How Logistics Firms Deal with
and Report on CSR Expectations
Master’s thesis within Business Administration Author: Mengni Tong P.N.860726-‐2287 Toni Moussa P.N.861222-‐1690
ACKNOWLEDGEMENTS
We would like to thank our thesis tutor Professor Paul McGurr for giving us full support during the whole writing period, especially for his inspiration, great guidance, and suggestions. We would like to express our gratitude to Associate Dr. Lucia Naldi and the seminar group who consulted us for certain problems, and promoted our thesis work all the time.
We would like to thank the department of Logistics and Marketing for giving me the fantastic opportunity to study a Master Degree in International Logistics & Supply Chain Management, and showing great patience and support during our lengthy journey towards graduation. All the professors and staff in the department have been a real pleasure to work with during our time at JIBS!
ABSTRACT
The concept of Corporate Social Responsibility (CSR) is not new; however, it has started to gain more attention during the last fifteen years. During this period, logistics activities were structured to maximize profitability of all firms in the supply chain by including only economic costs while disregarding social and environmental costs. Since logistics firms play a vital role in international trade, and since they are one of the main types of firms that are facing pressure from various shareholders to deal with social and environmental issues, it can be concluded that the performance of logistics enterprises under CSR pressure is worth investigating.
Literature review has been performed by the authors to discuss previous research on the environmental and social sustainability development, the concept of corporate social responsibility, CSR reporting and different ways of reporting, the geographical differences in Reporting CSR (Asia, Europe, and North America), CSR guidelines, and finally the term of logistics social responsibility.
A sample of 50 logistics companies is selected from three regions: Asia, Europe, and North America, which is presenting seven different logistics categories. We access to separate CSR reports ranging from 2009 to 2011 and other disclosures on the firms’ websites in order to analyze their CSR reporting status and practices under CSR pressures. Different reporting guidelines(e.g. GRI, GC, ISO 14001) and report types (e.g. Corporate Social Responsibility Report; Sustainability Report ) were investigated
Environment; ii) Society; iii) Shareholders; iv) Employees; v) Suppliers. Furthermore, for CSR practices implemented by other logistics firms which do not prepare CSR reports, four common dimensions are studied in the thesis: Environment, Employees, Consumers and Communities.
In the end, suggestions about the way to improve the current practices of corporate social responsibility reporting are provided. The paper also discusses the value of the results both for the business field and the academic field.
KEYWORDS: Logistics firms, Cooperate social responsibility, Sustainability, Environment, Reporting
TABLE of CONTENTS
1 Introduction………..1
1.1 Background………..2
1.2 Problem Discussion……….9
1.3 Purpose and Research Questions………...10
2 Literature Reviews……….12
2.1 Environmental and Social Sustainability Development……….12
2.2 Corporate Social Responsibility ………....13
2.3 Corporate Social Responsibility Reporting………16
2.4 Logistics Social Responsibility………...24
3 Methodology………26
3.1 Data Collection………...26
3.2 Choice of Companies………..28
3.3 Analysis Perspective………...29
3.4 Limitations………..31
3.5 Validity and Reliability………...31
4 Data Analysis………..32
4.1 Report Analysis………..32
4.1.1 General Report Comparison………33
4.1.5 Contents Descriptions………51
4.2 CSR Practices of Unreported Logistics Firms………..59
4.2.1 Related to the Nature Environment………63
4.2.2 Related to Employees………...64
4.2.3 Related to Consumers……….65
4.2.4 Related to Communities………..66
5 Conclusion………...67
5.1 Suggestions for Reporting Improvement………69
5.2 Discussion………...69
References………..71
Appendix 1: Elements of Corporate Social Responsibility………..75
Appendix 2: List of Sample Logistics Firms……….…………....76
1 INTRODUCTION
The introductory chapter presents a background of Corporate Social Responsibility within logistics field. It begins with the initiative to this specific thesis; and the purpose and questions of the research are also explained.
Logistics activities include the transport, storage, and handling of products as they move from raw material, to goods in process, and finally to finished goods ready to be moved to the final point of sale for consumption. Despite its high contribution to the economic development, it is only in the last fifty years that logistics started to be regarded as a major determinant of business performance and a main field of academic study. During this period, logistics activities were structured to maximize the profitability of all firms in the supply chain. However, this calculation of profitability included only economic costs while ignoring social and environmental costs. For the last fifteen years, public and governmental concern about social and environmental impacts of logistics firms has increased, as has the pressure to reduce these impacts (McKinnon, 2010).
The following section presents the background of the topic in interest. It outlines the social and environmental impacts resulting from logistics operations, a definition of Corporate Social Responsibility (CSR), the development of CSR, the growth of CSR reporting, and the development of the Triple Bottom Line Theory. These will be followed by a discussion of the problem at hand, which will lead to the purpose of this paper and the main research questions. The introduction chapter will be wrapped up with the outline of the thesis.
1.1 Background
Logistics Impacts
Concerning environmental impacts of logistics firms, distribution activities of goods cause harm to the air quality, generate noise, cause accidents, and contribute to global warming (McKinnon, 2010). Freight transport accounts globally for almost 8 percent of CO2 emissions while warehousing and material handling contribute a 2-3 percent to this total. The energy consumed by freight transport is increasing at a faster rate than the energy used for cars and busses (Ribeiro & Kobayashi, 2007). Although governments are working on cutting down CO2 emissions from their national economies, shipping alone could account for up to 50 percent of the total CO2 emissions by 2050 (Committee on Climate Change, 2008).
On the other hand, the social impacts of logistics firms according to Carter and Jennings (2002) are associated with three main activities which are purchasing, transportation, and warehousing. The social impacts of purchasing management include purchasing from minority suppliers; and collaborating with suppliers who use sweatshop labor, child labor, offer low “living wage”, and operate in unsafe locations. The social impacts of transportation activities can include the non-use of minority carriers, hiring and promoting unequally, long operating schedules for drivers, and payment of inadequate wage. The social impacts of warehousing management consist of hiring and promoting unequally, dealing weakly with family issues such as helping employees find child care, offering poor training programs to employees that teach them how to use equipments
safely, and not providing necessary equipment to workers such as gloves, hardhats, and hard-toed shoes.
Definition of Corporate Social Responsibility
Corporate Social Responsibility is a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis. Being socially responsible means not only fulfilling legal expectations, but also going beyond compliance and investing “more” into human capital, the environment and the relations with stakeholders” (Commission of European Communities, 2001, p.6).
Development of CSR
The concept of corporate social responsibility is not new. Formal writings on CSR have started in the second half of the twentieth century. In the 1950s, the concept was SR (social responsibility) instead of CSR (corporate social responsibility) because of the absence of modern corporations (Carroll, 1999). In 1953, Bowen started writing about SR after realizing that activities and decisions making in large businesses affect the lives of citizens, and that managers (businessmen back then) should be responsible for the consequences of their actions. Bowen defined SR as “the obligations of businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society.” Research on CSR
survey with fifty academic leaders concerning social topics where the question was “What topics do you see as most important for research in the social issues?” CSP (corporate social performance) was rated third out of twelve issues; business ethics was first and international social issues was second.
Moving to the twenty-first century, Carter and Jennings (2004) indicated that CSR is not limited only to business ethics, but it rather extends to include community, philanthropy, safety, workplace diversity, human rights, and the environment.
Since the nature of business relations is changing from national to multinational due to integrated supply chains, the concept of CSR is also transforming. Not only do companies have to be socially and environmentally responsible on the national level, but also in relation with their global partners such as suppliers, intermediaries, and third party logistics. The pressure exercised on these multinational firms comes from various stakeholders such as customers, employees, unions, shareholders, government, NGOs, and media who’s concern about social and environmental conditions in off-shore production sites is increasing (Maloni & Brown, 2006). This concern has largely resulted from multimedia communication that continuously shows irresponsible practices such as violation of union rights, use of child labor, unsafe work conditions, pollution, and discrimination. Famous examples that have been followed by media are Nike, Gap, H&M, and Wal-Mart (Frost & Burnett, 2007).
Today, many of the multinational corporations are trying to decrease stakeholders’ pressures by ensuring that their suppliers comply with social and environmental standards. This is achieved by using various codes of conducts (Andersen & Skjoett-Larsen, 2009). A code of conduct is a document stating a number of social and environmental standards and principles that a firm’s supplier are expected to fulfill (Mamic, 2005).
Development of CSR Reporting (also called Sustainability Reporting
and Corporate Social Disclosure)
According to Reynolds & Yuthas (2007), the notion of CSR reporting arises from an interpretation of a social theory under which firms owes obligation to society. These obligations include reporting the social and environmental impacts resulting from their operations.
Buhr (2007) claimed that voluntary environmental and social reporting has existed for many decades. Yet, the public disclosure of information about the social and environmental impacts of companies’ operations has become popular practice since the mid-1990s. Since that period of time, information about social and environmental impact has been commonly disclosed within the annual financial reports.
As CSR reporting became increasingly popular and broad, some leading companies in the reporting markets started separating their social and environmental disclosures by publishing a stand-alone report untied from annual financial statements. This method has become more common in late 1990s; however there is no one single standard for CSR
reporting. Today, multinational companies from different sectors and industries follow certain standards for social and environmental reporting (Adams & Frost, 2004).
Leading examples of reporting standards are:
• “EMAS (European, particularly German environmental management and audit).
• ISO 14001 (Internationally recognized environmental management certification).
• SA 8000 (Social Accountability International labor standards). • AA1000 (International accountability assurance reporting standard).
• Copenhagen Charter (International Standard involving stakeholder communications).
• GRI (Global Reporting Initiative) 2000 (International sustainability report)”. (Reynolds & Yuthas, 2007, p.50) Some of the above mentioned guidelines will be explained in the Literature Review section.
As an argument on where CSR reporting is heading, Buhr (2007) notes that mandatory CSR reporting remains limited. He added that sufficient knowledge about this concept is not reached yet, and concluded that the reporting process must help in changing management strategies and practices.
To further understand the concept of CSR reporting, one can refer to the “triple bottom line reporting” which dominated in CSR reporting between late 1990s and middle 2000s (Deegan & Unerman, 2011).
Elkington (1998) defined the TBL theory as providing information not only about the economic performance of a firm, but also environmental and social performance. The main global company that was behind the popularity of “triple bottom line reporting” was Shell who released a TBL report in the 1990s.
The TBL concept has for the last few years become increasingly popular in both government and non-government organizations. Its main proposal is that corporations’ success must be measured by their economic, social, and environmental performance. Success cannot be achieved in the long term if corporation fail to meet their obligations towards their various stakeholders. Therefore, TBL supporters believe that the corporations’ social and environmental performance must be measured, calculated, audited, and reported just like economic performance so that the obligations to communities, employees, customers, and suppliers are fulfilled. Referring to the notion of modern management that says “if you cannot measure it, you cannot manage it,” ethical business practices (social and environmental) must be measured by tools to insure corporations’ transparency to managers and other stakeholders (Norman & MacDonald, 2004).
Norman and MacDonald (2004) also claimed that in the awakening of the twenty-first century, the TBL term spread in a fast pace. By 2004, Google has returned around 52,000 web pages that mention the concept. Organizations such as Global Reporting Initiative (which will be explained more in details in the literature review) and AccountAbility have promoted the theory in corporations around the globe, and many of the corporations turned their interest into it. Big firms such as AT&T, Dow Chemical, Shell, and British Telecom have implemented the TBL terminology in their reports as have smaller firms. Furthermore, most of the big accounting firms added to their services measurements, reporting, and auditing of the additional two bottom lines. Finally, a large segment of the investment industry is today evaluating companies based on their social and environmental performance.
Companies can significantly improve their business performance and logistics activities by collaborating efficiently with suppliers, shippers, distributors and customers. Leading U.S. logistics firms have improved their environmental performance by reducing the waste of maintenance, enhancing inventory management practices, lowering the cost due to scrap and material losses, decreasing expenses of training and material handling, converting wastes to by-products, reducing the use of hazardous materials through more accurate materials tracking and reporting systems, lessening the use of solvents and paints, and finally recovering valuable materials through take back programs (Environmental Protection Agency, 2000).
Ford recognizes that the manufacturing and shipping processes cause harm to the environment. Therefore, the company has begun shipping their car parts in recyclable plastic containers focusing on Triple Bottom Line. The first goal was to be environmentally sustainable by avoiding tree consumption while providing larger containers able to carry more parts. This has led to reduction in total shipments which in turn helped decrease greenhouse emissions from ships, trains, and trucks carrying Ford parts. Finally, the containers get recycled to be later used for producing plastic car parts such as mudguards for F-150 trucks. The second goal was to be socially responsible by the use of the new designed plastic containers. The new design has eased the carrying and opening processes for plant workers. The third aim was to reduce costs. Since Ford started using the plastic containers, shipping costs were lowered by 25 percent (Markley & Davis, 2007).
1.2 Problem Discussion
The traditional financial accounting theory which is mainly regulated by corporations laws, stock exchange requirements, and accounting standards focuses almost entirely on financial accounting of economic performance. Despite the increased concerns about environmental and social problems resulting from multinational corporations, there is a deficiency in regulatory requirements relating to the public disclosure of information concerning the social and environmental performance of firms. Such disclosures are voluntary; yet a growing number of companies are today providing public disclosures of
social and ecological impacts of their operations. These disclosures are called “CSR reporting” since they include environmental and social accounting in addition to traditional financial accounting (Deegan & Unerman, 2011). Corporate Social Responsibility Reporting is also referred to Sustainability Reporting.
According to Carter and Jennings (2002), the main three logistics activities are purchasing, transportation, and warehousing. The Social Responsibility of these three activities fall into six wide categories (found in reporting guidelines) which include the environment; ethics; working conditions and human rights; diversity; safety; and philanthropy and community involvement. These six categories are studied in the CSR literature. Yet unfortunately, they have been investigated separately disregarding their inter-relationship. Quoting Carter and Jennings (2002, p.149): “Do logistics managers view these seemingly related groups of activities as falling under a larger, umbrella construct of social responsibility?”. The Commission of European Communities defined CSR in 2001 as “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis”. Based on this definition, we can ask here again: How and why do logistics managers deal with CSR and CSR reporting since it is not required by statute?
Harrison and Van Hoek (2011) argued that social attention has been turned to logistics recently because of the enormous potential damage that it can cause to the environment. They added that taking into consideration the renewable raw material and transportation modes that minimize the emission of carbon dioxide is important when taking logistics decisions.
Since logistics firms play a vital role in world trade by providing value-added services that affect products prices, and since they are one of the main types of firms that are facing pressures to deal with social and environmental issues, we concluded that the performance of logistics enterprises under corporate social responsibility pressure is worth investigating. By analyzing fifty different logistics firms from three main areas (Asia, Europe, and North America) and seven major categories (Shipping, Freight Forwarders, Third Party Logistics, multiple modals of logistics, truck leasing, express service, and packaging), we will address the following question: Do logistics firms report about their CSR? If so, how do they report it? Finally, based on the results of our study, we will be able to answer the following question: What can be suggested in order to improve CSR reporting?
To sum up, our paper will provide knowledge about the current trend of numerous multinational logistics firms’ performance under the pressure of Corporate Social Responsibility, and try to figure out how reporting practices in logistics firms vary, and what guidelines are followed the most.
The rest of the paper is organized as follows: Section 2 presents the theoretical framework, explaining the previous research of corporate social responsibility issues in logistics industry. An illustration of methodology with data collection is introduced in section 3. It also specifies the criteria for choice of sample logistics companies. Section 4 contains the analysis procedures from two information channels: separate CSR reports and CSR disclosure on the firms’ websites and the results of our analysis. Section 6, the final section concludes the paper, which also raises up several suggestions for CSR reporting as well as discussing the value of the research.
2 Literature Review
This following chapter contains the historical theories regarding on CSR. First, it starts by the development of the CSR phenomenon and the concept of CSR is clarified as to increase the readers’ understanding of CSR meanings. Next, the geographical differences in reporting CSR are clarified. Then, the theoretical CSR reporting guidelines are reviewed particularly related to our thesis. Finally, the relevant theories connecting CSR with logistics are discussed and later used in the empirical analysis section.
2.1 Environmental and Social Sustainability Development
Since the 1970s, there have been numerous discussions in several international forums about the environmental and human race impacts of the continuous development of economic activities. This has pressed the General Assembly of the United Nations to
place “sustainability” as a major issue on the agenda of governments and businesses around the globe. In 1987, a report under the title “Our Common Future” was presented by the World Commission of Environment and Development and was called “The Brudtland Report.” The aim of the report was to create a global agenda to alter the constant unsustainable pressures on the global environment. It was acknowledged that organizations must change the way they conduct their business and must question their traditional goals and principles. Following the 1987 Brundtland Report was the 1992 Earth Summit that was held in Rio de Janeiro, which placed the sustainable development issue as a main concern of international politics and business. Its main outcome was Agenda 21 which was an action plan for the twenty-first century that placed sustainability as the center of global development. In the same year, the European Union released a document under the title “Towards Sustainability” as part of its Fifth Action Programme. It was suggested in this programme that the accounting profession should include costing systems which internalize many environmental costs since traditional accounting ignores social and environmental costs and benefits. In 2002, a follow-up to the Rio de Janeiro Earth Summit was held in Johannesburg where a set of guidelines for the procedure of reporting social and environmental impact resulting from organization’s activities was launched (Deegan & Unerman, 2011).
Ness (2005) states that CSR is the duty implied on a firm to behave responsibly and sustainably, and to be accountable to its stakeholders. In order to manage social and environmental impacts, firms must assess their impacts responsibly.
The author discussed the social philanthropy of the 18th and 19th century when workers’ housing, healthcare, and nourishment were provided in order for them to work efficiently. Societal concern was a self-interest issue back then because of the need to comply with the dominant moral codes. For example, in 1802, the United Kingdom created the Apprentices Act of Health and Morals. The focus on environmental concerns grew in the 1960s, 1970s, and 1980s after realizing that firms and governments were unresponsive. With the growth of corporations and simultaneously the expansion of supply chains, environmental issues became coupled with social concerns. To illustrate, Nike labor malpractice has lead to the creation of the Fair Labor Association, the monitoring of manufacturing in less developed countries, and a more extensive public reporting amongst global suppliers. Ness showed how CSR can be practiced by small, medium, and global firms (Ness, 2005):
• Behave ethically according to societal norms, and treat others as you would wish to be treated.
• Discover, assess, manage and improve economic, environmental and societal risks and opportunities as an integral part of your business strategy.
• Relate your reward structure to behaviors that promote and integrate CSR into business practice.
• Make your actions transparently to all of your stakeholders • Tell it like it is
Werther and Chandler (2010) said that CSR covers the relationship between corporations and the societies with which they interact. Societies include all stakeholders such as customers, employees, suppliers, shareholders, communities, and the environment. After identifying its stakeholders, every firm can prioritize its strategy according to stakeholders’ needs so it maintains its societal legitimacy.
According to Wherther and Chandler (2010), CSR is important because companies’ operations are largely influenced by it. Consumers want to buy products and services from firms they trust, suppliers desire to collaborate with reliable partners, employees desire to work for companies they admire, investors like to support socially and environmentally responsible companies, and non-government organizations desire to work in partnership with firms looking for solutions. By balancing stakeholders’ demands with their conflicting interests, firms can maximize their profits and remain competitive. The authors added that the escalating importance of CSR in the twenty-first century is related to four trends which are the increased affluence of stakeholders, the growing concern of ecological sustainability, globalization that imposes firms to operate with various nations and cultures, and the free flow of information spread by global media.
A study of practicing CSR in global supply chains was conducted by Andersen and Skjoett-Larsen in 2009. They chose IKEA since it has been dealing with social and environmental issues for a long time, and since it is one of the many multinational corporations that have increased their outsourced manufacturing activities to developing countries. The main idea was that companies are not only responsible about their social
and environmental performance, but also about their suppliers’ performance. The authors concluded that CSR must be embedded in all business departments including international subsidiaries and offshore supply chain partners. To do so, “knowledge enhancing mechanisms” should be implemented internally and externally so that both employees and suppliers can maintain the knowledge about the company’s performance under its code of conduct. Another way is keeping an eye on employees and auditing the suppliers to ensure that they are behaving in a socially and environmentally responsible manner.
2.3 Corporate Social Responsibility Reporting
Although there is a lack of regulation in most countries and therefore the CSR reporting process is voluntary, many organizations choose to publish information about their social and environmental performance. There are various theories that help explain this voluntary reporting. Deegan and Unerman (2011) discussed the following theories:
One of the theories is Legitimacy Theory which implies that there is a social contract between organizations and the communities within which they operate. Therefore, organizations must be accountable for their operations since part of their license is given by society. This means that voluntary disclosure of societal and environmental issues add “legitimacy” to the social organization.
Another theory is Stakeholder Theory under which firms must satisfy powerful stakeholders who have the greatest influence on the firms’ profitability. Thus,
corporations must provide an account of their activities to all stakeholders that are affected by their activities. Since stakeholders include not only shareholders but also social organizations, CSR reporting is expected to maintain stakeholders’ satisfaction. A third theory is the Institutional Theory which assumes that companies must report their activities because of the pressure exercised from other companies who have previously reported their activities. This prevents losing the approval from stakeholders such as consumers, suppliers, and communities who are only interested in dealing with companies that publish their CSR reporting.
The next theory is the Positive Accounting Theory which predicts that managers would disclose social and environmental information only if it benefits them. Managers who choose to disclose information do so to show their understanding of CSR regardless of their interest in CSR reporting.
The authors also discussed Reputation Risk Management under which managers voluntarily report CSR so that they maintain the value and reputation of their firm among its influential stakeholders. CSR reporting becomes a necessity in this case in order to remain competitive and gain trust from major stakeholders who may require at any time the disclosure of public information about social and environmental impacts of a firm.
Hopwood, Unerman, and Fries (2010) have conducted surveys with business organizations and came up with the following reasons to explain firms’ engagement in sustainability and sustainability reporting:
• To maintain customers who are concerned with social and environmental issues. • To gain competitive advantage through products innovation.
• To attract and retain skilled employees who are concerned about sustainability. • To increase efficiency by reducing the use of energy.
• To maintain the license that allows them to operate (Legitimacy theory). • To attract investors looking for organizations operating sustainably. • To keep the good reputation and brand image of the business.
Different Ways of Reporting Corporate Social Responsibility
Traditionally, companies disclose information about their CSR activities in their annual financial report which included only financial reporting. These reports are directed to analysts and shareholders. However, some companies disclose information about their social and environmental performance within their annual financial report which is directed not only to shareholders, but also to the remaining stakeholders who have concerns about sustainability issues. Some companies separate their annual financial report from their CSR report by publishing a fully integrated CSR report. Some companies include social reporting in their environmental report. Some companies do not include social aspects in their environment report. The style of reporting also varies where some firms design their report to target their stakeholders; some firms designs it according to sections of their businesses; and some others use reporting guidelines such as Global Reporting Initiative (Line, Hawley, & Krut, 2002).
Geographical Differences in Reporting CSR
A survey was conducted 2004 to assess policies on corporate social responsibility in Europe, Asia, and North America based on twenty CSR elements which are listed in appendix 1. These elements are based on international conventions, codes of conduct, and industry best practices. The total sample was 240 firms from Asia and Europe, and 450 firms from North North America. The countries were the UK, Germany, France, Spain, Norway, Italy, Hong Kong, Singapore, Japan, Korea, Malaysia, Thailand, Mexico, Canada, and the United States (Welford, 2005).
The results of reporting on internal aspects on CSR showed that Asian firms had the least reporting on all six elements. This is because of the less common practice in Asia concerning normal working hours, maximum overtime, and fair wages structures. In other words, working long hours and earning low wages are two characteristics of Asian companies. Also, there is no guarantee in Asian firms for freedom of association, promoting employees development, and providing vocational education. On the other hand, the survey showed that the difference between European and North North American CSR reporting is small. North North American figures are slightly lower because of the inclusion of Mexico in the survey (Welford, 2005).
Concerning the results of external aspects, there were no big differences overall between the respondents form all three geographical areas. In fact, Asian firms have shown higher percentages of reporting on three elements (labor standards in developing countries,
inspection of suppliers, and code of ethics) since they have experienced issues regarding ethics, bribery, and corruption (Welford, 2005).
Finally, examining the results of reporting on accountability and citizenship, it can be noticeably concluded that European and North North American firms have more policies in all elements except the element of “policies and procedures for engaging a wide range of stakeholders in two-way dialogue” where North North American firms have the least policies (Welford, 2005).
Corporate Social Responsibility Reporting Guidelines
There is a lack of comparable reporting which may create confusion. In other words, there is no standard for CSR reporting. Yet, there are various guidelines that have been developed by different groups who proposed modals or frameworks for reporting and auditing (Reynolds and Yuthas, 2007). Citing some of the most commonly used guidelines:
Eco-Management and Audit Scheme (EMAS)
According to Iraldo, Testa, and Frey (2009), the EMAS regulation is a European Union scheme implemented by the European Commission since 1993. Its aim is to implement an Environmental Management System (EMS) in any firm. The authors have conducted a study (using a sample of 70 firms adopting EMAS and 31 firms not adopting EMAS) to investigate whether or not an EMS implemented within EMAS can affect environmental and economic performance. They concluded that EMSs did not reach maturity yet, but
they are implemented more efficiently by EMAS-registered firms. They added that EMS helps organization enhance their environmental performance and achieve competitive advantage through higher innovation capabilities.
Firms implementing EMAS must focus on the following guidelines: 1) Sustainable consumption and production.
2) Climate change and energy.
3) Protecting our natural resources and enhancing the environment. 4) Creating sustainable communities.
5) Keeping the council and local community focused on environmental limits. (Stroud District Council, 2012).
International Organization of Standardization (ISO 14001)
ISO 14001 was developed by the International Organization of Standardization. Urbonavicius (2005) defines ISO as a managerial tool that helps firms upgrade their internal functions. He added that ISO generates change in management procedures, cost savings, quality improvement, operation efficiency, profitability, international partnerships, and competitive advantage. The guidelines of ISO 14001 are defined as follows (ISO 14001, 2004)
i) General Requirements; ii) Environmental Policy;
iii) Planning: Environmental aspects, Legal and other requirements, Objectives, targets and programs;
iv) Implementation and Operation: Resources, roles, responsibility and authority, Competence, training and awareness, Communication, Documentation, Control of documents, Operational control, Emergency preparedness and response;
v) Checking: Monitoring and measurement, Evaluation of compliance, Nonconformity, corrective action and preventive action, Control of records, Internal audit;
vi) Management review.
Council on Economic Priorities Accreditation Agency Social Accountability Standard (SA 8000)
SA 8000 is a set of international workplace and human rights standards that was developed by the Social Accountability International. It was introduced to deal with emerging global social issues such as child labor, human rights, discrimination, and compensation since U.S. and European firms have been outsourcing many of their activities to less developed countries. SA 8000 helps firms improve their reputation, differentiate their products, and gain competitive advantage (Miles & Munilla, 2004). Companies implementing SA 8000 must adopt the following guidelines: Child labor, forced and compulsory labor, health and safety, freedom of association and right to collective bargaining, discrimination, disciplinary practices, working hours, remuneration, and management systems (SA 8000 Standard, 2008).
GRI was established in 1997 by numerous of organizations belonging to the Coalition for Environmentally Responsible Economies (CERES) who aimed to develop global guidelines supporting the reporting of economic, environmental, and social performance for any corporations (Global Reporting Initiative, 2002). Hedberg and Malmborg (2003) have studied the implementation of GRI in some Swedish companies and concluded that communication has enhanced between different departments with the use of GRI. They added that communication facilitates information sharing within the firm and with stakeholders, which in turn leads to transparency and control over the Triple Bottom Line.
Firms complying with GRI must focus on three guidelines which are social, economic, and environmental. The social part is broken down further by labor, human rights, society, and product responsibility sub-categories (Global Reporting Initiative, 2002).
The United Nation Global Compact (GC)
The Global Compact is a set that was developed by the United Nations. It is intended to increase the benefits of global economic development through voluntary corporate reporting. The GC focuses on human rights, labor rights, environmental concerns, and corruption. It has a particular application in Africa since it helps reducing poverty. GC also encourages companies to develop and join local and regional networks that support them in identifying opportunities on regional level (Williams, 2008).
Firms implementing the GC must follow ten principles grouped into four guidelines which are human rights, labor, environment, and anti-corruption (United Nations Global Compact, 2012).
2.4. Logistics Social Responsibility
According to Carter and Jennings (2002), the social responsibility of logistics firms examines three main processes which are purchasing, transportation, and warehousing. These three main processes fall under six broad categories that include the environment; ethics; safety; working conditions and human rights; diversity; and philanthropy and community involvement.
Purchasing Social Responsibility is “the inclusion in purchasing decisions of the social issues advocated by organizational stakeholders.” (Maignan, Hillerbrand, and McAlister, 2002, p. 642). This means that stakeholders are individuals who bring attention to firms about their social and environmental impacts resulting from purchasing activities. According to Carter and Jennings (2002), the environmental activities of purchasing processes include purchasing recyclable and reusable packaging in addition to working on reducing the quantity of packaging material purchased. Firms must also insure that their supply chain partners’ operations are environmentally friendly, and that their product can be reused or recycled. The ethical part of purchasing activities involve avoiding lying to or misleading suppliers’ representatives, blaming suppliers for mistakes
made by purchasers, and sharing information about suppliers with competitors. Philanthropy and community activities may include supporting local suppliers to further develop, and auctioning or donating gifts to firms from foreign suppliers. Diversity encourages purchasing from minority suppliers or women-owned businesses while human rights issues emphasize on ensuring that suppliers provide fair working conditions and pay reasonable wages to their employees. Finally, safety issues are concerned about ensuring safe working conditions, especially when moving incoming purchased material. According to Deakin (2001, p.6), Sustainable Transportation can be defined as “transportation that meets mobility needs while also preserving and enhancing human and ecosystem health, economic progress, and social justice now and for the future.” Firms aiming for sustainable transportation must achieve all three objectives simultaneously and in a fair way while taking into consideration access as well as mobility in the process. According to Carter and Jennings (2002), transportation managers can be environmentally sustainable by ensuring that vehicles are properly maintained in order to increase fuel efficiency and reduce leaks, transporting hazardous material appropriately, and participating in reverse transport of products for reuse and recycling purposes. Managers must also consider human rights by ensuring that drivers are not working for long periods of time and earning low wages. Safety issues involve the hours of service requirements, driver qualifications, and maintenance so that vehicles are operated safely. Finally, avoiding the receipt or offering of bribes is the center of ethical issues while selecting minority-owned carriers helps ensure diversity.
Warehouse managers have to deal with environmental issues such as packaging and labeling of hazardous materials in addition to reverse logistics activities associated with reuse and recycling. Philanthropic and community activities include the donation of excess or obsolete inventory to philanthropies. Safety issues related to warehousing activities involve training employees to safely operate forklifts and providing them with safety tools such as hardhats and goggles, whilst ethical issues are centered on preventing employees from steeling small materials. Diversity and human right issues in warehousing management are generic and can be applied to most functional areas within a warehouse (Carter & Jennings, 2002).
3 METHODOLOGY
This section describes the chosen method in details for the empirical work. Furthermore, the perspective from which we carried out our study is presented here as the methods of data collection, analysis framework, and other relevant factors need to be considered when conducting a research of this kind.
3.1 Data Collection
The goal of this paper is to explain logistics firms’ performance with regards to corporate social responsibility pressures. To realize such a goal, we focus on the firms’ reporting disclosure in CSR field as well as other resources published on their official website; for instance, the firms’ newsletters, blogs and booklets, whose results will be analyzed deeply in the following chapter. The sample includes 50 logistics companies across the
world. Since this is an explanatory, in order to get an acknowledge of current trends in CSR reporting by logistics firms, the sample size was less important compared to the characteristics and performances of these companies implementing environmental, ethical, social, and sustainable responsibilities since different CSR levels of the company needed to be represented. The sample selection is purposed oriented, so the authors are able to adjust the chosen companies in order to reach the intended objective and to answer the research questions (Saunders, Lewis, & Thornhill, 2007). Then we download the CSR reports in the latest year from some firms’ website, one piece for each firm, while others do not publish the reports. The year of publication ranges from 2009 to 2011, meaning that we study the most current report. When CSR was not included in the annual report or separate CSR report, the website was required to determine whether CSR reporting was found there or not.
The data collected in the paper is used for in-depth qualitative analysis, which we will be presented in Chapter 4. In-depth analysis is valuable to fulfill the intended purpose because it generates answers to the questions raised in our research. As Marshall and Rossman (2006) say, a qualitative case study allows a focus in depth and in detail of a specific topic. Meanwhile, the quantitative approach is used partly based on the needs of addressing these questions. As another traditional management research method, the quantitative approach focuses on numbers and figures for one to interpret. To some extent, it would eliminate the drawbacks of the qualitative approach. This paper aims to give answers to the research questions after analyzing these data in both of qualitative and quantitative ways.
3.2 Choice of Companies
Our sample for investigation is 50 logistics firms. The sample is purpose-based; we are trying to find different criteria. The first criteria when selecting the appropriate company is to fulfill the definition of logistics. In our study, a broad definition offered by the Council of Supply Chain Management Professionals is accepted that is “Logistics is that part of supply chain process that plans, implements, and controls the efficient effective flow and storage of goods, services, and related information from point of origin to point of consumption in order to meet consumer requirements” (Langley, Coyle, & Bardi, 2008, p.35). Different types of logistics firms are selected representing seven main categories are freight forwarding, multiple modals of logistics, shipping, the third party logistics (3PL), truck leasing, express service, and packaging companies (the last two are classified as “others” in pie chart 3.1). Pie chart 3.1 presents different percentages of each logistics category, of which freight forwarding firms plays a main role, taking over 32% of the whole sample. And multiple logistics modals (24%) whilst shipping (20%) follow next. Shipping 20% Freight forwarding 32% 3PL 8% MulQple-‐ modal 24% Truck leasing 8% Others 8%
Chart 3.1 A classification of sample firms: each color represents each type of logistics firms.
Secondly, we take the geographical distribution into consideration. The 50 logistics companies are located three large regions in the world: Asia, Europe, and North America. 19 logistics companies are chosen from Europe; 15 are Asian logistics companies and 16 are North American logistics companies. Most provide logistics services globally, while a few only limit their service to the domestic market. Therefore, the sample contains the three most flourishing markets, reflecting the global economic trends.
We did not differentiate on company size as we decide to look at major well-known logistics firms which are usually large across the three large economic development regions. Additionally, we focus on publicly-traded companies during the collecting procedure since generally the public companies have suffered more social responsibility pressures, and would be more willing to expose their activities of CSR issues online. Thus we hope that half of the logistics firms would report their CSR matters based on the report accessibility of the listed companies. Finally, the accomplished database fits this expectation to prove the significance of the public companies.
3.3 Analysis Perspective
The process to analysis is done as following: the first step is looking at the firms’ annual reports in CSR reporting, and then turning to look for separate CSR reports, finally
checking other disclosures on the firms’ websites if none found. The main resource for analysis roots in CSR reports from logistics firms. To analyze the companies’ reports, we adopt an inductive-deductive approach. Initially, we separately read these reports to identify corporate social responsibility emphasis involved in the selected companies’ report. In some cases, we had to review both if one firm published two kinds of CSR reports. Illustrating Kuehne & Nagel, they published the sustainability report and the environmental report in 2010. With regard to the analysis part, the literature review section is worth remembering. More importantly, different reporting standards for the CSR theme will provide a clearer guideline. We should compare the report’s contents with its in-use standard. Then a series of important CSR focus are listed by using words adopted by the firms’ reports. Thus, the different guidelines of reporting standards and the main contents of CSR reporting will be explored in the analysis part. On the other hand, other information about CSR performances is derived for the unreported companies from other recourses on their websites. Both qualitative and quantitative information is gathered by the two authors. Successively, we both review the reports and other public information again in order to verify the completeness of our list so that these emphases are also compared. Consistency is the first and foremost principle for such a list. No consistency indicator is used to compare on the list. When the description of certain content is different, we adjust the primary texts as to reach an agreement. However, it is difficult to cover all the CSR issues of logistics firms in the study. In fact, the companies could not implement all the CSR practices.
The following analysis chapter will enable us to address the main questions: If and How logistics firm report their CSR? To what extent logistics without reports carry out CSR. In addition, we hopefully provide further suggestions for reporting practice to these companies after analyzing current ones.
3.4 Limitations
For the purpose of clarification and further research use, it is necessary to set some limitation for our research. First, our investigation is logistics firms, which is different from firms with logistics or supply chain departments. Therefore, the latter would be another subject even though we study through the CSR field. More importantly, the data source in this paper is narrowed, which is helpful for in-depth analysis. All the data is retrieved from the sample firms’ websites rather than external channels, such as Internet and social media. However, it may cause misleading. Companies tend to public positive information in order to establish better social image. At the same time, the lack of some information may make us unable to cover the CSR issue of the chosen firm in a full context. Besides, time is another limitation for our paper since we only use one year report for each firm and highlight CSR information disclose of other firms in the current year. Then the paper is not able to trace the firm’s CSR footprints in a period of years. However, it leaves blanks behind it for research in the future.
There are two important principles in our study-validity and reliability. Validity guarantees that the obtained information is reliable and correct (Patel & Davidsson, 1994). Easterby-Smith, Thorpe, and Lowe (2002) define reliability as how the same approach would acquire consistent results. When one studies thoroughly with conceptualization, the data collection, data interpretation, and data analysis validity and reliability should be arranged with either a quantitative or qualitative method (Merriam, 1998).
In this perspective, we believe the information reported by these logistics companies, and we would not check to verify what they have reported. Therefore, all the data becomes more valid and unbiased which helps enhance the trustworthiness of this thesis, and moreover enables more positive results.
4 DATA ANALYSIS
The analysis has been made through the empirical information gathered with the help of pervious literature studies to identify CSR practices logistics firms have performed, which is connected to the purpose of the thesis. This section also serves as a base from which we make our conclusions.
All CSR reports in various forms are one main resource for data analysis. This part will enable to present how logistics firms implement CSR based on these reports in the following way; first the reports are compared in some dimensions in regards with the selection of logistics firms, then a discussion of different CSR reporting standards will be carried out and also whether internal departments belong to logistics firms or external professional accounting organizations are responsible for reporting CSR issues will be solved. Finally, the core substance describing various CSR activities by these logistics firms will emerge. After the whole analysis, we authors hope to give out some suggestions for improving reports in the conclusion section.
4.1.1 General Report Comparison
We found out that 23 logistics firms have reported CSR, thus the portion is close to half. This means that these reports as information resource are sufficient for our research. Thus, we believe the outcomes of our study are representative, instructional, and worthy to put into practice.
Table 4.1 (on the next page) gives out a map of our sample firms’ differences according to five indicators: Logistics categories, Region, Report or not, Standard, and Report type.
Table 4.1 Classification of selected logistics firms by analysis dimension Analysis dimensions Numbers of firms Percentage Logistics Categories Freight-forwarding 16 32% Multiple-modal 13 26% Shipping 10 20% 3PL 4 8% Express service 3 6% Truck leasing 3 6% Packaging 1 2% Region Asia 15 30% Europe 19 38%
North North America 16 32%
Report Or Not Report 23 46% Non-report 27 54% Standard* GRI 6 26.1% ISO14001 1 4.3% Multi-standard 8 34.8% Self-determined standard 8 34.8% Report Type* Environmental report/brochure 2 8.7% Corporate social responsibility
report 8 34.8%
Sustainability (development) report 9 39.2% Social and environmental report 1 4.3% A chapter in the annual report 2 8.7% Sustainability & citizenship report 1 4.3% *The number of companies within the two dimensions is 23(not 50).
Under the term of ‘Logistics Categories’, the table illustrates how many companies are picked up for each category. It also explains clearly the ratios of companies from each region. Then highlighting the last two analysis dimensions from the CSR reporting
perceptive, all the 23 reports by logistics firms does not have the same standard, and four types of standards are adopted of which both the multiple-standard and the self-determined standard are the most common methods for reporting CSR issues. That means logistics firms either use several verified standards formulated by social organizations or the government, or they define CSR reporting guidelines by themselves on the basis of their own corporate social activities. Furthermore, GRI is popular with the logistics firms in the single reporting form, and only one firm applies ISO 14001 standard. Even though all firms address the same subject-CSR, each firm may pose different emphasis, which leads to different report names. The 23 reports are sorted into six varieties of reports in the form of names. Nine pieces of corporate social responsibility reports and eight Sustainability reports are prominent, while only one firm publishes a Sustainability and Citizenship report or Social and Environmental report. Meanwhile, two logistics firms only focus on the environmental aspect named as the environmental report/brochure. The remaining two firms contain CSR reports as one chapter in their annual reports.
4.1.2 Characteristics of Issued Reports
The aim here is to check if the guidelines followed by each report are consistent with the equivalent reporting standard. The cornerstone of reporting framework on CSR in accordance with each standard is the provided guidelines.
The newest version of GRI Sustainability Reporting Guidelines is G 3.1 which is adopted in six reports by the logistics firms. It was released in 2006 and can be downloaded from GRI’s website. The guidelines are divided into two parts. Part 1 is Reporting Principles and Guidance that features guidance on how to report. Part 2 features guidance on what should be reported in the form of Disclosures on Management Approach and Performance Indicators. Over viewing the two parts again, the first part contains the following information: i) Principles to define report content: Materiality, Stakeholder Inclusiveness, Sustainability Context, and Completeness; ii) Principles to define report quality: Balance, Comparability, Accuracy, Timeliness, Reliability, and Clarity; iii) Guidance on how to set the Report Boundary. And the second part has three aspects: Strategy and Profile, Management Approach, and Performance Indicators (Global Reporting Initiative, 2012).
The six selected logistics firms have applied the above G3.1 guidelines. We authors examine one report by one. It is apparent to see that all the reports do comply with these guidelines; however, some differences have existed. Most reports are organized in the way as GRI standard has formulated showing the basis role of reporting framework. Also, five in six companies explain GRI guidelines elaborately while one company only mentions a few words inside its report. Besides, one reporting phenomenon is logistics firms prefer to set ‘table of contents’ mainly depending on part 2 and the corporate social responsibility report from CSX Corporation is just the example. More importantly, four logistics firms have made an impressive work on applying GRI guidelines into reporting. Each of the four reports put a specialized summary named as ‘GRI Content Index’ at the
end of report to point out the corresponding page where each branch of the guidelines is described in order to make readers easily position their interests.
The International Organization for Standardization (ISO 14001)
In the research, one logistics firm of the analysis sample-Yang Ming Marine Transport Corporation uses ISO 14001 out of the whole 14000 series. It was modified in 2004 and small and medium-sized enterprises (SMEs) can also benefit from this international standard and points to some resources, such as an environmental management system (EMS). From the guidelines angle, ISO 14001:2004 has 6 categories (see page 20). On the other hand, the G3 guidelines are constructed to be applicable to the ISO 14001 standard.
As Taiwan-oriented logistics firm, Yangming Marine published the Environmental Performance Report in 2010 using ISO 14001 standard because this standard “specifies requirements for an environmental management system to enable an organization to develop and implement a policy and objectives which take into account legal requirements and other requirements to which the organization subscribes, and information about significant environmental aspects” (ISO 14001, 2004). It proves that the standard is appropriate for this firm. Yangming Marine has covered almost all the ISO -14001 guidelines in its report including the general requirements, environmental policy, EMS, the overview of environmental programs last year, and new environmental
activities plan in the next year to other aspects of environmental activities. Yet, they did not mention too many details.
Multiple-standard
This is a more complex situation when logistics firms adopt more than one standard for reporting, and it is defined as ‘multiple-standard’ in the paper. Six out of the eight logistics firms come from Asia, including three Chinese firms and three Japanese firms, meanwhile two exception-DSV and The A.P. Moller - Maersk Group are registered in Europe, whose reports have been prepared in accordance with both of GRI and GC guidelines. Also, logistics firms in Asia adopt more standards than those in Europe in our findings. Table 4.2 (on the next page) provides an overview of logistics companies with corresponding standards under the ‘multiple standard’ model.
Table 4.2 Companies with multiple standards
Company Name Multiple standards* The A.P. Moller - Maersk
Group GRI, GC
COSCO GC, SASAC, GRI, ISO26000,CEC
Nippon Express Environmental Reporting Guidelines 2007, GRI
Nippon Yusen(NYK line)
Environmental Reporting Guidance 2007, GRI, ISO26000
DSV GRI, GC
Sinotrans SASAC, GC, GRI
China International Marine
Containers GRI, CEC, CFIE
K Line
GRI, Environmental Reporting Guidance 2007, Environmental Accounting Guideline 2005
*The abbreviation of SASAC, CEC &CFIE refers to the following text in the section.
Chart 4.1 demonstrates different proportions about how many companies use two, three, or five reporting standards. 62.5% companies put three or five different standards into use and the one firm-China Ocean Shipping Company (COSCO) even used five various standards in the 2010 report; thus they prepared a sustainability report with total of 329 pages.
Chart 4.1 Number of companies with multi-standard
Apart from several international reporting standards (i.e. GRI, GC) described before, there are six new types of standards included in these ‘multiple-standard’ CSR reports by the logistics firms:
1) ISO 26000: the standard was released by the same organization-ISO as ISO 14001. ISO 26000:2010 is “intended to encourage them to go beyond legal compliance, recognizing that compliance with law is a fundamental duty of any organization and an essential part of their social responsibility. It is intended to promote common understanding in the field of social responsibility and to complement other instruments and initiatives for social responsibility, not to replace them” (ISO 26000, 2010). The guidance on social responsibility is structured like (1) Organizational governance; (2) Human rights; (3) Labor practices; (4) The environment; (5) Fair operating practices; (6) Consumer issues; (7) Community involvement and development; (8)The relationship of an organization's characteristics to social responsibility; (9)Understanding the social
12.5%(1)
50%(4) 37.5%(3)
Number of companies with mul*-‐standards
responsibility of an organization; (10)Practices for integrating social responsibility throughout an organization; (11)Communication on social responsibility; (12)Enhancing credibility regarding social responsibility; (13) Reviewing and improving an organization's actions and practices related to social responsibility; (14)Voluntary initiatives for social responsibility.
2) Guiding Opinions on Performance of Social Responsibility (China): It is extracted from Central Enterprises and Central Enterprise Comprehensive Risk Management Guidelines issued by the State-Owned Assets Supervision and Administration of Commission of the State Council (SASAC). And the guidelines refer to international standards such as ISO26000 Guidance on Social Responsibility and GRI 3.1 Guidelines. Two Chinese logistics companies actively participated in the compilation of SASAC‘s guidelines for social responsibilities of enterprises under the central government. According 2010 COSCO sustainability report, the guidelines require that an enterprise must voluntarily abide by relevant laws and regulations, social norms and business ethics; while in the pursuit of economic efficiency, it should also shoulder the responsibility for shareholders including employees, consumers, suppliers, communities, and the natural environment to achieve comprehensive and coordinated sustainability between the enterprise, the society, and the environment.
3) China Corporate Social Responsibility Standards and Best Practices:This is recommended by the Sustainable Development Business Committee of China Enterprise
Confederation (CEC). One Chinese shipping giant-COSCO complies with the guidelines regarding economy, environment, safety and anti-corruption.
4) Social Responsibility Guidelines for China's Industrial Enterprises and Industrial Associations: It is released by the China Federation of Industrial Economics (CFIE). The general guidelines cover eight aspects of corporate governance, business performance, environmental protection, energy savings, production safety, care of employees, stakeholders' interest, as well as social community involvement.
5) Environmental Reporting Guidance 2007(Japan): The guidance is formulated by Japanese Ministry of the Environment. It summarizes the preferred directions and contents, based on the current domestic and international trends of environmental reporting. Totally it has five chapters. Chapter 1 refers to plan an environmental reporting publication. Chapter 2 and 3 describe the key components for environmental reporting. Chapter 4 represents status of social initiatives and Chapter 5 describes upcoming issues involved in the report (Environmental reporting guidelines, 2007).
6) Environmental Accounting Guideline 2005(Japan): It is also published by Japanese Ministry of the Environment. It ‘aims at achieving sustainable development, maintaining a favorable relationship with the community, and pursuing effective and efficient environmental conservation activities. This guideline for accounting procedures allow a
