Business-Society Relations in Retail Value Chain (23E54000, 6cr) CSR in supply chain management Mika Skippari Aalto University School of Economics

Stakeholder relations as a driver for sustainable supply chain management (1) Effective supply chain managements requires identification and understanding of customer needs. Importance of customer experiences has been emphasised in the creation of customer value; the dogma of customer orientation. At the same time, traditional supply chain management has focused on economic efficiency (= decreasing costs) –However, customers and consumers have become more aware of societal effects of business, and they require and expect firms to behave social responsible way. The new marketing myopia ( Smith et al Journal of Public Policy & Marketing, 29 (1): 4–11 ) –Customer value and customer experiences have been overly emphazised in marketing actions; the role of customers is been considered as too narrow –Unhealty food (fast-food retailers and yourg customers), car manufacturers (US) producing powerful cars

Stakeholder relations as a driver for sustainable supply chain management (2) Sources of the new marketing myopia –A single-minded focus on the customer to the exclusion of other stakeholders –An overly narrow definition of the customer and his or her needs –A failure to recognize the changed societal context of business that necessitates addressing multiple stakeholders

Stakeholder relations as a driver for sustainable supply chain management (3) In order to manage succesfully their supply chains and create long- term, comprehensive customer relationships, a firm has… –…to take into consideration a wide array of various stakeholder interests in their marketing actions ( a shift from customer orientation to stakeholder orientation) –…to understand that customers / consumers can have different stakeholder roles and identities Market orientation plus (Hult 2010, Journal of the Academy of Marketing Science) –Market-focused sustainability that is based on effective stakeholder management –Integrating the customer and other important stakeholders into marketing strategy making and implementation –A need for a broader sustainability perspective to ensure that a firm’s consumer, business, supply chain, community and environmental relationships and interactions remain viable.

Changing and context-driven stakeholder roles Customers are not only “consumers” that seek to satisfy their immediate material needs Customer can have multiple stakeholder roles (parent, employer, community member) –“generalized customer” (Daub and Ergenzinger 2005) Customer perceptions of responsibility varies depending on the stakeholder role Perception of sustainability of a stakeholder can vary in different contexts / situations (e.g., environmental activists in Botnia’s pulp mill investment in Uruguay)

Sustainability actions Can be divided into three groups: –Charity –Business operations (e.g., environmental-friendly production system) –Product-related sustainability (fair trade, organic food) Product-related sustainability is the most effective way to create customer loyalty and awareness ( Du et al Reaping relational rewards from corporate social responsibility: The role of competitive positioning. International Journal of Research in Marketing, 24 (3): 224–241 )

Sustainable supply chain management Effective supply chain management can help deliver, among other benefits, improved sustainability (reduce waste and reduce exposure to resource, political, criminal, and financial risk) ( Linton et al Sustainable supply chains: an introduction. Journal of Operations Management, 25 (6), 1075–1082 ). In order to do that, a firm’s long-term sustainability goals requires an integrated perspective incorporating both marketing and supply chain considerations (Closs et al., 2010) –From a marketing perspective, sustainability goals strongly influence product design, communication, and channel selection. –From a supply chain perspective, sustainability goals strongly influence component selection, materials sourcing, production, packaging, distribution, and recycling decisions.

Sustainable supply chain management A firm has to consider the cross-functional marketing and supply chain interactions of value-added processes –marketing decisions related to promotion and package design strongly interact with supply chain decisions related to sourcing, packaging, manufacturing, distribution, and recycling A poor package design choice may result in reduced sustainability through product damage or waste, increased transportation cost, or limited recycling capability

Variations in sustainable supply chain leadership among global firms (Closs et al., 2010) Four dimensions of sustainability: Environmental, Ethical, Educational, and Economic Specific sustainability actions internally or with supply chain partners –Conservation (e.g., minimize reliance on natural resources) –Usage reduction (reducing waste, increasing recycling) –Business management practices, employee relations, community involvement, outsourcing David J. Closs & Cheri Speier & Nathan Meacham Sustainability to support end-to-end value chains: the role of supply chain management. Journal of the Academy of Marketing Science 39:101–116.

Variations in sustainable supply chain leadership among global firms (Closs et al., 2010) Sustainable leadership types: ”Reactor”, ”Contributor” and ”Innovator” Reactor –Economic approach, short-term perspective, comply with laws and regulations Contributor –Recognize strategic importance of sustainability, participate in community development, enhance existing supply chain sustainability Innovator –Strategic priority on sustainability, create new initiatives, apply sustainability to change and positively benefit their stakeholders and communities David J. Closs & Cheri Speier & Nathan Meacham Sustainability to support end-to-end value chains: the role of supply chain management. Journal of the Academy of Marketing Science 39:101–116.