VI E W P O INT
B y E STH E R YO U NG
Social Responsibility and
the Supply Chain
AmCham
Shanghai’s
latest
Viewpoint
shows how
businesses can
meet their
goals and
responsibily
manage
societal goals
Caterpillar has leveraged its CSR programs in China
S
upply chain operations and corporate
social responsibility (CSR) are often
considered mutually exclusive. However,
aligning operating goals with consumer
preferences and government targets
across the supply chain can often support a
company’s business objectives in China, especially in
light of existing business challenges, according to
AmCham Shanghai’s newest Viewpoint, The China
CSR Imperative: Integrating Social Responsibility into
the China Supply Chain.
China’s economic growth is accompanied by
rising labor and resource costs as well as pressure
from consumers who are progressively more focused
on products and services that are responsibly
managed and are environmentally sustainable.
In addition, as supply chains impact a growing
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insight
june 2012
number of communities throughout China,
government policy is focusing on positive
contributions to CSR initiatives. These priorities are
echoed in China’s 12th Five-Year Plan (FYP),
released in 2010, that prioritizes sustainable
development through social responsibility. Many of
these policies touch directly on China’s efforts to
curb its massive energy usage and subsequent
emissions, including stipulations on mandatory CO2
reductions over the next year and limitations on
resource usage.
Integrating CSR across the supply chain can
reduce costs in the long run, as CSR goals call for
limited energy and resource usage in addition to
smart labor planning. Companies can also leverage
fair labor practices, environmentally friendly
sourcing and sustainable manufacturing processes
to build their brand and ensure consumer loyalty, as
well as build stronger and better connections to
national and local government.
Caterpillar Corporation, based in Peoria, Illinois,
is one example of a company that has integrated CSR
goals into its operations, which has helped its
business in more ways than one.
In certain areas in China, companies can be
subject to local government-mandated rolling
electrical brownouts and blackouts to reduce overall
energy usage and meet national energy goals. They
may come without much advanced notice, or
companies may be asked to work during off-peak
hours. At the end, these can lead to increased cost of
transportation and overtime for workers and
disrupted supply chains.
However, Caterpillar’s energy-saving practices
have helped the company reduce energy costs and
avoid these brownouts and any disruption to its
operations. Caterpillar’s multi-functional research &
development center in Wuxi, Jiangsu province, for
example, has been recognized for its work. The
10,000-square-meter, state-of-the art facility was
constructed in Wuxi New District in 2009 with a
strong focus on environmental impact and energy
efficient design. Subsequently, the Wuxi government
has committed to not limit the facility’s electricity
sources and the facility has been exempted from
power brownouts and blackouts. It has operated for
three years without interruption to its power.
Other companies are doing the same, including
Dow Chemical, based in Midland, Michigan. In the
chemical industry, companies often use intermediate
bulk containers (IBCs) to transport and store fluids
and bulk materials. They are usually discarded after
use. In the Asia-Pacific, Dow uses second hand and
washed IBCs instead of new IBCs to receive its
supplies. Every IBC is recycled/washed five to seven
times before it is disposed, reducing costs and
building its reputation as a responsible company.
“Setting the standard for sustainability is one of
Dow’s four strategic themes,” says Niklas Meintrup,
director of Dow Business Services Group, AsiaPacific. “We integrate sustainability in the way we
conduct business, including supply chain,
purchasing and all other business services to our
clients and customers.”
“
See the full
report at www.
amchamshanghai.org
When describing how Dow precisely maintains
its quality, Meintrup describes the effort as a
“process,” which requires extensive talks with
management to communicate productively. Dow
also uses the Dow S4TAR Award Program to
promote sustainable business growth for both Dow
and any operators along its supply chain, ensuring
that Dow’s partners follow Dow’s standard of
sustainable practices. The S4TAR Award program is
a long-term partnership program between Dow and
Dow’s suppliers that focuses on sustainability
practices. It sets performance goals and is a platform
for best practices exchange that aims to ensure
accountability in Dow’s supply chain. Awards are
given every year.
Sharon Xiao, Senior Sustainability Researcher of
Haworth Asia-Pacific, Middle East and Latin
America, also emphasizes the need for concrete
actions and continued connection with suppliers to
enforce CSR goals. Since Haworth also employs
original equipment manufacturers, the company
audits a supplier before signing a long-term contract
and every subsequent year performs two quality
checks.
To view and download a copy of The China CSR
Imperative: Integrating Social Responsibility
into the China Supply Chain, which highlights
recommendations and other case studies, visit
the AmCham Shanghai website at www.amchamshanghai.org.
june 2012
insight
25
Companies can
also leverage
fair labor
practices,
environmentally
friendly sourcing
and sustainable
manufacturing
processes to
build their
brand…”