Corporate Social Responsibility in Multinational Corporations
Option #1: CSR in Multinational Corporations
Companies doing business internationally deal with complex sourcing and supply chain issues. Unfortunately, many multinational corporations have failed to include CSR practices in their global operations. Due to a number of international human rights disasters resulting from lack of supply chain auditing, corporations are rapidly becoming more transparent and are adopting globally accepted codes of conduct.
Read the case of Apple and Foxconn (pg. 273) See Attached in the textbook. In a well-written paper, respond to the following issues:
• Explain why a firm is responsible for its supply chain. If the answer is that a firm is not responsible, discuss an organization that exemplifies this. If the answer is that the firm is responsible, then how far down the supply chain does this extent (i.e., to immediate suppliers, the suppliers' suppliers, or beyond)? Support all claims or assertions with scholarly research according to the CSU Global Writing Center (Links to an external site.).
• Why does Apple continue to source its production to overseas firms such as Foxconn? What advantages, if any, does this generate for Apple? What are the disadvantages, if any, that result from this relationship? How could Apple have avoided the threats identified? Overall, do the benefits of Apple's decision outweigh the costs? Support your opinions with scholarly research according to the CSU Global Writing Center (Links to an external site.).
Your well-written paper must adhere to the following parameters:
• Be 4-5 pages in length, not including the title and reference pages.
• Be supported by six, with at least four scholarly references. Remember, you must support your thinking/opinions and prior knowledge with references; all facts must be supported; in-text references used throughout the assignment must be included in an APA-formatted reference list.
• Review the grading rubric within this assignment for more detail on how this assignment will be graded.
• Be formatted according to the CSU Global Writing Center (Links to an external site.).
Review the Module 4 Critical Thinking Assignment rubric for full details on how you will be graded on this assignment. Reach out to your instructor if you have questions about the assignment.
Case Study
Apple
Although some firms are reconsidering the value to their business of outsourcing, for others, outsourcing makes clear business sense. Apple is one of these companies. One reason for this is that, today, the best electronics in the world are made most efficiently in Asia. One company in particular does it bigger and better than anyone else:
Foxconn (also known by its parent company’s name, Hon Hai) is the world’s largest contract manufacturer. . . . Across China, it employs 1.4m on 28 campuses. . . . In the past decade it has gone from being one of many invisible firms in the electronics supply chain to the world champion of flexible manufacturing.61
Apple, along with many other major consumer electronics firms, is highly reliant on Foxconn. According to some reports, “about half of all consumer electronics sold in the world today are produced at [Foxconn’s] mammoth factory campus in Shenzhen, China.”62 As such, the firm makes a large percentage of Apple’s iPhones and iPads. Not only is Foxconn able to make those products well, but it is also able to make them extremely efficiently:
Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly-line overhaul. New screens began arriving at the [Chinese] plant near midnight. A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.63
In spite of the remarkable economic value that Foxconn delivers, like Nike before it, Apple has received some negative press for its extended supply chain in Asia. In particular, as its biggest supplier, conditions at Foxconn’s factories have drawn the greatest media attention64 that has covered a range of issues related to employees striking,65 rioting,66 committing suicide,67 being underage and underpaid,68 and being poisoned.69
As a result of the press coverage, Apple under Tim Cook has moved to alter stakeholder perceptions of its commitment to an ethical supply chain by taking a number of steps to improve conditions at Foxconn’s factories. First, Apple released a report that comprehensively assessed working conditions in firms “that represent 97% of its materials, manufacturing and procurement spending”—the most detailed report on its supply chain that Apple has released. Second, Foxconn announced it will increase wages, reduce overtime, and generally improve working conditions for all its employees.70 Third, Apple committed to have all its supplier factories audited by the third-party organization Fair Labor Association (FLA), along with a promise to stop working with those suppliers that “do not measure up to its labor and human rights standards.”71 Finally, following the FLA’s audit, Apple and Foxconn agreed to implement the changes recommended, in particular in relation to pay and overtime—recommendations that “included reducing work hours to a maximum of 40 hours a week and limiting overtime to a maximum of 36 hours a month—the legal maximum in China.”72
In spite of all the negative stories that have emerged in the Western press about Foxconn’s oppressive factory conditions and its relationship with Apple, two points are worth keeping in mind. The first point concerns the effect these stories have had on public perceptions of Apple—arguably, “they have not impacted Apple’s reputation one jot,”73 which suggests they are not an issue for most of the firm’s many stakeholders. The second point is the position of Foxconn’s employees, many of whom moved from the countryside in China to its big cities in pursuit of economic progress. In response to Foxconn’s commitment to bring its overtime rules in line with Chinese laws, “allowing workers to work no more than nine hours of overtime a week,” and improve health and safety conditions (which some fear will reduce margins and threaten jobs), employees are beginning to push back. Interviews with workers at Foxconn’s Shenzhen campus revealed
that they work more than the legal limit of nine overtime hours a week. A majority said they work 10 to 15 overtime hours and would prefer more, having left their distant homes to make money in this southern Chinese boomtown.74
In acting to protect its reputation, Apple is merely the latest firm to learn from the trial and error of earlier pioneers, such as Nike. For these firms, their reputations and the values around which their brands are built are core strategic assets. And in some respects, the supply chain is more of a strategic issue for Apple, given that supplier contracts are usually longer in the consumer electronics industry than “the three-month terms common in the apparel business.” This necessarily “gives Apple a much bigger stake in the long-term success of Foxconn as a supplier, and makes it less attractive to cut and run to a cheaper option.”75
In general, factory audits conducted by independent third parties serve to guard against these reputation threats. In spite of the challenges (“At HP, for example, only seven of the 276 factories in its supply chain fully complied with its code of conduct at the last audit”),76 audits are seen as a solution whereby Western firms can continue to operate in low-cost environments, local employees can continue to benefit from their presence, and NGOs can receive some assurance that the local employees are not being abused.77 Best practice, pushed by firms such as Nike and GAP (and now Apple), dictates that firms should work with contractors to improve conditions when violations occur and should sever ties only in persistent cases.78
CSR in Multinational Corporations
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CSR in Multinational Corporations
Explain why a firm is responsible for its supply chain. If the answer is that a firm is not responsible, discuss an organization that exemplifies this. If the answer is that the firm is responsible, then how far down the supply chain does this extent (i.e., to immediate suppliers, the suppliers’ suppliers, or beyond)?
Multinational corporations happen to traverse the entire world, and their influence in the world is immense. Their activities also happen to influence how the world works, including laws that are adopted and the daily consumer decisions. Recently, several multinational corporations have come under fire for their relationship with suppliers who do not seem to be as socially responsible as they are. Even though some companies have claimed responsibility for the actions of their suppliers, there has been a debate over whether such companies should take responsibility for the actions of suppliers further down their supply chain. Numerous companies, for example, Apple, Dell, Nike, HP, and Adidas, have come under pressure from the media, the public, and other organized groups. These companies were accused of being in bed with suppliers who were not socially responsible. Some companies like Nestle had to issue a public declaration noting that it would not continue to buy cocoa from suppliers who were tolerant of child labor (Ruehle et al., 2017). However, as the researchers indicate, Nestle has struggled to ensure that it remains true to its declaration. Therefore, the question here is, should multinational corporations be held responsible for the actions of their suppliers further down the chain?
The answer to the question above is yes. Multinational companies should be responsible for the actions of their suppliers, and the extent of their responsibility should be beyond their suppliers’ suppliers. The reason for the above is that these companies make billions because of their supply chains. In the same way that, for example, Nestle is keen to make sure that its chocolate bars sell, it is the same way that they should commit to making sure that their chocolate is not tainted with labor from children who should be in school. It is retrogressive to guarantee one person a future at the expense of the futures of tens of others. As indicated by Tekin, Erturk, and Tozan (2014), “all companies are obliged to implement practices and initiate activities on economic, environmental, and social aspects to maintain their sustainability.” However, even though this is the case, the chances are high that a supplier in the chain will be negligent of its obligation. In such instances, it is the responsibility of the multinational corporation to make sure that all its suppliers comply with the rules and regulations of being socially responsible. In a bid to protect their brands and to ensure their names are not tainted, multinationals will at times account for the misdemeanors of their suppliers (Amaeshi, Osuji, Nnodim, 2008). In such instances, multinationals are usually and typically looking out for their interests. The billions they make should be accounted for in terms of whether they are being made legitimately. It is possible for these companies to fuel vices through their suppliers because of the money they have. For example, if Nestle had continued to work with suppliers who entertain child labor, it is highly likely that the more Nestle grows, the higher the number of children will be used in the farms because of the need for cheap labor. Therefore, this responsibility should be on suppliers beyond the suppliers’ suppliers.
Why does Apple continue to source its production to overseas firms such as Foxconn? What advantages, if any, does this generate for Apple? What are the disadvantages, if any, that result from this relationship? How could Apple h...