This seminar introduces the concepts, application, practice and strategies involved in determining the urgent need for business to operate through sustainable practices. In addition, it addresses ethical issues in a way that upholds and enhances the triple bottom line of a company: People, Planet, and Profit. Addition, this seminar introduces the students to concepts in business ethics and how it influences the topic of sustainability. The seminar teaches practical solutions on how to embed sustainability within the business operations. Students will come away from the course understanding what embedded sustainability is and how to drive proactive solutions that bring social innovation to the forefront of the business as a key strategy for future business success.

1. Lecture 2:
Sustainability & Ethics
More than just a public
relations statement…
Global Business Management

2. Global Business Management
Outline of the Seminar
12:30 – 4:15 - Seminar Session #2
• An actual case
• The Mefford Argument
• An Applied Case – Multinational
4:15 – Seminar Evaluation

3. Relating logistics management and supply chain management to
supplier networks and marketing channels
Source: Dr. Sweta Thota
Or Business (B2B)
Global Distribution
Value Chain Management
Channel Management
Distribution Channels

4. Value the relationships
for the long-term

5. https://www.youtube.com/watch?v=_5r4loXPyx8

6. The Fortune at the
Bottom of the Pyramid
Recent thinking and practice in
management has challenged the
widely held view that the role of the
poor…is to exercise our generosity
Bottom of the Pyramid = the 2.7 billion
people who live on less than $2 a day.
“Serving the World’ Poor, Profitably”

7. Poverty gap at
$2 a day (PPP)
(%)
2008-2012
Poverty gap is
the mean
shortfall from
the poverty line
(counting the
nonpoor as
having zero
shortfall),
expressed as a
percentage of
the poverty
line. This
measure
reflects the
depth of
poverty as well
as its incidence.
World Bank,
Development
Research
Group.

8. Global Business Management
The Problem
“the critical barrier to doing business in rural regions is distribution access.”
Today’s marketing literature assumes a developed world marketplace of intense
competition and a highly developed communications and distribution
infrastructure.
The developing world, particularly its rural markets, is almost entirely ignored.
What can be Done?
How do customers in developing countries get access to products and services?
Over coming this barrier is called socially responsible distribution

9. The Distribution Challenge
After an order 2 months ago
the book is delayed again….

10. - Describes initiatives that provide poor producers and consumers with
market access for goods and services by helping neutralize the
disadvantages they suffer from inadequate physical links to markets,
information asymmetries, and weak bargaining power.
- Governments, civil society, and the private sector can all play a role in
providing
Taking Costs
Out
Reinventing
the
Distribution
Channel
Taking the
Long-term
view of
investing for
the future
Creative Market-Based alternatives identified

11. Global Business Management
Three-quarters of India’ Poor lives in rural areas and
87%+ lives in poverty (less than $ day)

12. Cost of a Cup of Coffee…

13. “Socially Responsible Distribution: Strategies
for Reaching the Bottom of the Pyramid”

14. The Problem
“the critical barrier to doing business in rural regions is distribution access.”
Today’s marketing literature assumes a developed world marketplace of intense
competition and a highly developed communications and distribution
infrastructure.
The developing world, particularly its rural markets, is almost entirely ignored.
What can be Done?
How do customers in developing countries get access to products and services?
Over coming this barrier is called socially responsible distribution

15. Socially Responsible Distribution

16. ITC committed to significant enhancement of its
rural distribution by investing in a chain of mini-
malls to sell a range of goods and services
• Provides real-time information to farmers
• Technology is used to redefine power in the
distribution channel…however it did affect
intermediaries
• Developed trust….with the farmers and the
community
Different than the Mall Strategy?

17. • NGO – Non Government Organization
• Example of a non-profit
entrepreneurial startup.
• Illiteracy is a significant barrier to
enhancing welfare at the Bottom of the
Pyramid

18. • Rural population’s ability to benefit
from India’s growth, industrialization,
and development is seriously
compromised by poor communication
and distribution links
• Given the difficulty in ensuring break-
even operations in rural areas, the DoP
has extended the reach of its network
by relying on private entrepreneurs
who offer a range of postal services
from their own private premises.

20. • Develop a scalable delivery system
• Setup strong centralized service design, supervisory, and control systems
• Cluster retail locations
• Develop benchmarks for retail locations
• Derive higher volume by share distribution
• Engage the community to facilitate entry
• Select trustworthy retail representatives
• Carefully adjust price and features

21. • What are thoughts and
examples?
• What type of products?
• What will need to change?

22. Insight
“Looking at your business through the lens of sustainability can
be a source of tremendous creativity, helping to fundamentally
rethink the nature of your business venture” – Embedded
Sustainability

23. Journal Article –
Business & Society Review
“The Economic Value of a
Sustainable Supply Chain”
• Written by Bob Mefford
• USF Professor
• Makes a case for CSR
to become a key part of
operations by how CSR
leads to better financial
performance
• The paper tries to appeal
to a capitalistic society.

24. Introduction
“An economic argument
can also be made for
sustainable corporate
actions”
Milton Friedman (1970)
makes this argument in
his article “The Social
Responsibility of Business
Is to Increase Its Profits?”
But what if socially
responsible corporate
behavior actually
increases returns to
shareholders?
True Sustainability Profit
Planet
People

25. Global Business Management
This paper
Refers to
Sustainability
and CSR
as identical….

26. Brand Equity
An important marketing
concept implying firms
with strong brand equity
develop a loyal and
profitable customer base
Service Profit Chain
Links customer Sat and
loyalty in services to
market performance
Alien Tort Statute in the US
U.S. firms may even be sued in U.S. courts for their corporate practices abroad.

28. Another tenet of the lean philosophy is that if one partner in a
supply chain proposes, the others will also benefit, creating a
virtuous cycle.
Shared Value
Does not attempt to
squeeze suppliers

29. A key part of lean production philosophy is that employees are assets
rather than costs.
This, of course is not the way in which MNEs using foreign subcontractors
think of employees of those subcontractors, an most probably do not think
of their own employees in that way either…
Eventually the work will move elsewhere as the country develops
economically and wage rates inevitably rise, or the exchange rate moves
against them, without productivity gains.

31. “Contrary to the argument often used by firms as they seek the lowest cost
source of supply, it may actually result in lower
long-term production costs to pursue sustainable supply chain practices”

32. If in fact a firm realizes higher revenues, lower costs, and reduced financial risk because of CSR
policies, then the market should reward higher profits that are expected to result in the future

34. The firm, as a social
institution, with its powerful
influence on economic
activities, has a moral
responsibility to try to better
society.
This argument, although
appealing to many
philosophically, is unlikely to
result in much movement
toward greater CSR in most
capitalist countries.
Social Activists Capitalist Countries
The Friedman view still
dominates in most
boardrooms and executive
suites…
Many firms are unlikely to
change their practices unless
they see an economic benefit
to doing so or are required by
law to change.
It is often difficult to convince
a CEO or a CFO on moral
arguments alone
Therefore, theoretical and
empirical evidence in support
of ethical corporate behavior
leading to greater shareholder
value is useful if one believes
firms should increase their
CSR efforts.
Friedman Again…
Economic Benefit
Moral & Profit
Link Needed
More Work Deeds
to Be Done

35. Compliance Collaborative
Vs.

36. • The collaborative approach involves the buyer working closely with the
supplier to not only see that the code of conduct is followed but upgrading the
production system to eliminate the “root cause” of the poor working
conditions—low quality and productivity forcing the supplier to compete
mainly on price.
• Lean production practices are fully supportive of the collaborative approach
and result in a win–win–win situation for the buying firm, the supplying firm,
and the workers at the supplier.
• The buyer receives lower cost and better quality products, the supplier
increases its quality and lowers its cost through higher productivity, and the
workers can share in the increased competitiveness of both firms.

37. Strategic CSR targets those social issues that are closely tied to the company’s
business, providing greater leverage to both increase the firm’s competitiveness
and mobilize the firm’s resources and capabilities to benefit stakeholders.
The model proposed in this paper develops some mechanisms whereby CSR
practices could lead to increased competitiveness, profitability, and valuation of
the firm.
Marketing Channels:
The marketing effects result
from greater customer loyalty
and brand equity, which lead to
higher revenue and profits.
Production Channel
On the production side, the
implementation of lean
manufacturing results in better
working conditions, improved
employee morale, more training
and higher skills, which, in turn,
result in higher quality and
productivity, reducing costs.
Financial Channel
A financial effect occurs because
of the greater predictability of
cash flows and reduced risk,
resulting in a lower cost of
capital.
Value Chain Management
Synergy Between the Channels
There are some feedback and interactive effects between these three channels that synergistically produce higher
profits and increased shareholder returns.

38. More Work is Needed
This model still needs to be
tested in its entirety….
How will you
contribute to this
change in society?

39. Prevalent View - Cost Best Practice View - Opportunity
Ecological and social factors are treated primarily
Defensively Offensively
In Isolation Systematically – Every Business Decision at every
point in every product, service, or process life
cycle.
In Terms of Harm Reductions In Terms of Zero Harm and Positive Benefits
As a Niche As Mainstream
Through Trade-Offs (Win – Lose) Through Innovation (Win-Win)
As If They Require Social or Green Price Premiums As If They Must Be Competitively Priced
In Light of Incremental Change In Light of Disruptive Change
As a Subset of Existing Customer Needs As an Entirely new Class of Buyer Needs –
Contributing to the Common Good
Source: Adapted from Embedded Sustainability

40. Global Business Management
Extending CSR
(Corporate Social Responsibility)
to a Global Supply Chain
• The 7th International Conference on Operations and Supply Chain Management
(ICOSCM 2013)
Antai College of Economics and Management, Shanghai Jiaotong University
Shanghai, China
June 22-25, 2013
Presented by:
Payson E. Johnston, University of San Francisco
Paper Co-Written by:
Robert N. Mefford, University of San Francisco

41. Outline of the presentation
• Objective of the research
• Pressures for CSR
• Review of previous research
• Case study of a multinational firm
• Discussion of issues and challenges in supply chain CSR
• Conclusions and a look ahead

42. Objective of the Research
• Review of a Multinational’s sustainability journey is discussed in the
context of the theoretical and empirical literature on CSR. Implications
for other firms undergoing a similar evolutionary process are highlighted.

43. Pressures for CSR
Demands
from the
company’s
stakeholders
(employees,
customers,
suppliers,
communities,
governments,
and
shareholders
(Waddock 2008)
Pressures
from their
peer
companies
Global
concerns
about the
environment
Ratings and
rankings
such as
Fortune
magazine’s
annual
“Most
Admired
Companies”
issue
Non-
Government
al
Organization
s (NGOs)
working
conditions in
developing
countries
became
evident
Social
investors
who direct
their
investment
to socially
responsible
firms
“Enlightened
long-term
self-interest”
(Blake 2006)
There is an
increasing
body of
evidence
that
sustainabilit
y efforts can
actually
increase
shareholder
value
(Eccles, et al,
2012;
Freeman, et al,
2010; Porter
and Kramer,
2011)
Since the 1980’s firms around the world have confronted
an array of pressures to become “socially responsible”
….at first the effort was defensive

44. (Blake 2006; Eccles, el al, 2012; Clark 2007; Mefford 2012)
Increasing Productivity and quality,
reducing costs,
motivating employees,
mitigating risks,
and increasing brand image

45. Review of previous research on
CSR• Models for CSR evolution in a company:
• Elementary-engaged-innovative-integrated-transforming
(Mirvis and Googins, 2006)
• Social stewardship-social responsiveness-business ethics-global citizenship
(Frederick, 2008)
• Protector-builder-innovator (Blake, 2006)
• Risk management-strategic intent-citizenship
(Costello and Lozano, 2009)
• Corporate social responsibility-corporate social watchdog-supply chain
responsibility (Spence and Bourlakis, 2009)

46. Lean & TQM
Extended to Suppliers
• Similarities to the quality and lean journeys of companies
(Lu, et al. 2012; Gopalakrishnan, et al, 2012; King and Lennox, 2001; Narasimhan and Schoenherr, 2012)

47. Case study of a multinational
firm’s CSR evolution
• Evolution of CSR and the Incorporation of Sustainability into Culture
• Steps Taken to Adopt CSR in the Business
• Future prospects of CSR

48. Evolution of the MNC CSR Journey
and the Incorporation of
Sustainability into the Culture
Starts
discussing CSR
openingly and
eventually
reporting on
CSR efforts
Compliance caused
a big shift
Moved beyond
brand level
discussions to
ROI Discussions
CSR starts to
Operationalize
within the
Business w/ Team
reporting to
Supply Chain
Executives
Reducing
packaging & more
comprehensive
take back and
recycling of
products
Embedded
into Design
Principles
Suppliers
Required to
Sign-off on
Code of
Conduct
Grading of suppliers
on their CSR reports
/performance &
grading of carbon
reduction
disclosures
10 year period

49. Steps Learned by the Firm on
Adopting CSR in the Operations
1. Moving CSR from the corporate level and operationalizing it through the company
2. Creating the tools and processes necessary to track, collect, and drive
3. Ensuring the finances were/are allocated
4. Look for Win/Win projects (Profit & Society) with positive business ROI:
Sustainability
5. Bottoms up grass-roots efforts and top down support are both needed
6. Don’t be afraid to try and fail and try again and again and again

50. Future Prospects at the Company
Movement of CSR practices into the supply
chain
Drive for increasing transparency within the
supply chain
Move to a system approach to measure
sustainability
Embed into the DNA at every level and
function
Leverage industry standards and organizations
Move CSR beyond the walls of the company

51. Comparison of this Company’s
CSR journey to Other Companies
• Firm has progressed through the stages to corporate citizenship fairly
rapidly (Frederick, 2008 / Costello and Lozano, 2009)
• Corporate social responsibility-corporate social watchdog-supply chain
responsibility (Spence and Bourlakis, 2009)
…the company is developing programs to move towards that goal at
this present time
• Next stage of expansion of CSR to supply chain presents many
challenges:
• Cultural differences in views on CSR with suppliers
• Power imbalances in supply chain
• Small suppliers lack knowledge and resources
• Limitations of codes of conduct and audits
• Mutual benefit must be emphasized
This MNC has a multi-layered and global supply chain
allowing for the “multiplier effect” CSR (Preuss 2005)

52. Lessons from
the quality and lean journeys
• History of the quality and lean movements
• Barriers encountered in implementing quality and
lean programs
• Supply chain challenges and solutions
• Collaborative approach emphasizing win-win most
effective
• A few firms were successful in spreading lean and
quality programs to their suppliers
(Mefford 2010, Womack and Jones 1996, Anderson and Skjoett-Larsen 2009 )
Will this approach work for extending
CSR to the supply chain?

53. This Appears to be the Next in the
Evolution of CSR
Challenges are surmountable
Potential for realizing the dual benefits of
improved profitability and societal impact for
all members of the supply chain are huge
when one considers the hundreds of suppliers
and thousands of stakeholders involved in a
global firm
Involves elements of the:
 “Transforming” stage of Mirvis and Googins (2006)
 “Global citizenship” stage of Frederick (2008)
 “Innovator” stage of Blake (2009)
 “Citizenship” stage of Costello and Lozano (2009)
 But is closest in concept to the “Supply Chain Responsibility Stage” of Spence
and Bourlakis (2009)

54. Conclusions and a look ahead
1. The potential of Supply Chain CSR
2. Embedding CSR in the corporate culture and strategy
3. “Shared value” leads to the best results for the company and society
4. Supply Chain CSR will require time, resources, and patience but is
achievable…a long term project
5. This is the new frontier of CSR for many global companies
“There is little evidence to suggest that ESCM (Ethical Supply Chain Management) is widely
embedded through the supply chain.” (Millington 2008)

55. Custom Programs in Entrepreneurship & Innovation
How does this Apply
to Value Chain Management?
• The channel is were the actions is at
…production, marketing, and financial
• CSR is critical in these functions

56. Value the relationships for the long-term

57. Custom Programs in Entrepreneurship & Innovation
Relating logistics management and supply chain management to
supplier networks and marketing channels
Source: Dr. Sweta Thota
Or Business (B2B)
Global Distribution
Value Chain Management
Channel Management
Distribution Channels

58. 1. Be able to identify ways that embedded sustainability can improve value chain
conditions and what are the ethical implications that should be addressed.
2. Understand the basics of business ethics and sustainability terminology
3. Gain the skills to analyze issues plus make business manager decisions that are
ethical and sustainable and contribute to improving the world in which we live
and do business.
4. Utilize the concepts of business ethics to address “gray areas” in the
marketplace via a logical and fact-based way that ensures a sustainable
business.

59. 1. Be able to identify ways that embedded sustainability can improve value chain conditions
and what are the ethical implications that should be addressed.

60. 2 - Understand the basics of business ethics and sustainability terminology

61. 3. Gain the skills to analyze issues plus make business manager decisions that are ethical
and sustainable and contribute to improving the world in which we live and do business.

62. 4. Utilize the concepts of business ethics to address “gray areas” in the marketplace via a
logical and fact-based way that ensures a sustainable business.

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