Strategic Management and CSR - Cotton Africa
Strategic Management and CSR - Cotton Africa
Strategic Management and CSR - Cotton Africa
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<strong>Strategic</strong> <strong>Management</strong> <strong>and</strong><br />
<strong>CSR</strong><br />
Claus Aabling, Project Manager (<strong>CSR</strong>),<br />
Danish Federation of SMEs<br />
Textile East <strong>Africa</strong> Project<br />
Nairobi, September 20th, 2012<br />
1
<strong>Strategic</strong> <strong>Management</strong> <strong>and</strong> <strong>CSR</strong>
<strong>Strategic</strong> <strong>Management</strong> <strong>and</strong> <strong>CSR</strong><br />
How do you develop a strategy with a<br />
strong potential for success?<br />
Idea<br />
Vision, creative thinking,<br />
foresightedness, mind-set,<br />
intuition etc.<br />
Tools<br />
Knowledge of strategic<br />
context,<br />
analytical skills,<br />
structure in the approach<br />
etc.
<strong>CSR</strong> focus of European buyers<br />
• Labour st<strong>and</strong>ards (working hours, wages, forced<br />
labour, child labour, disciplinary practices, freedom of<br />
association, collective bargaining, social benefits,<br />
provident fund, medical insurance etc.)<br />
• Occupational health <strong>and</strong> safety (exposure to<br />
hazardous substances, machine guarding, ergonomics,<br />
noise, dust, first aid, fire safety, emergency<br />
preparedness etc.)<br />
• Environmental protection (discharges of hazardous<br />
substances to water, air <strong>and</strong> soil, organic cotton, etc.)<br />
• Community activities at foreign suppliers are<br />
not the focus of much attention of<br />
European buyers
<strong>Strategic</strong> <strong>Management</strong> <strong>and</strong> <strong>CSR</strong><br />
<strong>Strategic</strong> <strong>CSR</strong> is NOT…<br />
• …just some ad-on to the company<br />
<strong>Strategic</strong> <strong>CSR</strong> is…<br />
• …an integrated part of the company’s overall<br />
strategy<br />
• …closely connected to the business model of<br />
the individual company<br />
• …an integrated part of the company’s<br />
management systems, routines <strong>and</strong> activities
<strong>Strategic</strong> <strong>Management</strong> <strong>and</strong> <strong>CSR</strong><br />
Therefore strategic <strong>CSR</strong> requires…<br />
• …to observe the company <strong>and</strong> its context in a holistic<br />
perspective<br />
• …analysis <strong>and</strong> underst<strong>and</strong>ing of the company’s strategy<br />
• …analysis <strong>and</strong> underst<strong>and</strong>ing of the company’s business<br />
model<br />
• …analysis <strong>and</strong> underst<strong>and</strong>ing of the company’s business<br />
challenges <strong>and</strong> opportunities<br />
• …analysis <strong>and</strong> underst<strong>and</strong>ing of the company’s<br />
challenges <strong>and</strong> opportunities within <strong>CSR</strong>
<strong>Strategic</strong> <strong>Management</strong> <strong>and</strong> <strong>CSR</strong><br />
Doing good<br />
Preventing harm
<strong>Strategic</strong> <strong>Management</strong> <strong>and</strong> <strong>CSR</strong><br />
•Optimising production processes<br />
through high OHS st<strong>and</strong>ards<br />
•Reduced accidents = reduced<br />
production stops<br />
•Fewer faulty products<br />
•Recycling & energy savings =<br />
financial savings<br />
Dem<strong>and</strong><br />
•Customers / end consumers<br />
with special requirements<br />
•Being at the forefront with<br />
trends in customers’<br />
requirements<br />
Production<br />
processes<br />
strategic<br />
<strong>CSR</strong><br />
Human<br />
resources<br />
•Ensuring high st<strong>and</strong>ards in<br />
value chain – avoiding<br />
negative publicity / br<strong>and</strong><br />
damage – (for own company<br />
<strong>and</strong> for customers)<br />
•Ensuring stabile supplies <strong>and</strong><br />
quality of products<br />
Value<br />
chain<br />
relations<br />
•Attracting / maintaining high<br />
skilled labour “employee<br />
br<strong>and</strong>ing”<br />
•Healthy <strong>and</strong> motivated<br />
employees performing at<br />
optimal level
Dem<strong>and</strong><br />
• 70 - 75 % of US <strong>and</strong> EU consumers a company’s<br />
commitment to <strong>CSR</strong> is an important parameter for their<br />
buying behaviour<br />
• 59 % of US consumers are planning to spend the same<br />
or more from socially responsible companies within next<br />
year<br />
• Yet only 11 % of US consumers have heard<br />
communications about <strong>CSR</strong> from any company in the<br />
past year<br />
• 77% say that it is very important for the apparel industry<br />
to be socially responsible – only 52 % believe the<br />
industry has performed well (various studies including<br />
PSB/Burson-Marsteller <strong>CSR</strong> br<strong>and</strong>ing survey 2010)
Dem<strong>and</strong><br />
• Danish apparel importers reply when they were asked on<br />
importing from / outsourcing to Kenya:<br />
– Can they deliver products of organic cotton?<br />
– Can they produce according to the criteria of Oeko-<br />
Tex, <strong>and</strong> the environmental labelling schemes the<br />
Flower <strong>and</strong> the Swan? (www.oeko-tex.com, www.ecolabel.eu, www.nordicecolabel.org)<br />
• Other social/environmental labelling schemes or<br />
certification st<strong>and</strong>ards, preferred by European buyers:<br />
BSCI, SA8000, GOTS, WRAP, bluesign, ISO14001<br />
(www.bsci-intl.org, www.sa-intl.org, www.global-st<strong>and</strong>ard.org,<br />
www.wrapcompliance.org, www.bluesign.com, www.iso.org)<br />
• Communication <strong>and</strong> documentation is key to attract<br />
<strong>CSR</strong> concerned buyers
Dem<strong>and</strong> - Nü by Staff
Dem<strong>and</strong> - Nü by Staff<br />
Staff<br />
• Established 1993<br />
• 2004: Gross profit : 3 million USD,<br />
employees: 15<br />
• 2010 Gross profit: 9 million USD,<br />
employees: 39<br />
• Women's fashion clothes<br />
• Winner of Danish business newspaper `Børsen´s<br />
`Gazelle-prize´ 5 times<br />
– Gazelle criteria:<br />
• Turnover larger than 500.000 USD<br />
• Positive growth all years<br />
• Double gross profit within last 4 years
Dem<strong>and</strong> - Nü by Staff
Dem<strong>and</strong> - Nü by Staff
Dem<strong>and</strong> - Nü by Staff
Video…<br />
Nü by Staff fashion show 2011
Dem<strong>and</strong> - staff
Human resources – Merlin Creations<br />
• 1998:<br />
– Turnover: 78.000 USD,<br />
– 15 workers<br />
• 2007:<br />
– Turnover 6.3 million USD,<br />
– 250 permanent workers, 400<br />
contract workers in peak<br />
season
Human resources – Merlin Creations<br />
Challenges: Only ad hoc HR<br />
management<br />
– Health <strong>and</strong> safety<br />
– Overtime<br />
– <strong>Management</strong> of contract<br />
workers (contracts etc.)<br />
– Legally required social<br />
benefits<br />
– Health <strong>and</strong> safety
Human resources – Merlin Creations<br />
• Implemented<br />
actions<br />
– Employed a HR<br />
manager: streamlining<br />
HRM
Human resources – Merlin Creations<br />
• Implemented actions<br />
– HR policy: Recruitment,<br />
welfare <strong>and</strong> sexual<br />
harassment, health <strong>and</strong><br />
safety,<br />
– St<strong>and</strong>ing orders: Outlines<br />
disciplinary actions<br />
– All employees covered<br />
under provident fund /<br />
employee state insurance /<br />
medical insurance
Production processes – Merlin Creations<br />
• Slide for off-loading<br />
heavy sacks,<br />
prevents physical<br />
tare on workers <strong>and</strong><br />
eases production flow
Production processes – Merlin Creations<br />
• Energy saving light<br />
tubes saving 40 % of<br />
electricity
<strong>Strategic</strong> Benefits Merlin Creations<br />
• HRM has freed<br />
management resources for<br />
R&D, marketing, business<br />
development etc. – more<br />
business opportunities<br />
– Business development <strong>and</strong><br />
new customers<br />
• Financial savings<br />
• Better management = better<br />
quality
<strong>Strategic</strong> Benefits Merlin Creations<br />
• Attrition rates decreased<br />
by 15 %<br />
• Increased productivity<br />
due to improved physical<br />
working conditions<br />
• Rejection / rework rates<br />
decreased by 15 %<br />
• Prerequisite for doing<br />
business with larger<br />
buyers / European<br />
• Ability to attract new<br />
customers
Jaya Prabha Exports: Production processes,<br />
value chain relations <strong>and</strong> human resources<br />
30 % shipped by expensive<br />
air freight <strong>and</strong> high CO2<br />
emissions<br />
Compliance issues: Wages,<br />
overtime premium ,working<br />
hours, social benefits<br />
Tight lead<br />
times<br />
Excessive<br />
overtime<br />
Exhausted<br />
workers<br />
High worker turnover <strong>and</strong><br />
high expenses for training<br />
new workers<br />
Physical <strong>and</strong> mental strain on<br />
workers, quality issues <strong>and</strong><br />
high rejection rates
Jaya Prabha Exports: Solutions <strong>and</strong> benefits<br />
Dialogue with customer,<br />
production planning <strong>and</strong><br />
down stream supply chain<br />
coordination: Reduced air<br />
freight from 30 % – 3%<br />
Increased<br />
efficiency<br />
<strong>and</strong><br />
reduced<br />
costs<br />
Freed<br />
human <strong>and</strong><br />
financial<br />
resources<br />
Compliance: Reduced<br />
overtime, increased overtime<br />
premium <strong>and</strong> social benefits<br />
Reduced worker turnover,<br />
increased quality <strong>and</strong><br />
reduced cost<br />
Decreased<br />
strain on<br />
workers
Jaya Prabha Exports: Solutions <strong>and</strong><br />
benefits<br />
Energy<br />
efficient<br />
boiler<br />
running on<br />
bio fuels.<br />
Reduced<br />
CO2<br />
emissions<br />
<strong>and</strong><br />
reduced<br />
production<br />
costs
Jaya Prabha Exports: Solutions <strong>and</strong><br />
benefits<br />
Implementing<br />
Oeko-Tex criteria<br />
New<br />
customers<br />
<strong>and</strong> improved<br />
status among<br />
existing<br />
customers
Jaya Prabha Exports: Solutions <strong>and</strong><br />
benefits<br />
“We’ve been able to<br />
reduce overtime,<br />
improve quality,<br />
reduce rejection<br />
rates, make deliveries<br />
on time <strong>and</strong> introduce<br />
two more customers”<br />
Rangaswamy, V.<br />
C.E.O<br />
Sri Jaya Prabha Exports
Exercise 2 & 2 discussion<br />
• What concrete<br />
initiatives would<br />
you implement in<br />
order to utilise<br />
<strong>CSR</strong> as a strategy<br />
for penetrating<br />
European<br />
markets?
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