Corporate Social Responsibility through Humanitarian Supply Chain
Aid through MNC, CSR through HSC
Uday Kiran Kavaturu
Student ID: 6796112 M47BSS – Corporate Social Responsibility
Coventry University
MBA International Business
14 July 2016
Company Profile
We are Kavaturu Consultants (fictitious). We are an independent organisation based in London, who aim to service the society by providing assistance to companies in planning their CSR objectives by understanding their core values and missions and fuse their social contributions with value chain activities or intangible assets such as brand image, loyalty etc., which helps them improve their position in the markets. We provide assistance is research, partnership contracts with non-profit organisations, budget planning and other relevant aspects of CSR.
Introduction
Typically a supply chain involves management and control of flow of materials, information and finances from manufacturers to customers (downstream) and vice versa (upstream). This can be seen in businesses in everyday life. However this report focuses on a special aspect of supply chain which involves movement of critical resources for humanitarian needs. Humanitarian needs can occur when non-controllable calamities such as the earthquake, floods, hurricanes etc happen, which requires swift response to control the damage and save precious lives. The response involves coordination in procurement of materials of survival such as food, clothing, shelter and to deliver them in the shortest possible time. These tasks are usually left out to the government agencies, NGOs and sometimes even the armed forces like Military and Navy (Blecken 2010). This report aims to find out how MNCs which can provide potential resources in terms of volunteers, logistics support, warehousing etc can get involved during these emergencies. Also, this report aims to identify how this activity can be accounted for under CSR initiatives and how a company can imbibe such actions into their corporate strategy.
As an independent consultant, this would be our report to a large logistics company in the UK called Wincanton. This report includes the analysis of Wincanton’s past CSR initiatives, and recommendations on how Wincanton can support and partner with an NGO like the UK Aid to help with the relief operations through their logistics expertise and financially stable growth.
In the next section, we review the literature to understand humanitarian supply chain (HSC) in detail. Special characteristics of HSC are looked at, differences between commercial and HSC are discussed in brief. The co-operation and contribution of private sector companies are also examined through examples. In the later sections, Wincanton is introduced, opportunities for the company in terms of HSC are discussed. A short scale plan is drafted out for the company to initiate a long-term partnership with UK Aid.
Literature review
The topic of humanitarian supply chain started to receive much attention at the beginning of the 21st century. This may perhaps be due to the devastating impact of the Asian Tsunami in 2004. Since then, human aid organisations are moving to different parts of the world to help the affected populations (Vojvodic et al 2015). The growth can also be from the fact that after the Hurricane Katrina 2005 and the Indian Ocean Tsunami in 2004, United Nations has activated various cluster groups; Water, Sanitation & Hygiene (WASH), Logistics Cluster, Health Cluster, IT cluster etc. Logistics cluster is chaired by the World Food Programme (WFP) (Heaslip 2013)
To gauge the impact of natural disasters, the below charts helps us to see the number of lives affected over the years through disasters and the amount of monetary damage done across the world.
(Source: Efthekar 2016)
There are some key players in every relief operation who play important roles as we can see in the chart below. Although Governments, NGO, other donors and suppliers have been contributing majorly towards HSC, our aim is to pull private corporations such as Wincanton towards this social cause which can be mutually beneficial.
Source (Vojvodic et al 2015)
There are basically four stages of HSC namely Mitigation, Planning, Response and Recovery (Eftekhar 2016). Mitigation phase involves assessment of past incidents to gather information of sources of disaster and prepare set of activities to minimise the impact of the incident, should it happen again. Planning phase is preparing the society to be ready and brace for impact. Response phase is the swiftest of all where aid it carried to the impacted location to minimise the damage and to save lives. Recovery is the post-incident management where reconstruction of the damaged sites, improvement to affected families’ living standards are planned. In all these phases the priority is not to make profits but to help and save precious lives. The contribution of private companies can be done at all stages of HSC.
Our focus through this report is particularly on the ‘Response’ phase of the HSC where agile logistics is necessary. Blacken (2010 cited in Vojvodic et al 2015) suggested humanitarian logistics as the process of planning, implementing, controlling the efficiency and cost-effectiveness of storage and transportation of materials and information from the point of origin to the affected region. In fact, 80% of the total costs in a disaster relief is attributed to logistics, making it the most essential element in humanitarian aid (Cozzolino 2012 cited in Vojvodic et al 2015).
Some of the main differences between the commercial supply chain(SC) and HSC can now be discussed briefly. While SC is focused on reducing costs and adding value to the customer, HSC’s objectives is primarily to save lives. While demand is predictable in SC, it is almost always impossible to predict it in a natural disaster. Flow of logistics, decision making structure, amount of necessary coordination, speed etc are all very different when compared to HSC (Eftekhar 2016). The crisis situations are not static. So it is imperative to the humanitarian agents to embrace flexibility in planning (Banomyong and Sodapang 2012 cited in Vojvodić et a 2015).
Some of the key challenges of HSC are; changing number of actors, expectations of the donors, competition for funding, effects of media, unpredictability, resource availability and most importantly coordination (Balcik et al 2010). Coordination and collaboration problems arise due to many reasons such as language miscommunication, complex legal documentation along the sea ports, competition among the aid agencies for materials etc.
Davies’ research (2011) suggests that the contributions of the private sector towards developing societies are becoming more significant. The for-profit organisations are funding and sharing experiences in socially responsible activities such as human aid. The contributions however will differ depending on the size of the company and the role company wishes to play. The role of a business is to create value to its shareholders, but at the same time, to create value for the society which is mutually beneficial (Rangen et. al 2012). In an online survey conducted by Economist in 2008, more than 55% of companies have given high priority to corporate social responsibility (CSR) initiatives.
Compared to public companies, private organisations have greater freedom to allocate funds towards philanthropic activities such as human aid, regardless of how these funds affect their business purpose (Rangan et al. 2012). Our aim is to leverage this freedom and direct the funds and competencies towards emergencies. Although it is challenging to convince the management to make philanthropic contributions, several strong arguments can be made which can help the company achieve competitive advantage.
For example, during and after a major crisis, publications and media are plagued with information about how the parties (humanitarian aid agents) which pledged to lend humanitarian aid, have contributed towards improvement or deterioration of the situation ((Budziszewski 2009)). Although it is difficult to judge in its entirety, media is a platform through which companies can gain public support and loyalty which in turn can provide competitive advantage.
The long-term partnerships of large logistics companies such as FedEx with American Red Cross, DHL and Mercy Corps, DHL and IFRC, TNT with WFP etc have proven time and again that their logistics expertise can be used more than just for profits. They have benefited from the relationships as they learn more through each experience how to operate outside the comfort zone which significantly helped their value chain activities. And TNT, especially has made recommendations to the World Food Programme to evaluate new common areas of interest to strengthen their bond (Vojvodic et al 2015).
Crises can also provide opportunities for MNCs to improve their sustainability records and be shown as ethical and caring companies. Because these companies sometimes have good reach in remote ares through their distribution channels and by making joint initiatives with humanitarian aid agencies, they can showcase results as their own and achieve competitive advantage (Davies 2011). Through this, the companies not only strengthen their image, but also address some of the key challenges of HSC.
All of the above examples and literature suggest that the partnerships between the private sector and the aid agencies are not new or uncommon. They have been forming and with rapid pace. This could be due to company’s own benefits or due to true philanthropic motives. Either way, it is a good sign for humanity and during emergencies, the affected people could use all the help they can get.
How can Wincanton Help?
Wincanton is one of the leading 3rd party logistics (3PL) supplier in UK and Ireland. With more than 18,000 employees, 4000 vehicles, 200 sites across UK and Ireland, Wincanton delivers supply chain operations with excellence through superior service and value across diverse industries such as defence, energy, consumer goods etc (Wincanton plc 2016). Their growth strategy is to expand beyond UK and the company is currently acquiring logistics companies across Italy, Spain, Portugal and Russia. With a UK revenue of £1.1bn, the company’s experience, potential and expertise in the field of supply chain and logistics can be seen (CTP 2016) which is one of the primary reasons for choosing this company for this report.
However, delivering goods across different sites around UK is not the only job of Wincanton. They are firm believers of contributing to the society, evident through their values, culture and social activities.
Values of Wincanton. Source (Wincanton Plc 2016)
Corporate social responsibility activities taken up by them so far have helped for the betterment of the community. Let us review them in brief.
Wincanton operates at both local community level and national level. Win canton helps the local community of Northampton to conduct ‘road safety awareness’ days for school kids. where they sponsored high-visibility vests for children to be worn in winter months. At Linconlshire, they sponsor a road safety programme for young drivers.
At a national level help national charities with fundraising through customer surveys. The surveys are sent out to customers for feedback on their logistics service and for each survey response money gets sent to NSPCC (National Society for the Prevention of Cruelty to Children) (Wincanton Plc 2016), although it is unclear on the amount of money being sent over.
On a major scale, they are partners with ‘Transaid’ for more than six years. Transaid is an international charity organisation focused on improving lives and to reduce poverty in Africa and other developing nations. Wincanton helped improve health-infrastructure in rural areas of Madagascar. They also created driver training centres to raise the standards and to reduce on-road deaths (Wincanton Plc 2016).
Their sustainability report (2015) also shows their care towards the environment as they won awards such as ‘Low carbon and efficiency award 2015’ by MotorTransport, ‘Logistics carbon reduction award 2015’ etc., for reducing carbon emissions through their logistics carbon reduction scheme. Their other notable CSR initiatives are health and well being of employees, training and development, graduate opportunities etc.
Source: (Kramer and Kania 2006 Cited in Sujay 2016)
These CSR initiatives can be seen as both philanthropic and strategic as some of their activities help with their value chain, loyalty etc while some of them are solely aimed at the betterment of the society which places Wincanton just above the ‘Societal expectations’ line in the above CSR model chart. Their commitment towards society is another compelling reason for choosing Wincanton for humanitarian aid.
Source: (Annual Report 2015)
As we can see from the above financial figures, their Operating Profit stands at almost £50 Million. Considering the fact that there is no compulsion in the UK as per law on the amount of necessary spending towards CSR activities, and considering the expansion strategies of the company in the near future, our recommendation would be to allocate 0.5% of the profits which amount to almost £5Million towards humanitarian aid.
The distribution of allocation these funds can be a challenging task. As our literature suggests, the demand forecast for emergencies is difficult to predict. And to stock materials for survival such as Food, Clothing etc. for delivery to unknown locations could be a burden on inventory management. But it does not always have to be an emergency. Wincanton can help with the Response and Recovery stages of HSC in the ongoing Syrian crisis. So we suggest to partner with an NGO who is already a major player in global humanitarian aid, ‘UK Aid’. To emphasise their recent contributions, the UK government pledged £2.3 Billion in 2012 towards Syrian crisis, and as on 4th July 2016, the allocations towards NGOs such as UK Aid, Red Cross etc and their results can be seen in the below two charts.
(Gov.UK 2016)
(Gov.UK 2016)
If Wincanton is ready to make this contract, many lives can be improved. Below statistics show the number of people affected, and through Wincanton’s expertise in logistics, and through UK Aid’s European contacts and experience, basic necessities can be delivered quickly and quality of living can be improved.
(Gov.UK 2016)
As Wincanton is a UK based company, it can be easy to make the contract with UK Aid. And as UK Aid is supported by the Government, there is possible insurance coverage for risking deliveries to war zone areas. Although the Syrian crisis can be short-term, the partnership with the agency can be long-term and the strategic benefits discussed in this report can be reaped by the company.
Conclusion
In the modern era, companies need and perform CSR activities to achieve strategic objectives. Most CSR activities aim to improve different areas of the business. However, world events and natural disasters shake the foundations of human living and to cater to the needs of the victims would be beyond any corporate or personal gain. We, at Kavaturu consultants believe that there is potential and motivation in the private sector which can be directed towards the ultimate needs of humanity and we strongly believe that a large company such as Wincanton would be a strong contributor and this CSR initiative would serve to be a reliable helping hand in the long run.
References
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