and complex value chains with multiple layers of suppliers and fast-shifting relationships characterize the present business model. The nature of the supply chain causes difficulties in building trust between the MNC and its stakeholders