SCHOOL OF INTERNATIONAL AND PUBLIC AFFAIRS COLUMBIA UNIVERSITY

CORPORATE SOCIAL RESPONSIBILITY THROUGH THE SUPPLY CHAIN: MNCs TO SMEs

ANUPAMA SINGH SUDARSHANA KUNDU WILLIAM FOSTER

MAY 11, 2005

TABLE OF CONTENTS EXECUTIVE SUMMARY...........................................................................4 INTRODUCTION.........................................................................................7

OBJECTIVE......................................................................................................................................................7 WHAT IS CSR?...............................................................................................................................................7 WHAT ARE SMES?..........................................................................................................................................8 WHY SMES AND MNCS?...............................................................................................................................8 QUESTIONS RAISED..........................................................................................................................................8 METHODOLOGY................................................................................................................................................9

REGIONAL ECONOMIC DEVELOPMENT COMPARISONS..........10 CASE STUDIES..........................................................................................12

ARACRUZ CELULOSE S.A.: BRAZIL..................................................................................................................12 Brazil: Key Socio-economic Indicators................................................................................................12 SMEs in Brazil......................................................................................................................................12 Company Profile...................................................................................................................................13 CSR Practices.......................................................................................................................................13 SME Benefits.........................................................................................................................................14 MNC Benefits........................................................................................................................................15 Conclusion............................................................................................................................................16 CEMEX: MEXICO............................................................................................................................................17 Mexico: Key Socio-economic Indicators..............................................................................................17 Mexico is Latin Americas largest economy with USD 626.1 billion in real GDP in 2003. After steady growth in the late 1990s, Mexicos economy has slowed due to the weakening of the U.S. and global economy. In 2000, Vicente Fox was elected president, breaking 71 years of one-party rule by the Institutional Revolutionary Party (PRI). Since his election, Fox has had difficulty passing reforms through Mexican congress. Crime and human rights abuses continue to be major social problems in Mexico, and despite attempts to raise tax revenues, the government is still heavily dependent on oil revenues. These factors, paired with the Mexicos heavy reliance on the U.S. economy, create an uncertain economic outlook for Mexico...............................................................................................17 SMEs in Mexico....................................................................................................................................17 CSR Practices.......................................................................................................................................18 SME Benefits.........................................................................................................................................19 MNC Benefits........................................................................................................................................19 Conclusion............................................................................................................................................20 THE CONSTRURAMA PROGRAM IS AN EXAMPLE OF HOW LARGE MNCS CAN CONTRIBUTE TO THE ENTERPRISE AND CSR DEVELOPMENT OF SMES BY STRENGTHENING THE CAPACITIES OF SMES WITHIN THEIR DISTRIBUTION NETWORK. WHILE THE CONSTRURAMA PROGRAMS PRIMARY GOALS ARE TO INCREASE CEMEXS PROFITS THROUGH STRENGTHENING FRAGMENTED DISTRIBUTION NETWORK, THE PROGRAMS IMPLEMENTATION RESULTS IN SME AND CSR DEVELOPMENT OF ITS DISTRIBUTORS, MOST OF WHICH ARE SMALL FAMILY-OWNED ENTERPRISES. THE PROGRAM INVESTS CAPITAL AND RESOURCES IN PARTNER SMES, WHICH DIRECTLY BENEFITS BOTH THE SMES AND THE LOCAL COMMUNITIES THAT THEY OPERATE IN. THE PROGRAM EXTENDS CEMEXS REACH TO THE RURAL POOR, TO OFFER ALTERNATIVE CONSTRUCTION PROJECT FINANCING AND BETTER PRODUCTS AND SERVICES. THE NET RESULT OF THE PROGRAM IS IMPROVED SOCIAL WELFARE FOR THE LOCAL COMMUNITIES INVOLVED. THEREFORE, THE CEMEX EXAMPLE ILLUSTRATES THAT AN MNCS PURSUIT OF PROFIT CAN DIRECTLY RESULT IN SOCIAL RESPONSIBILITY, SME DEVELOPMENT AND LOCAL COMMUNITY DEVELOPMENT................................................................................................................................................20 DELTA CORPORATION: ZIMBABWE....................................................................................................................21 Zimbabwe: Key Socio-economic Indicators.........................................................................................21 Company Profile...................................................................................................................................22

CSR Practices ......................................................................................................................................22 SME Benefits.........................................................................................................................................22 MNC Benefits........................................................................................................................................23 Conclusion............................................................................................................................................23 UNILEVER: GHANA.........................................................................................................................................24 Ghana: Key Socio-economic Indicators...............................................................................................24 Company Profile...................................................................................................................................25 CSR Practices.......................................................................................................................................25 SME Benefits.........................................................................................................................................25 MNC Benefits........................................................................................................................................26 Conclusion ...........................................................................................................................................26 UNIIEVER: VIETNAM......................................................................................................................................27 Vietnam: Key Socio-economic Indicators............................................................................................27 Company Profile...................................................................................................................................27 SMEs in Vietnam...................................................................................................................................28 CSR Practices.......................................................................................................................................28 SME Benefits.........................................................................................................................................29 MNC Benefits........................................................................................................................................29 Conclusion............................................................................................................................................29 GAP INC.: INDONESIA..................................................................................................................................30 Indonesia: Key Socio-economic Indicators..........................................................................................30 Company Profile...................................................................................................................................30 SMEs in Indonesia................................................................................................................................31 CSR Practices.......................................................................................................................................31 SME Benefits.........................................................................................................................................32 MNC Benefits........................................................................................................................................32 Conclusion............................................................................................................................................32

ANALYSIS...................................................................................................33 CONCLUSION............................................................................................38 BIBLIOGRAPHY.......................................................................................39

Executive Summary
This paper is an attempt to look at the benefits of adopting corporate social responsibility (CSR) activities for small and medium enterprises (SMEs) in developing countries. We focus specifically on those SMEs that are part of the supply chain of large multinational corporations (MNCs) in developing countries. In this paper we study five MNCs (Aracruz Celulose, Cemex, Unilever, Delta Corporation and Gap Inc.) across six developing nations (Brazil, Mexico, Ghana, Zimbabwe, Indonesia and Vietnam) in three different geographic regions of the world (Latin America, Africa and South East Asia). These cases clearly reveal that the adoption of CSR practices by SMEs can result in better market opportunities and economic growth. In each case the multinationals partner with their SME counterparts and transfer CSR practices to the SMEs who adopt them due to the mutual benefits collected by both parties. This transfer and voluntary adoption of CSR practices is a powerful means of propagating CSR, because in many developing countries, CSR legislation is ineffective due to weak law enforcement capabilities. In addition, the role of the MNCs in these case studies is not restricted to passing on CSR knowledge; it includes developing the capacity of SME partners to prepare them to adopt and sustain CSR practices. During this capacity building process, SMEs gain access to the technology, financial capital and managerial knowledge of advanced nations that would otherwise be unavailable to them.

This report was prepared in partial fulfillment of the requirements for the Master in International Affairs and Master in Public Affairs degree at the School of International and Public Affairs at Columbia University. It was prepared at the direction of Columbia University and of the World Bank Institute. The views expressed herein are those of the authors and not necessarily those of the School of International and Public Affairs, Columbia University as a whole, or the World Bank Institute.

Abbreviations and Acronyms

ADB ADR AFTA ARA ASEAN AusAID BNDES BOVESPA BSR CIEM CMS CSR DFID EIU Empretec FDI GDP HDI IDB IDD IFC ILO MNC NGO NYSE PMRC PPP PRI SIPA SME UNCTAD UNDP UNICE UNIDO USAID USD VBC VCCI Asian Development Bank American Depositary receipts ASEAN Free Trade Agreement Aracruz Celulose SA Association of Southeast Asian Nations Australian Agency for International Development (AusAID) Brazilian National Economic and Social Development Bank Brazilian Stock Exchange Business for Social Responsibility Central Institute of Economic Management Commercial Market Strategies Corporate Social Responsibility Department for International Development Economist Intelligence Unit emprendedores (entrepreneurs) and tecnologa (technology) Foreign Direct Investment Gross Domestic Product Human Development Index Inter-American Development Bank Iodine Deficiency International Finance Corporation International Labor Organization Multinational Corporation Non-governmental Organizations New York Stock Exchange Prime Minister's Research Commission Purchasing Power Parity Institutional Revolutionary Party School of International and Public Affairs Small and Medium Enterprise United Nations Conference on Trade and Development United Nations Development Program Union des Industries de la Communaut europenne United Nations Industrial Development Organization US Agency for International Development United States Dollars Vietnam Business Council Vietnam Chamber of Commerce and Industry

WASME WB WBCSD WBI WTO

World Association for Small & Medium Enterprises World Bank World Business Council for Sustainable Development World Bank Institute World Trade Organization

Introduction
Objective The purpose of this paper is to demonstrate that the adoption of corporate social responsibility (CSR) practices by developing country SMEs that operate within the supply chains of multinational corporations (MNCs) results in greater market opportunities for SMEs. What is CSR? There are several definitions of CSR that have been put forward. The World Business Council for Sustainable Development uses the following definition: Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large. 1 Alternatively, CSR is about how companies manage business processes to produce an overall positive impact on society.2 According to Business for Social Responsibility (BSR), CSR is defined as achieving commercial success in ways that honor ethical values and respect people, communities, and the natural environment.3 Alternatively, CSR is an action by a firm, which the firm chooses to take, that substantially affects an identifiable social stakeholders welfare.4 The stakeholder concept is reiterated in another definition, which states: CSR is concerned with treating the stakeholders of the firm ethically or in a socially responsible manner. Stakeholders exist both within a firm and outside. The aim of social responsibility is to create higher and higher standards of living, while preserving the profitability of the corporation, for its stakeholders both within and outside the corporation.5 It is important to remind ourselves that social and environmental concerns form only a part of CSR. An important component of CSR is profitability. Companies have to remain competitive, albeit in a sustainable manner, to be able to generate employment and generate wealth. Generation of employment and wealth are especially important for developing economies, which are trying to graduate from poverty. The World Bank Groups CSR Practice has chosen to define CSR as The commitment of business to contribute to sustainable economic development working with employees, their families, the local community, and society at large to improve their quality of life, in ways that are both good for business and good for development.6 In all of these definitions, CSR is viewed as a comprehensive set of policies, practices and programs that are integrated into business operations, supply chains and corporate decision-making processes to improve stakeholders lives. All of our subsequent discussions on CSR are based on this broad definition of CSR.

1 2

Holme et al. Corporate Social Responsibility: News and Resources, Mallenbaker.net 3 Business for Social Responsibility 4 Frooman p. 227 (1997) 5 Hopkins (2004) 6 Strengthening Implementation of CSR in Global Supply Chains World Bank Group, Oct 2003

What are SMEs? According to the International Finance Corporation7, an SME is any enterprise that falls into one of the following categories:

NUMBER OF TOTAL EMPLOYEES ASSETS Micro-enterprise Small enterprise 10 11-50 $100,000 $100,000 $3 million Medium enterprise 51-300 $3 million and $15 million and

TOTAL ANNUAL SALES $100,000 $100,000 $3 million $3 million and $15 million and

While these definitions are admittedly subjective and still under review, they are broadly consistent with those used by most other international financial institutions. Why SMEs and MNCs? Three-fourths of all enterprises throughout the world are SMEs. These enterprises generate employment for a significant percentage of the working population in every country and thus play a major role in economic development.8 This is particularly true of developing countries.9 Over the past twenty years, rapid globalization has led to greater overseas market access and higher competition amongst firms. Multinational corporations have had to look for new sourcing options that reduce costs without compromising product quality. As a result, MNCs are increasingly looking overseas to incorporate developing world SMEs into their supply chains. Questions Raised 1. Does CSR actually benefit SMEs? This question explores the debate on the true nature of CSR when implemented. Some argue that MNCs exploit SMEs and use CSR as a means to appear responsible. However, we argue that CSR offers significant returns to SME owners in the form of managerial and technical skills and sustainable productivity methodologies.

7
8

International Finance Corporation: World Bank Group Small and Medium Enterprise Department UNIDO, SME Cluster and Networking Development Hamner and Rosario (1997)

2. Traditional top-down strategies do not achieve sustainable CSR. What are alternative methods that can be employed? Until recently, popular opinion assumed that for CSR to take hold and provide results, it must be developed and imposed by MNCs onto SMEs. However, by adopting a more holistic approach to CSR, one can observe that capacity-building and worker empowerment can lead to sustainable improvements. 3. How important is the role of MNCs in facilitating growth for SMEs? Could the SMEs have done it themselves? The greatest obstacles to SME growth are limited access to financial capital, technology inefficiencies and human resources inefficiencies. We argue that it is infeasible for SMEs to access such resources without the direct assistance of MNCs. 4. What is the payoff to MNCs? Are they doing it as philanthropy / public relations or for mutual benefit? Although CSR is often implemented through corporate philanthropy or as part of public relations campaigns, it provides a strong business case for decreasing costs and improving overall operations. The cases within this study provide evidence of CSRs potential business returns. 5. What are some of the key elements of a successful transfer of CSR practices to SMEs by MNCs? A careful understanding and analysis of local cultural features and economic and social underpinnings is crucial for MNCs to successfully navigate a host developing country. 6. What is the role of Government / Multilateral organizations? Governments play a large part in initiating dialogue between MNCs and SMEs. They can demonstrate how CSR practices through the supply chain can help MNCs reach their bottom-line goals. Moreover, governments can encourage SMEs to adopt CSR practices and capacity-building methodologies. Meanwhile, multilateral organizations can work on a macro-level to demonstrate the benefits of development and on a microlevel to assist governments and MNCs with their engagement with SMEs. Public intervention can also supply needed capital, however, in many developing countries, the public sector has limited means of providing such resources. The public sector should instead act to reinforce the benefits SMEs gain from MNCs. Methodology This paper is a cross-country analysis of MNCs that are operating in the developing world. We will examine the following MNCs through cases study format: Aracruz Celulose in Brazil, Cemex in Mexico, Delta Corporation in Zimbabwe, Unilever in Ghana and in Vietnam and Gap in Indonesia. Within each region we will examine the CSR practices and their effects on the SME and MNC. Each case study is segmented into the following sections: Country Overview, Country SME Sector, Company Profile, CSR Practices, SME Benefits, MNC Benefits and Conclusion.

Regional Economic Development Comparisons In order to analyze comparative economic and social conditions, we analyze the GDP, foreign direct investment (FDI) and U.N. Human Development Index rankings for the Latin American & Caribbean, the Asian and the Sub-Saharan African regions of the world.10,11 We have chosen to analyze GDP per capita to reflect comparative economic development; cumulative FDI inflows to represent relative foreign investor and MNC confidence; and the U.N. Human Development Index rank to reflect relative social development. The data reveals that Latin America & the Caribbean have greater economic and social development than both Asia and Sub-Saharan Africa, while Asia is more developed than Sub-Saharan Africa. Meanwhile, Asia leads both Latin America & the Caribbean and Sub-Saharan Africa in cumulative FDI inflows from 1992-2003, which illustrates MNCs growing attention to Asias economic growth potential and increasing market opportunities. We believe that the industrial development of these regions directly impacts SMEs abilities to strengthen enterprise development capacities and CSR practices, and that the relative development levels accurately depict the level of SME and CSR development initiatives currently underway in these regions of the world.

GDP Per Capita (PPP US$)

8,000 7,000 6,000 5,000 PPP US$ 4,000 3,000 2,000 1,000 0

Latin America & the Caribbean East Asia and the Pacific Sub-Saharan Africa

GDP Per Capita

Source: UNDP Human Development Reports, http://hdr.undp.org/statistics/

10 11

UNDP Human Development Report Statistics World Investment Report: Shift Towards Services, 2004

10

Cumulative FDI Inflows (1992-2003)

1200000 1000000 800000 400000 200000 0
Latin America and the Caribbean South, East and South-East Asia Sub-Saharan Africa

Millions of 600000 U.S. Dollars

FDI Inflow
Source: UNCTAD 2004 World Investment Report, http://w w w .unctad.org/en/docs/w ir2004annexes_en.pdf

U.N. Human Development Index Ranking

0.8 0.7 0.6 0.5 HDI Rank 0.4 0.3 0.2 0.1 0

Latin America & the Caribbean East Asia and the Pacific Sub-Saharan Africa

Source: UNDP Human Development Reports, http://hdr.undp.org/statistics/

11

Case Studies
Aracruz Celulose S.A.: Brazil Brazil: Key Socio-economic Indicators12

Indicator GDP (real growth rate) Nominal GDP (at PP US $) Nominal GDP (US $) Population GDP per capita Net direct investment flows

Unit % billion USD billion USD million USD million USD

Value 5.2 1535 604 179.1 3380 17070

Brazil has the second largest GDP and the largest national debt in Latin America. After the devaluation of the real in January 1999, Brazil began to cut its national debt, which was over half of GDP, through emergency tax cuts and decreases in spending. In 2002, left-wing Luiz Incio Lula da Silva was elected president and has since contained inflation and returned the country to strong growth through stringent fiscal and monetary policies. While GDP is expected to grow by 3.7% in 2005 and 3.3% in 2006, with consumer prices rising by 5.9% in 2005 and by 4.5% in 2006, Brazil still faces economic and political uncertainty. Burdensome debt, poverty and high unemployment continue to be major problems for Brazil.13 SMEs in Brazil Small enterprises play a significant role in the Brazilian economy. In 2000, micro 14 and small enterprises accounted for 20% of Brazilian national GDP, 96% of all enterprises and 53% of the overall workforce.15 Of these micro and small enterprises, 11.5% were in the agriculture and livestock sector, which represents 10.2% of GDP.16 Within the agricultural sector, the Brazilian forest and wood products industry is overwhelmingly comprised of SMEs with 98.2% of the total number of forest-harvesting operations, 98.9% of furniture manufacturers and 98.9% of wood processing enterprises in 2000.
12 13

All Key Socio-Economic Indicators are from Economic Intelligence Unit, Country Data Economist Country Briefings: Brazil 14 In Brazil, micro enterprises are defined as up to 19 employees. See May et al. (2003) 15 Instituto Brasileiro de Geografia e Estatistica 16 CIA World Factbook: Brazil

12

A major problem with forestry SMEs is their lack of sustainable forestry management practices compared to larger firms.17 This is primarily because of the historically uncompetitive nature of sustainable forest management operations as compared to other land use alternatives, such as harvesting without management or the planting of other more profitable crops. 18 Company Profile Aracruz Celulose S.A. is the worlds largest producer of bleached eucalyptus kraft pulp, a high-quality variety of hardwood pulp used by paper manufacturers to produce premium tissue, writing and printing, and specialty papers worldwide. The company is responsible for approximately 31% of the global supply and in the year ending December 31, 2003, they produced approximately 2,250,000 tons of pulp. In 2003 the company employed 2,281 of their own employees through Aracruz and its international subsidiaries, and employed 7,546 permanently outsourced employees. Aracruz owns approximately 405,700 hectares of forest and other land in the Brazilian states of Esprito Santo, Bahia, Minas Gerais and Rio Grande do Sul.19 The hardwood pulp and lumber supplied by the company is produced exclusively from planted eucalyptus forests. The lumber is sold to the furniture and interior design industries in Brazil and abroad, under the brand name Lyptus. Aracruz is listed on the Sao Paulo Stock Exchange (BOVESPA), on the Latin America Securities Market (Latibex), in Madrid - Spain and on the New York Stock Exchange (NYSE). 20 Aracruzs operations are designed for sustainable forestry management. The company only sources its wood from renewable eucalyptus plantations to ensure the long-term sustainability of the forest and invests heavily in forestry research and ecosystem preservation operations.21 Examples of such operations are its integrated pest management practices, which rely on biological control of pests and diseases on its plantations, and its electricity sourcing, of which over 90% is from biomass through the burning of by-products of the pulp production process.22 CSR Practices Many of the forests in which Aracruz operates are comprised of two productive sectors: eucalyptus plantation and harvesting and family-based agriculture. The local farmers within these regions raise cattle and grow a variety of crops, including coffee, citrus, and corn. Of these farmers, many are from indigenous groups that have long-standing cultural and generational ties to the land they manage. While there have been strained relations between Aracruz and indigenous farmers over land ownership and environmental management issues in the past, Aracruz has made a significant strides towards improving these relationships through its Forestry Partners Program.23
17

Sustainable forestry management and operations refers to practices that supply goods and services from a forest ecosystem without a decline in the yield of goods and services over time and without the degradation of site quality, See Pacific Forest Trust, Glossary 18 May et al. (2003) 19 Aracruz 20 ibid 21 ibid 22 Aracruz Celulose, Pax World Funds, June 2004 23 World Rainforest Movement

13

The Forestry Partners Program was created in 1991 and involves approximately 71,000 hectares contracted in partnership with more than 3,000 farmers in more than 100 municipalities in the states of Esprito Santo, Bahia, and Minas Gerais. The program gives farmers the opportunity to integrate into the Aracruz supply chain by planting seedlings of native tree species in their vacant land. The farmers are provided with forestry resources and sustainable forestry management training during the growth stage, which takes an average of five to seven years.24 When the wood is harvested, the farmers sell their wood to Aracruz and are given the option of keeping 3% of the harvest for personal use, as well as the residues such as bark and branches, left over from the harvest which can be sold to local businesses as sources of energy. 25 This diversification of land use by farmers mitigates risk and provides an alternative, often more profitable, revenue stream to a guaranteed market. In addition, Aracruz passes its sustainable forestry management expertise on to the farmers, thereby promoting sustainable and environmentally responsible forestry operations. SME Benefits Local farmers have significant incentives to participate in this program. For many local farmers, up to 90% of non-tree production is for self-consumption. In addition, the expansion of conventional farming activities, such as rice, beans and fruit, is often unprofitable, because of the lack of investment capital and the absence of profitable markets for excess goods. Therefore, the program offers an opportunity to augment current income, diversify crop risks, make use of marginal areas, cooperate with fellow farmers and utilize a new energy source for business and household operations. The farmers tree harvests generate sizeable returns, which can be reinvested in better technology to increase the productivity of their food crops.26 Farmers who participate in the program receive supplies, advanced funding, a guaranteed revenue stream, and technical assistance. As of 2003, farmers who join the program were offered three plan options: seedling supply, preferential contract and purchase and sale contract. The seedling supply plan provides free eucalyptus seedlings and technical assistance to participating farmers and Aracruz commits to purchasing the wood after harvesting. The preferential contract plan provides the same benefits as the seedling supply plan, but also includes the supply of fertilizers and ant traps. The purchase and sale contract plan is the most comprehensive plan, in which farmers receive financing for setting up the project in addition to those benefits provided by the preferential contract plan. The financing is provided in installments, which are released upon conclusion of various forest plantation implementation stages. The debt to Aracruz is ultimately paid in wood, not cash, because the financial value of the loan is converted into wood when the financing is provided and paid after harvesting.27 In 1999, Aracruz entered a partnership with the Indigenous Associations representing the Tupinikim and Guarani communities, which followed the resolution of conflicts regarding 2,500 hectares of land that had belonged to Aracruz but was incorporated into
24 25

Larson et al. (1994) Pax World Funds 26 Larson et al.(1994) 27 Aracruz Celulose, "Social and Environmental Report, 2003

14

indigenous reservations in the municipality of Aracruz. 28 Between 1999 and 2004, the Forestry Partners Program generated US$4.1 million in revenues to these indigenous communities. 29 These revenues create jobs, higher tax revenues and additional forestry resources that are cycled back into the local economy to stimulate growth and enhance social welfare. In addition to these economic benefits, the indigenous communities are also contributing to a more sustainable environment through the improved forestry management skills that they obtain through the program. MNC Benefits Aracruz benefits from the Forestry Partners Program in several ways. First, it receives operational and economic benefits from the establishment of a reliable alternative source of wood supply. The program reduces maintenance and transportation costs and mitigates potential supply shocks through the diversification of wood supply. 30 Second, it receives social benefits from the goodwill that it creates with local and indigenous communities by encouraging economic development in rural areas by increasing farmers incomes, creating new jobs and helping reduce rural exodus. Finally, it receives political benefits through its contribution to the Brazilian governments goals of increased tax collection and unemployment reduction. The political benefits that Aracruz has gained are significant. For example, Veracel Celulose is a bleached eucalyptus pulp manufacturing facility under construction in Eunpolis, located in the southern cone of the Brazilian state of Bahia. It is a jointly owned by Aracruz Celulose (50%) and Stora Enso (50%), a Finnish-Swedish company. Veracel has received financing and significant political support from the Brazilian government because they believe that it will attract further investment in the region and help create more employment opportunities.31 The Brazilian National Economic and Social Development Bank (BNDES) will invest R$ 1.5 billion in the Veracel project as part of its National Forest Program, a program designed to stabilize the Amazon timber industry by avoiding the exhaustion of timber resources while simultaneously protecting large tracts of forest through the establishment of a network of National Forests (Florestas Nacionais or Flonas). Brazilian President Luis Incio Lula da Silva intends to expand the financing lines for sustainable forestry projects and to improve legislation regulating forest plantations. During a visit to the Veracel construction site on January 21, 2005, the president stated that "The National Forest Program is one of the priorities of our government. With it, we are looking not only at today but also for maintaining sustainable development for a long time." He also stated that "The Veracel pulp mill is one more possibility for us to prove the need to make use of the multifunctionality of our land, and not think that rural land is only good for raising cattle." The president also said that the major social significance of the Veracel pulp mill was the deciding factor for the financing. President Lula highlighted initiatives such as Veracel's Forestry Partners Program, as having a significant social impact. Under the program
28 29

Boosting Income for Indian Communities, Aracruz Celulose IFC Projects, Aracruz Corp., Project Number: 23271 30 Larson et al. (1994) 31 Andersson and Orjan

15

farmers income can reach R$ 485 per hectare per year, whereas in cattle ranching, on average, annual income is R$ 200 per year. The Forestry Partners Program has reached 10,000 hectares of eucalyptus plantations in the extreme south of Bahia, and is expected to hit 23,000 hectares in three years. The eucalyptus produced in the region through the partnership should represent 18% of the Veracel mill's requirements for wood. President Lula concluded, "A project such as this one shows us that it is possible to invest in a responsible environmental fashion".32 To address NGO and local stakeholder concerns over the socio-economic impacts of the project, Veracel signed an agreement with UNDP to have UNDP conduct an independent impact assessment in the nine municipalities where the company operates: Belmonte, Canavieiras, Eunpolis, Guaratinga, Itabela, Itagimirim, Itapebi, Porto Seguro and Santa Cruz Cabrlia. The assessment will take into account the Human Development Index (HDI), tax revenue receipts and presence of Veracel in the region to determine the projects impact on each community.33,34 Conclusion The Forestry Partners Program is an example of how large MNCs can contribute to SME and CSR development by incorporating local stakeholders into the supply chain. By providing business development capital and resources that the farmers would otherwise not be able to access, Aracruz enables farmers to raise crops and operate small forestry operations at the same time. This creates an additional, stable revenue stream for farmers through land diversification. In addition, the sustainable forestry and land management techniques that Aracruz passes on to the farmers contributes to the long-term sustainability of the Brazilian forest and increases local awareness of modern forestry management techniques within local and indigenous communities.

32

33 34

Lula praises Veracels Forestry Partners Program and says the PNF is a government priority, Veracel Press Room, Jan 2005 An Independent View on Veracel, Stora Enso Sustainability, 2004 Veracel and UNDP sign agreement for review of the socio-economic impact of the plant, Veracel Press Room, June 2004

16

Cemex: Mexico Mexico: Key Socio-economic Indicators

Indicator GDP (real growth rate) Nominal GDP (at PP US $) Nominal GDP (US $) Population GDP per capita Net direct investment flows

Unit % billion USD billion USD Million USD million USD

Value 4.4 1016 676 105 6450 14102

Mexico is Latin Americas largest economy with USD 626.1 billion in real GDP in 2003.35 After steady growth in the late 1990s, Mexicos economy has slowed due to the weakening of the U.S. and global economy. In 2000, Vicente Fox was elected president, breaking 71 years of one-party rule by the Institutional Revolutionary Party (PRI). Since his election, Fox has had difficulty passing reforms through Mexican congress. Crime and human rights abuses continue to be major social problems in Mexico, and despite attempts to raise tax revenues, the government is still heavily dependent on oil revenues.36 These factors, paired with the Mexicos heavy reliance on the U.S. economy, create an uncertain economic outlook for Mexico. SMEs in Mexico SMEs are integral to Mexicos economy. In 1994, they comprised 98.7% of all business enterprises, 77.7% of total employment and 43.3% of total sales. Like many other developing countries, Mexico has cement and building materials distribution chain that is dominated by local SMEs. There are approximately 40,000 separate cement storefronts scattered throughout Mexico, the majority of which are small family-owned hardware establishments with names like Lupitas Cement and Juanitos Materials.37 85% of these sales are to local individuals who buy cement by the bag for small-scale do-ityourself home improvement projects; many of these individuals are poor.38

35 36

Big Differences Between Individual Countries, Latin Business Chronicle The Economist, Country Briefings: Mexico 37 Cemex expands retail venture in Mexico, abroad, Aggregate Research Industries, July 2004 38 Peter Fritsch (2002)

17

Mexican cement and building materials distribution SMEs face many barriers to sustainable business development. They lack the technical and financial resources to invest in market opportunities; they have difficulty accessing credit and face high costs of capital; they do not have economies of scale; they lack marketing and management skills and the understanding of general business best practices.39 Company Profile CEMEX, S.A. de C.V. is a Mexican holding company whose entities main activities are within the construction industry through the production, distribution, marketing and sale of ready-mix concrete, cement and clinker. Cemex is a global cement manufacturer with operations in North, South and Central America, the Caribbean, Europe, Asia and Africa, and approximately 25,900 employees. Founded in Mexico in 1906, Cemex has grown from a small regional player into one of the top international cement companies with sales volume of USD 7.164 billion in 2003. On December 31, 2003, CEMEX had a production capacity of over 80 million metric tons of cement per year. The companys primary production facilities are located in Mexico, Puerto Rico, the United States, Spain, Venezuela, Colombia, Egypt, the Philippines, Thailand, Costa Rica, the Dominican Republic, Panama and Nicaragua.40 CSR Practices In 2001 Cemex launched a new marketing and product distribution initiative called Construrama. The Construrama program is a Cemex-owned licensee system that offers Mexican cement distributors the opportunity to participate in a nationwide retail network with strong brand recognition. Unlike typical franchise models in which distributors must pay money and surrender decision-making autonomy to participate, the Construrama program directly invests money and resources in its local distributors and does not require participants to sell only Cemex products. Distributors gain access to a variety of more cost-effective and readily available products through the Construrama brand in addition to training and best practices education. This benefits both the local community and the local distributors. For example, Cemexs efforts to better cater to the needs of the rural communities where many of its Consturama distributors reside have resulted in enhanced community development through the development of alternative construction project financing options. After conducting a year-long study in an extremely poor neighborhood in Guadalajara, Cemex discovered that poor Mexicans often raise capital for construction projects through lotteries, where each participant donates funds to a pool dedicated to financing construction. These funds would often be used for purposes other than building, therefore Cemex worked with local community leaders to develop pools where winners received cement and building materials instead of cash. In addition, Cemex provided construction advice and blueprints to improve building quality. Cemexs cooperation with such poor communities has resulted in improved community building and development through the creation of new and better homes for the poor. The program has

39 40

APEC Center for Technology Exchange and Training for SME, SME Profile: Mexico CEMEX website

18

helped tens of thousands of families finance construction projects and Cemex plans to extend it to 800,000 families in the next five years.41 SME Benefits The Construrama program benefits SME distributors on many levels. Most distributors are family owned hardware stores, whose owners want to build sustainable businesses that can be passed on to their children. But, when it comes time to value or sell their businesses, owners often find that they are not worth more than their inventory.42 The Construrama program helps small business owners add value to their business and their community through the donation of capital resources and business training. Participants receive capital for new storefronts, inventory tracking software and computers.43 In addition, distributors receive management and business consulting advice and training to help build the business skills they need to grow their local businesses. The publicity, merchandising, customer service and marketing support that distributors receive, also helps to enhance the participating stores image and marketing capabilities. Through Construrama, distributors have access to more than 500 different product and services offerings at competitive prices, which allow them to offer consumers more options to cater to individual needs. All these factors contribute to the SMEs ability to increase sales and income.44 Beyond the unique brand recognition of Construrama, the program benefits SMEs and the greater community through Cemexs sharing of best business practices. This helps enable participating SME suppliers and distributors to build stronger, more competitive and sustainable businesses that generate greater value and higher economic returns for themselves and their communities. Improved business practices lead to improved efficiency and competitiveness, which leads to stronger growth and revenues, which in turn leads to higher employment and greater tax revenues. Therefore by investing in its distributors, Cemex is passing capital and best practice knowledge down the supply chain to local SMEs, who in turn help contribute to the improvement of local community welfare and development in the towns that they operate, many of which are rural and poor. Finally, by strengthening local cement and building distributors businesses, Cemex is contributing to the sustainability and competitiveness of small family-owned businesses. Local hardware merchants are facing increased competition from larger hardware stores like Home Depot, who recently entered the Mexican market and plans to expand. Therefore, the Construrama program will help local SMEs retain their competitive advantage.45 MNC Benefits Cemex benefits from its Construrama program through increased competitive advantage; the establishment of strong brand loyalty, higher market penetration and increased sales
41 42

The Art of Innovating on a Shoestring, Financial Times, September 24, 2004 Why Mexicans mix cement with football, Aggregate Research Industries, July 2004 43 Young, slide 24 (April 2004) 44 Construrama 45 Why Mexicans mix cement with football, Aggregate Research Industries, July 2004

19

through its consolidation of Mexicos fragmented distribution channel. Mexicos cement distribution network is highly fragmented. More than 20,000 outlets, approximately 75% of the retail cement sales in Mexico are through local distributors, many of which are small mom-and-pop businesses.46 Cemexs consolidation of this fragmented distribution network will continue to collect economic and strategic benefits for the company through the integration of more distributors into the Construrama network. In addition, by leveraging the existing SME local community relationships, Cemex gains immediate access to local consumers and reduces the time needed to establish trust in its Construrama brand. Construrama has strengthened Cemexs existing sales network through the standardization of information systems and storefronts, and has helped increase supply- chain operating efficiencies and reduce costs. The program has been extremely successful since its inception. Within the first six months the program grew into the largest construction materials chain in Latin America, and as of December 31, 2003, the program has reached 750 independent concessionaries with approximately 2,100 storefronts in more than 700 towns across Mexico. Cemex is currently deploying the program to its South and Central American markets. 47 Conclusion The Construrama program is an example of how large MNCs can contribute to the enterprise and CSR development of SMEs by strengthening the capacities of SMEs within their distribution network. While the Construrama programs primary goals are to increase Cemexs profits through strengthening fragmented distribution network, the programs implementation results in SME and CSR development of its distributors, most of which are small family-owned enterprises. The program invests capital and resources in partner SMEs, which directly benefits both the SMEs and the local communities that they operate in. The program extends Cemexs reach to the rural poor, to offer alternative construction project financing and better products and services. The net result of the program is improved social welfare for the local communities involved. Therefore, the Cemex example illustrates that an MNCs pursuit of profit can directly result in social responsibility, SME development and local community development

46 47

Lukac (March 2004) Overview, Cemex Website

20

Delta Corporation: Zimbabwe Zimbabwe: Key Socio-economic Indicators

Indicator GDP (real growth rate) Nominal GDP (at PP US $) Nominal GDP (US $) Population GDP per capita Net direct investment flows

Unit % billion USD billion USD million USD million USD

Value -8.2 20 4 12.9 350 91

Due to expansionary macroeconomic polices and a break down of law and order Zimbabwes economy has deteriorated sharply since 1997. By 2001 real per capita GDP had declined by over 20 percent relative to 1997, inflation reached triple digits, and real interest rates were negative. The Reserve Bank of Zimbabwe has been successful in combating inflation, decreasing it from 600% in January 2004 to 132.7% as of December 2004. The June 2004 Government Monetary Statement and Fiscal Policy Review indicates positive developments in, for example, tax policy, public finance management, corporate governance, and financial sector guidelines. Additionally, a number of measures are designed to attract investments in the economy from the Zimbabwean diaspora. Nevertheless, it is expected that Zimbabwes economic growth will decline as it settles into a new equilibrium. Many firms have scaled back operations to adjust to lower income levels; however, new difficulties will arise from economic instability and growing health concerns regarding HIV/AIDS. It is estimated that real GDP has contracted by 8.2% in 2004 (compared with a recent government estimate of 2.5%) and it is forecast to contract by 3.1% in 2005 and 0.5% in 2006.48 SMEs in Zimbabwe Approximately 15.2% of Zimbabwes employment can be attributed to SMEs. In Zimbabwe a small enterprise is defined as a business employing not more than 50 people with assets of less than Z$3.0 million.. Medium enterprises for manufacturing are those employing up to 100 people and with an asset base of Z$12 million. For other sectors, medium enterprises employ up to 75 people, with an asset base of Z$7 million.49
48 49

Ibid. Ngwenya, et al. p 12 (April 2003)

21

Zimbabwe is now making concerted efforts to provide access to financial services for SMEs and to assist with the utilization of the same for productive purposes. Company Profile Delta Corporation, listed on the Zimbabwe Stock Exchange, is a conglomerate in food and leisure sectors. It is a holding company that has invested in and taken management responsibilities for a portfolio of business which operates in Zimbabwe. The company was first registered in 1946 as Rhodesian Breweries Limited. Group activities are principally in the beverage, retail, hotel and agro-industrial sectors. It has cross-border investments within Mozambique. In 2004, Delta Corp had sale proceeds of $1,064,543. It currently has plans to expand production in various divisions of the group by $350 Billion.50 The group accounts for 10% of the countrys GDP. Major brands include Castle Lager, Golden Pilsner, Lion Lager, Carling Black Label, Zambezi Export Lager, Zambezi Lite Lager, Zambezi Dry Lager, Bohlinger's Lager, Chibuku, Rufaro, Coca-cola, Diet Coke, Fanta, Sparletta, Sprite and Schweppes. It operates throughout Zimbabwe.51 CSR Practices In conjunction with Empretec, a UNDP supported training agency, Delta Corporation initiated a program entitled Stand Up and Go that is aimed at promoting SMEs in Zimbabwe. The program encouraged senior management to work with the procurement department to identify outsourcing opportunities. When successful applicants were identified, they were encouraged to attend a two-week entrepreneurial development course run by Empretec.52 Delta Corporation paid all training costs. The intensive training program combined behavioral aspects of entrepreneurship and practical exercises, which build the skills needed to plan and operate SMEs. After the course, Empretec selects the most competent of the applicants for final interviews and selection by Delta Corporation, conducted at the head office. The successful applicant would receive funds in accordance with their project proposals, with amounts ranging from $10,000 to $250,000. The amount was determined by evaluating the amount needed for the purchase of capital equipment, stock purchase, working capital, and operating expenses. The funds were distributed as a loan with a one-year grace period, 1% annual interest rate and loan payable over a five-year period. All amounts repaid where then invested in a revolving fund of $1 million to provide seed capital to new enterprises. Delta Corporation required the applicants to submit weekly financial reports to monitor progress of their enterprises. Delta also provided support when needed. SME Benefits By 1997, a total of 250 jobs had been created by the Stand Up and Go program. Today, Delta Corporation continues to do business with 26 entrepreneurs who participated in the program. SMEs have gained access to wider corporate markets, leading to higher turnover and continued contracts with Delta Corporation. In addition to the successful development of SMEs, this program helped to establish many cases of successful outsourcing such as cleaning, catering and laundry services that were outsourced
50 51

The Herald, November 26th, 2004 Thomson ONE Banker 52 Chambers of Industry in Zimbabwe

22

throughout the company as well as housekeeping and food and beverages which were outsourced by the hotel division. MNC Benefits Due to deteriorating economic conditions in Zimbabwe, the Delta Corporation needed to find ways to reduce costs, focus resources on its core business and increase outsourcing to SMEs. In some cases former employees were able to establish SMEs that supplied Delta. Furthermore, Deltas relationship with the government improved as a result of the enterprise development support, as did the companys reputation. Conclusion This case study demonstrates the positive impact managerial and entrepreneurial training can have on SMEs and MNCs alike. In the light of hyperinflation and political unrest, Delta Corporation was still able to find a means to decrease costs and transfer knowledge to local SMEs. Moreover, this program helped to alleviate the difficulty SMEs have in acquiring financial capital. The positive spillover into the local economy, although not quantified, has generated greater social and economic progress.

23

Unilever: Ghana Ghana: Key Socio-economic Indicators Indicator GDP (real growth rate) Nominal GDP (at PP US $) Nominal GDP (US $) Population GDP per capita Net direct investment flows Unit % billion USD billion USD Million USD million USD Value 5.8 53 9 21.4 399 139

Ghana is an independent republic with a democratic government, which lies on the Gulf of Guinea and forms part of the West African Region. The country has a relatively welleducated population, a capable bureaucracy and abundant natural resources. Ghana has one of the strongest economies in West Africa, yet the countrys economic base continues to be agriculture and the people remain poor. Gold mining, the production of cacao and tourism are the main sources of revenue. SMEs in Ghana Currently, Ghanas SME sector is comprised of 51.61% of formal sector employment. This sectors contribution to real GDP per capita is $377.18.53 Various SME development schemes are currently in place in Ghana including the Private Sector Development Fund contributed by Italy to provide 10 million Euro credit to eligible SMEs. SMEs in Ghana have faces several constraints to growth. Specifically, SMEs have cited the high cost of obtaining local raw materials, most likely resulting from poor cash flows.54 Furthermore, like many SMEs across the world, Ghanas SMEs suffer from a lack of financial capital. This stems from the fact that SMEs have limited access to capital markets, both locally and internationally, due to the perception of higher risk, informational barriers and the higher costs of intermediation for smaller firms. As a result, SMEs often cannot obtain long-term financing in the form of debt and equity. SMEs also have difficulties in gaining access to appropriate technologies and information on available techniques.55 Other constraints on capital and labor, as well as uncertainty surrounding new technologies, restrict incentives to innovation.

53 54

Ayyagari, et al. (2003) Kayanula and Quartey (2000) 55 Ibid

24

Company Profile Unilever, a Dutch company specializing in food, home and personal care products, has operations in 100 countries in Asia Pacific, Latin America, Africa and the Middle East, Europe and the United States. In 2003, it employed 52,000 people in Africa and the Middle East, with 234,000 worldwide. Unilever has been in Ghana since 1963. Their factory in Ghana employs 800 people and their plantations employ 1,700 people for a total of 2,500 people directly employed by Unilever. Unilever retains services from third party companies for transportation, security, canteen and housekeeping, harvesting and for selected manufacturing and distribution services. Indirectly, the company affects the lives of 42,000 families.56 They had sales of 27,238.60 GSB and net income of 1253.13 GSB in 2004. CSR Practices Unilever, in conjunction with the Ministry of Health and UNICEF, recognized the growing problem of iodine deficiency and formulated a business plan to supply iodized salt more cheaply. Iodine Deficiency (IDD) is the worlds most prevalent yet easily preventable cause of brain damage. It affects over 740 million people, 13% of the world population. The best way to prevent IDD is to add iodine to cooking salt. However, iodized salt is more expensive than raw non-iodized salt, therefore people with low incomes do not pay the additional cost. Unilever in India had experience with a low-cost iodized salt called Annapurna. The Popular Foods team in Africa decided to re-engineer its business systems to provide Annapurna to low-income families in Ghana. They utilized product and process development principles and re-engineered the supply chain. More specifically, they worked backwards to determine product costs, maintaining that price is determined by the market. They also used raw materials and low cost technology to increase quality and yield of raw materials as well as to eliminate storage and distribution waste. To keep capital costs low, Unilever outsourced production of iodized salt to third party salt producers. They developed partnerships with local manufacturers, investing time, resources and training to help them raise quality standards. The spillover from such linkages was the increase in capacity through the transfer of production methods, technical know-how and human resources management. Unilever also saved on brand development costs by drawing upon the experience of Annapurna in India. This included running a series of road shows to raise awareness of Annapurna and aligning the brands health messages with those of Ghanas Health Service, in order to build consumer confidence. To reach remote villages, Unilever and UNICEF teamed up with a local bank to provide micro-credit facilities to enable village women to buy Annapurna and other products for future sale. Now over 400 women are involved, providing them with a useful source of income and helping to decrease iodine deficiency in remote parts of Ghana. SME Benefits As stated earlier, many SMEs in Ghana suffer from high costs of raw materials and a lack of technical knowledge. Unilever was able to assist SMEs in utilizing local resources more efficiently, through the transfer of business know-how and quality standards,
56

World Investment News, Interview with Ishmael Yamson, April 2001

25

resulting in profitable use of raw materials.57 Overall, Unilevers iodized salt program created over 200 jobs and partnerships with over 60 suppliers within Ghana.58 MNC Benefits Since its 2000 launch, Annapurna has helped to nearly double the use of iodized salt in Ghana from 28% of the population in 1998 to approximately 50% in 2002. In just two years it captured 35% of the market. After 18 months the product became profitable for Unilever.59 Now Unilever plans to introduce new enriched products to other parts of Africa through similar supply chain methods. This case study demonstrates the bottomline benefits MNCs can obtain while benefiting SMEs and increasing nutritional health within a country. Owing to the success of Annapurna in Ghana, Unilever Ghana launched Krrunchy Biscuits, fortified with vitamin A. Conclusion This program illustrates that supply chain linkages can be used to successfully transfer CSR practices. The transfer of enhanced production methods and technological knowledge assisted SMEs in capacity building and business expansion. This case also demonstrates how various subcontractors can be involved in the early stages of production. Moreover, due to the dire effects of iodine deficiency on labor productivity and human capital, the greater social benefits of this case are significant.

57 58

Helen Lo, Business Case of CSR: A Unilever Perspective Ibid 59 Ghana: Fortified Foods Improve Health (2004),

26

UniIever: Vietnam Vietnam: Key Socio-economic Indicators

Indicator GDP (real growth rate) Nominal GDP (at PP US $) Nominal GDP (US $) Population GDP per capita Net direct investment flows

Unit % billion USD billion USD million USD million USD

Value 7.7 224 45 82.6 544 1950

Vietnam is currently seeing huge spurts of growth post the doi moi reforms60 and is being touted as the next Asian miracle economy. It has high literacy rates (above 90%) and with sustained growth rates of 7% has seen an impressive record of poverty reduction. The country is increasingly attracting more FDI. At the same time the young population is demanding a better standard of living. Company Profile The Unilever Group was created in 1930 when the British soap-maker Lever Brothers merged its businesses with those of the Dutch margarine producer, Margarine Unie. It has since then grown to become one of the largest fast-moving consumer products companies in the world with some of the top brands like Dove, Knorr, Lipton, Close-Up, Ponds, Vaseline etc. Its CSR practices are well known and documented. Unilever has operations in around 100 countries and its products are on sale in 50 more countries.61 Unilever started its operations in Vietnam in 1995. Since then it has witnessed huge growths and its turnover has increases from USD 7.95 million in 1995 to USD 223 million in 2002. It contributes approximately USD 21 million to the state budget.62

60

The Vietnam government launched a reform program in 1986 called doi moi to revitalize a much depleted economy. The process was characterized by a move away from centralized planning, market reforms, macro-economic stabilization and a gradual opening up of trade. The reforms have been extremely successful and Vietnam is now put forward as a model for reforms in transition economies. As a result of the reform poverty levels have decreased from70% o of the population in the mid-1980s to about 37% in 1998 and approximately 30 % now. 61 www.unilever.com 62 UN Global Compact Workshop New York, Jan. 15-16th, 2004

27

SMEs are involved in supplying raw materials, packaging, finished products (contractors) and finished goods distribution within Unilevers supply chain. The company has 130 suppliers of raw materials and packaging materials, 330 distributors and 9 key manufacturing contractors. SMEs in Vietnam The CSR agenda is relatively new in Vietnam, although safeguards for worker's rights and working conditions are well articulated in national legislation.63 SMEs contribute significantly to the national economy, as they constitute 65% of the GDP, 85% of the industrial labor force and 20 % of the exports64. International economic integration for Vietnam takes an important step forward with the implementation of the bilateral trade agreement with the United States; application for WTO accession, and; the ASEAN Free Trade Agreement (AFTA), which requires the reduction of tariffs and import barriers among all ASEAN member nations by 2006. This means that all firms have to conform to global norms with respect to environment, work environment etc and at the same time be economically efficient in the face of fierce competition. There is a growing fear that many SMEs may have to shut down their operations if they fail to meet international standards. Hence growth of social responsibility norms with concurrent growth of SMEs is critical for this country. CSR Practices When Unilever started its operations in Vietnam most local raw material and manufacturing suppliers did not have sufficient knowledge regarding cost-efficient supply chain management systems, technology, quality control, safety and environmental standards These SMEs also had very little access to capital and lacked managerial inputs regarding strategy and policies for their development. Unilever aimed at bridging these gaps for those SMEs, which were willing to work with them through contract specifications and developing working relationships. It is also to be noted that the majority of SMEs in Vietnam happen to be in the textile or footwear sector, which has low returns and more focus from the government. Unilever defined quality, safety, and environmental standards for its partners and provided the technological inputs necessary for the SMEs to meet those standards. Extensive training programs on quality standards, warehousing specifications, safety and environment standards etc. were undertaken. These standards were defined and monitored by Unilever. Additionally the company defined labor standards in its contract specifications, which included legal minimum working age of 18 in conformance to Vietnamese law. The wage rates for supplier employees were also set in this contract and this meant that that the workers in these SMEs got wages that were substantially higher than the minimum country wage rates. Along with these Unilever imparted knowledge of best practices to its key contract manufacturers in the areas of equipment and machinery, formulations and processing and repairs and maintenance. One of the successful ways in which Unilever did direct transfer of knowledge to its manufacturers was by stationing a
63

64

Corporate Social Responsibility (CSR) in Vietnam - New Phenomenon and New Trends Dao Quang Vinh, Deputy Director, Institute of Labor science and Social Affairs Ministry of labor - Invalids and Social Affairs, Vietnam ,December, 2003 UNECE Expert Meeting for Good Governance for SMEs, by Arun Agrawal, Geneva, Switzerland, April 1-2nd, 2004

28

Unilever official at the site of the manufacturer. At the same time they provided financial support as required to ensure financial viability of the SMEs and secure their long-term growth. SME Benefits The SMEs that collaborated with Unilever gained from the transfer of new technologies and capabilities. At the same time they grew over time as steady business relationship justified expansion plans for them including diversification for some. Local suppliers now form 55 % of all raw materials required by Unilever.65 Unilever, on the other hand, guarantees a business of $34 billion of business to its suppliers. The growths of these SMEs have been phenomenal. Third party volumes increased from 3,705 tons in 1995 to 91,024 tons in 2002. Of this, approximately 7,692 tons were exported. E.g. Bicico Chemical Cosmetic Enterprise, one of Unilevers detergent manufacturers, grew in volume from 3,000 tons in 1996 to 23,000 tons in 2000, its turnover grew from $1,800 to $285,000 and number of employees increased from 12 to 250.66 Similarly, Duy Tan is one of Unilever Vietnams leading suppliers of packaging material. Its total turnover increased from $900,000 in 1996 with 160 workers to $6.60 million and 664 workers in 1992.67 It is estimated that for every person who is directly employed by Unilever, there are approximately 3 persons who, in a dedicated way, cooperate with Unilever. The environmental, quality, safety and productivity standards in partner SMEs have improved significantly.68 MNC Benefits Unilever gained through creating additional production capacity without incurring the cost of setting up a factory by entering into contracts with local manufacturers. Additionally, they were able to develop a reliable supply of raw material and packing material and increase their distribution reach, while mitigating risk by reducing their reliance on imports. Ultimately, these changes resulted in the reduction of lead times and lower working capital including warehousing requirements. In the process, Unilever managed to substantially reduce overall supply chain costs and has become the market leader in five out of its six product categories.69 Conclusion Unilever attributes its success to several factors.70 It cites respect among potential partners as a precondition. Unilever also emphasizes that the partnership is symbiotic and that partners have to adopt a long-term reference frame in which each partner contributes and understands the others needs. It is especially important for the large MNC to understand local cultural nuances. Most importantly they stress understanding the constraints of local SMEs and tailoring goals and expectations accordingly.71
65 66

www.unilever.com UN Global Compact Workshop New York, Jan. 15-16th, 2004 67 ibid, note: of the USD 6.60 million only USD 3.18 million is for Unilever 68 Helen Lo, Unilever UK 69 ibid 70 Heemstra Principles for TNC- SME cooperation: the experience of Unilever 71 Also see, Unilever: Building Business Linkages with SMEs in Vietnam, www.unilever.com

29

GAP INC.: Indonesia Indonesia: Key Socio-economic Indicators

Indicator GDP (real growth rate) Nominal GDP (at PP US $) Nominal GDP (US $) Population GDP per capita Net direct investment flows

Unit % billion USD billion USD million USD million USD

Value 5.1 826 258 223.8 1150 871

Indonesia is the worlds largest archipelago. It is part of the countries that formed the East Asian miracle countries. However, it has seen mixed fortunes since the East Asian crisis. Its growth rate of 4.9 %72 is modest by current Asian standards. It has become a conflict-prone area owing to the East Timor crisis and is politically unstable. FDI has also been decreasing as a result73. Company Profile GAP Inc is one of the largest apparel companies in the world with a turnover of $15.9 billion and 150,000 employees.74 The company sources its products from third party manufacturers using approximately 3,000 garment factories across 50 countries. It has been the subject of high profile campaigns to improve the working conditions of its third-party manufacturers. However, GAP is taking strong strides to rid itself of this image. It is one of the first companies worldwide to adopt a vendor code of conduct which covers issue such child labor, wage rates of employees, harassment etc. Each factory under all garment manufacturers has to undergo this vendor code of conduct evaluation before it is approved for production. GAP employs more than 90 full-time employees worldwide to improve factory conditions and meet the vendor code of conduct norms. Suppliers are given time to comply with these norms and if they fail to meet the deadline GAP withdraws its partnership. It has withdrawn roughly 130 factories worldwide in 2003 because they failed to meet GAPs strict vendor code of conduct evaluation. It came out with a very transparent social responsibility report in 2003 which
72 73

World Bank Asian Development Bank 74 Gap Inc, Social Responsibility

30

was bold enough to admit that few factories, if any, in the United States or anywhere else are in total compliance all of the time.75 SMEs in Indonesia In Indonesia, a tiny number of large firms tend to dominate the private sector at one extreme, with an abundance of informal micro-enterprises and small firms at the other.76Value added by small and micro-enterprises account for 9% of total manufacturing while employment in these enterprises constituted 59% of the total manufacturing labor force in 1999.77 Despite its importance, few of the institutions, government or non-government, including foreign assistance institutions were involved in the promotion of SMEs until 1993 when the Indonesian government established the Ministry of Cooperatives and Small Enterprises to coordinate the efforts of the SMEs' promotion.78 Indonesia needs considerable development in its SME sector to recover from the East Asian economic and the East Timor crises. The role of the SMEs is more significant in the apparel sector. There are an about 1.5 million directly employed directly in this industry and an estimated 4 million in supportive industries. In terms of its contribution to Indonesian non-oil exports, the value of textile and garment sector (excluding knitting) amounted to almost $2.6 billion 79 in 2003 and was 15% of all exports (excluding oil and gas).80 Hence, SME development becomes even more critical in the textile sector. CSR Practices GAP and Indonesian manufacturers have had a tumultuous past relationship. In July 1997, 700 workers from its third party manufacturers went on protesting miserable wages and the factory management's refusal to recognize their independent union. However, GAP made a fresh beginning in 2001 as part of a partnership initiative with the Global Alliance. Under the aegis of the Global Alliance initiative The Center for Societal Development Studies at Atma Jaya University in Jakarta conducted interviews in 2001 with eight garment manufacturers from which GAP sourced their products. The study focused on asking workers about their needs and hopes for the future. As a result of workers concerns about sexual harassment, workplace morale, and their supervisors lack of effective communication skills came to the fore. One of the key findings in Indonesia was that relations between factory managers and workers needed to improve. As a result, GAP Inc conducted supervisory skills training seminars with more than 450 managers in these eight factories, impacting more than 10,000 workers. The training focused on positive communication skills, stress management, problem solving, teamwork and leadership. This was in addition to GAPs efforts of improving working conditions in these factories and raising wages.

75 76

Beyond The Label: GAP Inc.s Commitment to Ethical Sourcing. Program for Eastern Indonesia SME Assistance, IFC 77 Industri Logam Mesin Elektro Dan Aneka 78 ACTETSME, SME Policies: Indonesia 79 Toemion, Theo F., Chairman, Indonesia Textile & Apparel Global Partnership Forum, Feb 18th, 2004 80 Mekong Private Sector Development Facility, IFC

31

SME Benefits Independent evaluations of the program in Indonesia indicate that it did manage to improve the interaction between supervisors and subordinates in the eight target factories. Positive additional effects included reduced absenteeism, improved problem solving, fewer rejects and defects and lower employee turnover.81 Consequently it boosted the volume and the quality of the products. Overall the SMEs benefited by having better working conditions and by being able to grow through the better productivity and larger volumes. MNC Benefits The main motive would have been to clean its tarnished image. In a sector like branded apparel, reputation and corporate image is critical for the success of the company. GAP sales had fallen substantially post the lawsuits that had been leveled against it for the alleged Saipan sweatshops and the campaigns, which followed these lawsuits. In the long run, GAP also benefits from a more robust supply chain with lower production costs due to lower defect rates and higher productivity in its contract manufacturers. Conclusion GAP proclaims that it is important to partner with its third party manufacturers and understand that they face problems. Being the larger player, it has to help the SMEs to identify solutions and help them implement them. It has also learnt that a larger number of the problems lie in local cultural attitudes and business practices rather than simple economic factors. MNCs need to understand these cultural nuances and tailor their solutions and working relationships accordingly.

81

China `The Winner' as U.S., Europe Lose Textile Quota, EFU, Aug. 2004

32

Analysis We now revisit the questions that were put forth at the beginning of this paper and analyze each with regard to the case studies that were previously discussed. 1. Does CSR actually benefit SMEs? There is a popular argument that CSR is only meant for large multinationals. SMEs lack the power to influence governments and dictate standards; hence the standards used are not in their best interests. Moreover, most SMEs are struggling to establish themselves and lack the resources or the know-how to implement CSR practices. It is also argued that MNCs typically exploit SMEs and use CSR solely to improve public relations. Thus, is there really a case for CSR for SMEs? From the evidence of our case studies we argue that there is a strong business case for SMEs to adopt CSR practices. Some of the main reasons are as follows: Productivity: gathering innovation for products and efficiencies Expanding business: expanding the reach of business through access to new markets and increasing customer base Improved working environment: increased motivation, less staff turnover and the ability to attract better quality staff Reputation: enhancing the reputation of the firm brand building for global companies 2. Traditional top-down strategies do not achieve sustainable CSR. What are alternative methods that can be employed? Traditional top-down strategies, described as the development and imposition of CSR practices by MNCs onto SMEs, were thought to be the most effective means for instilling responsible business practices within SMEs. However, it is evident that partnerships with MNCs that encourage capacity-building and worker empowerment are effective means for SMEs to gain knowledge of CSR practices and methods of CSR implementation. SMEs under this model carry out CSR activities because they clearly link the benefits of CSR to their own growth. 3. How important is the role of MNCs in facilitating growth of SMEs? Could the SMEs have done it themselves? SMEs lack the managerial and technical skills to implement CSR practices. MNCs can transfer these skills to SMEs through training and the sharing of best practices. At the same time, most SMEs in developing economies lack access to financial capital. This lack of resources for economic growth inhibits the potential adoption of CSR practices. MNCs can play a significant role in SME development and CSR adoption by investing the financial capital that is required for SME business growth and capacity building. Therefore MNCs can be major contributors to SME growth through the transfer of business skills and the provision of financial capital to partner SMEs.

33

4. What is the payoff to MNCs? Are they doing it as philanthropy / public relations or for mutual benefit? Some of the existing literature on CSR suggests that MNCs choose to practice CSR in their supply chains for a number of compelling reasons other than philanthropy. Business for Social Responsibility (1998) points out that public demands for enforcement of regulations and for increased disclosure by investors, regulators and public interest groups have played a strong role in increasing corporations' sensitivity to their social responsibilities. Others note that public and shareholder expectations of corporations to deal with complex social and economic issues in the communities where they operate have also risen dramatically over the past decade. 82 Many corporations have learned that consumers and business customers often seek to align themselves with firms that have a reputation for social responsibility. Some have indicated that in order to stay competitive in global markets MNCs have developed strong supply chains through which they can transfer standards to their suppliers as well as on their own divisions and subsidiaries. Moreover, many corporations now realize that the benefits of CSR also include greater access to capital, reduced operating costs, improved financial performance and enhanced brand image.83 The cases reviewed in this paper corroborate this literature. There is a clear business case for the MNCs to carry out CSR initiatives. None of the MNCs in our case studies have implemented CSR as philanthropy, even though many do have a large charity contribution arm as well. Our review indicates that many MNCs obtain immediate and direct business benefits from CSR in the form of lower costs, less risks and liabilities, more efficient operations and better quality products. MNCs also perceive longer-term returns from CSR by promoting sustainable development, including stronger competitive advantage, preservation of crucial resources and raw materials, a favorable corporate image and opportunities for new product development. 5. What are some of the key elements of a successful transfer of CSR practices to SMEs by MNCs? SME development through supply chain linkages requires MNCs to carefully research and analyze their operational and environmental conditions. A basic understanding of the SMEs cultural mindset and business etiquette is the first step to clearly identifying how MNCs can develop their supply chain activities. Training high-level managers on cultural sensitivity and the importance many cultures place on respect and societal positions can facilitate communication and discussions with local SMEs. With regard to direct supply chain and SME development, it is necessary for the MNC to understand the local economic and environmental limitations that may inhibit SMEs from engaging in further capacity-building activities. Such constraints include limited managerial capabilities and limited access to financial capital for increasing operational capacity. Building confidence and trust between MNC managers and SME suppliers is a key step towards the successful transfer of CSR practices. Establishing confidence and
82 83

Berry and Rondinelli (1998) ibid

34

trust strengthens business partnerships and provides a foundation for CSR transfer. In addition, procurement managers should be encouraged to actively pursue new partnerships with CSR friendly local suppliers and maintain a database of suppliers with corresponding profiles and capabilities. A ranking system, based on performance and compliance with specified standards may facilitate the active participation from procurement manages to engage local SMEs. Required annual reviews of the database may help facilitate such activities. Partnerships between MNCs and SMEs should focus on building capacity of SMEs to implement CSR practices on their own through direct information exchange. This can be accomplished by holding structured and informal meetings in various settings to encourage suppliers to freely discuss challenges and achievements. Training for SME managers on managerial, operational and technical improvements can also increase standards within and partnerships between SMEs. In addition, providing incentives to those suppliers who are performing well may encourage other suppliers to participate in MNC training activities and increase overall standards. 6. What is the role of different agencies: Government / Multilateral organizations? Role of Government Without a balanced and enabling framework that supports local business, the tools highlighted above will be of limited value. Governments have a significant role to play in engaging SMEs and MNCs in dialogue on creating an enabling environment in which CSR practices can be adopted more easily and on establishing mechanisms that help SMEs build capacity to grow and sustain their CSR initiatives. Governments must also focus on attracting investors who will bring additional developmental benefits besides tax revenues, such as employment, new skills and technologies. In addition, governments can contribute to CSR development by designing comprehensive frameworks and systemic approaches that will bring together the existing work on standards and codes of different companies at the country level. By doing so, governments will promote and enable a fuller CSR implementation across industry sectors. Governments in developing countries are beginning to take on such roles. Indonesia has established a Ministry of Cooperatives and Small Enterprises84 to coordinate various efforts of SME promotion.85 Vietnam issued a decree in 2001 for the support of small and medium sized enterprises to help ensure orderly growth of SMEs in the country. Some of the initiatives underway include: creating a favorable legal environment to ensure that all business activities do well; providing favorite and promotion policies for SMEs in specific sectors such as textile and clothing, shoe and leather, consumer goods and export production, parts and spare parts manufacturing, food and foodstuff processing, electrical and electronics and information technology; receiving and implementing technical assistance projects of international organizations and countries to develop SMEs; establishing centers for consulting and

84 85

Ministry of Cooperatives and SMEs, Indonesia UNECE Expert Meeting on Good Governance for SMEs

35

supporting SMEs in sectors, cities and provinces; and expanding internal and external markets for SMEs.86 Role of Multilateral Institutions While we believe that MNCs policies have the greatest effect on SME development and CSR practices, we also believe that multilateral organizations can contribute significantly to such development. Although the role of multilateral institutions was not specifically discussed in our case studies, multilateral institutions like the World Bank, the UNDP, the Asian Development Bank, the Inter-American Development Bank, as well as bilateral aid programs like AusAid, USAID, and DFID and other CSR and SME organizations like WASME and WBCSD, have critical roles to play in facilitating activities that will promote CSR capacity and institution building policies and projects. Furthermore, international organization can help build capacity by offering access to financial capital through the provision of grants and soft-loans. Given their global perspective and network, these organizations can also help create supportive networks that facilitate dialogue and join different agents, such as SMEs, MNCs and Governments to leverage strengths and knowledge across agents, regions and sectors. Multilateral institutions need to raise awareness and help governments establish ways to work together and to engage in public/private partnerships. Some of the activities that can be undertaken to accomplish such goals are: sharing of best practices through workshops and publications, training and research and forming intermediary organizations which provide SMEs with capital to build capacity and pursue CSR activity. Some current CSR initiatives undertaken by such organizations include: The U.N. Global Compact: The Global Compact is an initiative created by the U.N. that brings MNCs together with UN agencies, labor and civil society, to support ten principles in the areas of labor, human rights, the environment and anti-corruption. By establishing internationally accepted principles, the Global Compact helps companies feel confident that their actions are being guided by values that are universally supported and endorsed. 87 As of March 1, 2005, the Global Compact had 1947 company participants.88 The Global Compact has become an important mechanism for joining the business and citizenship strategies of MNCs. These large corporations have increasingly become extended enterprises, with extensive supply chains and complex market channels, involving highly interdependent networks of stakeholders. There is a pressing need for consistent policy and practice in executing business and community strategies. However, the process of turning executive commitment into operational reality remains a great challenge. Many mechanisms are required to effectively implement these commitments, but the Global Compact helps drive these commitments forward by providing a model against which they can be tested,
86 87

Ibid. Journal of Corporate citizenship, Issue 14 88 UN Global Compact

36

measured and improved, while at the same time providing a dynamic system for cooperation and learning from a broad range of participants.89 The Inter-American Development Bank - Multilateral Investment Fund: The Inter-American Development Banks Multilateral Investment Fund has invested in several projects throughout Latin America that specifically target the development of CSR practices in SMEs through the supply chain. In Mexico, they are attempting to improve the competitiveness and market opportunities for SMEs by supporting the implementation of CSR practices among SMEs that are in the value chain of larger enterprises. 90 In Chile, they are trying to improve the competitiveness of SMEs by incorporating CSR practices into business strategies as a SME management system to maximize social and private benefits.91 Meanwhile, in Columbia, they are attempting to improve the competitiveness and sustainability of SMEs by developing CSR practices that will improve market access, economic performance and finance avenues.92 Vietnam Business Council (VBC): VBC is a consultative and deliberative forum comprising representatives from business, government, and civil society. 93 The VBC meets regularly over time to address issues related to the development of economic, social, business policies and laws. The Vietnam Business Council was created under the leadership of four key organizations: (1) Vietnam Chamber of Commerce and Industry (VCCI), a national organization which assembles and represents business enterprises and associations from all economic sectors across the country; (2) Prime Minister's Research Commission (PMRC), the think-tank of the Prime Minister on economic, social and administrative reforms, which provides advice and proposals to the Prime Minister and leaders of the Vietnamese Government; (3) Central Institute of Economic Management (CIEM), the research institute which helps the Vietnamese government work out economic laws and policies; and (4) Association of Small Entrepreneurs in Hanoi.

89
90 91 92 93

Post and Carroll, Journal of Corporate Citizenship (Autumn 2003) Multilateral Investment Fund, Project Name: Implementing CSR Measures in SMEs in the Supply Chain Ibid. Multilateral Investment Fund, Project Name: Program to institute CSR practices to SMEs Workshop on Corporate Social Responsibility in the Promotion of Social Development: Experiences from Latin America and Asia, Inter-American Development Bank, Tokyo, Japan, July 1216, 2004

37

Conclusion In conclusion, the adoption of CSR practices by developing world SMEs can be most readily accomplished with the active participation of MNCs within the SME supply chain. MNCs must carefully examine the local economic and social conditions and the business environment that exists in the respective developing nation, to build effective supply chain partnerships and CSR transfer models. While multilateral institutions like the World Bank and the U.N. have successfully launched SME and CSR development initiatives based on humanitarian and environmental appeals, we believe that these initiatives will be more effective if they focus more on the specific interests of MNCs. The furthering of CSR practices in the developing world is heavily dependent on MNCs buying in to the CSR value proposition. Business managers ultimately report to their shareholders, therefore, it is essential to build a strong business case that provides convincing evidence of the potential business returns on SME partner investment. The case studies that are analyzed in this paper provide such evidence. This work reveals that by investing in SME supply chain linkages, MNCs can greatly enhance the business practices and efficiency of SMEs while concurrently enhancing their own profitability and social responsibility. Therefore, it is clear that MNCs can collect both tangible and intangible returns from investing in the CSR and general business development of partner SMEs. It is this return on investment that clearly distinguishes CSR from corporate philanthropy.

38

BIBLIOGRAPHY 1. Agrawal, Arun. Good Governance For SMEs with Special Reference To Practices In South/ South-East Asian Countries, UNECE Expert Meeting for Good Governance for SMEs, Geneva, Switzerland, Aril 2004; available online at: http://www.wasmeinfo.org/statearungse3.htm 2. An Independent View on Veracel, Stora Enso Sustainability, 2004 3. Andersson, Mans and Barthholdson, Orjan. Swedish Pulp in Brazil: The case of Veracel; available online at: http://www.swedwatch.org/filemanager/download/44/Veracelrapport.pdf
4.

APEC Center for Technology Exchange and Training for Small and Medium Enterprises: SME Profile, Mexico; available online at: http://www.actetsme.org/mexi/mex98.htm Aracruz Social and Environmental Report 2003; available online at: http://www.aracruz.com.br/ra2003/pdfs/e_rsa2003.pdf Aracruz Celulose Pax World Fund, June 2004; available online at: http://www.paxworld.com/News26/story2.htm

5.

6.

7. The Art of Innovating on a Shoestring, Financial Times, September 24, 2004 8. Arun, Raste. Responsibility of SMEs for Development of Peoples Economy. Bangkok 1-3 Nov 2004 Third International Conference 9. Ayyagari, Meghana, Thorsten Beck, and Asli Demirguc-Kunt, Small and Medium Enterprises Globally,: August 2003. Available online at http://www.worldbank.org/research/bios/tbeck/abd.pdf 10. Berry, Michael A and Rondinelli, Dennis A. Proactive Corporate Environmental Management: A New Industrial Revolution. Academy of Management Executive, 1998 (12) 2: 38:50.

39

11.

Best Business Practices for Corporate Social Responsibility: EU launches dialogue on best practice for multinationals, Workshop Report No. 3, Brussels, May 28th, 2001, available online at: http://europa.eu.int/comm/trade/csr/rep_wkshp3.htm

12. Big Differences Between Individual Countries, Latin Business Chronicle; available online at: http://www.latinbusinesschronicle.com/statistics/gdp/ranking.htm
13.

Brazil: Aracruz Celulose is now facing problems in two states, World Rainforest Movement, May 2002; available at http://www.wrm.org.uy/bulletin/58/Brazil.html

14. Cemex expands retail venture in Mexico, abroad, Aggregate Research Industries, July 2004 15. Chambers of Industry in Zimbabwe, Delta Corps Stand up and Go, available online at http://www.zarnet.ac.zw/indigenisation/programmes.html
16.

China Apparel, China The Winner as U.S., Europe Lose Textile Quota, August 2004, available online at: http://www.efu.com.cn/eng/onllinesales/promotion/allround/2004-8-31/6018.htm Commercial Market Strategies; available online at: http://www.cmsproject.com/home/home.cfm?view=normal

17.

18. Company Codes of Conduct and International Standards - Corporate Social Responsibility Practice Part I, World Bank, available online at http://siteresources.worldbank.org/INTPSD/Resources/CSR/Company_Codes_of_Co ndu ct.pdf 19. Company Codes of Conduct and International Standards - Corporate Social Responsibility Practice, Part II, World Bank, available online at http://siteresources.worldbank.org/INTPSD/Resources/CSR/CompanyCodesofCondu ctII.pdf
20.

Corporate Social Responsibility: Implications for Small and Medium Enterprises in Developing Countries, UNIDO, 2002, available online at: http://www.unido.org/userfiles/BethkeK/csr.pdf

40

21. Corporate Social Responsibility: Making Good Business Sense, World Business Council for Sustainable Development, 2001. 22. Corporate Social Responsibility, News and Resources; Mallenbaker.net, http://www.wbcsd.org/DocRoot/5mbU1sfWpqAgPpPpUqUe/csr2000.pdf 23. Cranmer, Ziba and Twose, Nigel, Responsibility Breeds Success, Development Outreach, World Bank Institute: March 2003 24. Development of Clusters and Networks of SMEs, UNIDO, Vienna, Private Sector Development Branch, 2001 25. Engaging Small Business in CSR Corporate Social Responsibility in Small and Medium Sized Businesses, February 2001 Michael Hopkins, MHCInternational Corp. http://www.mhcinternational.com/newsitem.php?action=article&article=55 26. Fox, Tom and Prescott, Dave, Exploring the Role of Development Cooperation Agencies in Corporate Responsibility, Development Cooperation and Corporate Social Responsibility: Exploring the Role of Development Cooperation Agencies; international conference, Stockholm March 22-23, 2004 27. Fox, Tom, Halina Ward, and Bruce Howard, eds. Public Sector Roles in Strengthening Corporate Social Responsibility: A Baseline Study. The World Bank: October 2002, available online at: http://www.iied.org/docs/cred/csr_wbreport.pdf 28. Fritsch, Peter. Hard Profits : A Cement Titan In Mexico Thrives By Selling to Poor --- Cemex's Huge Market Share Lets It Keep Prices High, Expand Around the Globe --- Mr. Rivera Saves for One Bag, The Wall Street Journal, April 4, 2002; available online at: http://college.hmco.com/business/gillespie/global_marketing/1e/students/readings/ch 06-02.html
29.

Gap, Inc. Beyond the Label: Gap Inc.s Commitment to Ethical Outsourcing, available online at: www.ksg.harvard.edu/cbg/hiv-aids/Beyond_the_Label.pdf Gap, Inc. Social Responsibility; available online at: www.gapinc.com/social_resp/social_resp.htm

30.

41

31.

Gasper, Antonio K., Possible Role of the Multilateral Investment Fund (MIF) in the Area of Corporate Social Responsibility (CSR), October 2003, available online at: http://www.iadb.org/mif/v2/files/StudyRoleMifCSR.pdf

32. Ghana: Fortified Foods Improve Health (2004); available online at: http://www.unilever.com/Images/Ghana_fortified_foods_annapurna_tcm13-5527.pdf 33. Gonzalez III, Joaquin L. Corporation-Community Collaboration for Social Development: An Overview of Trends, Challenges, and Lessons from Asia: 2004; available online at: www.iadb.org/int/jpn/English/support_files/AsiaOverview.pdf 34. Halina Ward, Public Sector Roles in Strengthening Corporate Social Responsibility: Taking Stock The World Bank: January 2004, available online at: http://www.iied.org/docs/cred/Taking_Stock.pdf 35. Hamner, Burton and Rosario, Teresita del. Green Purchasing: A Global Channel for Improving the Environmental Performance of Small Enterprises, Nov. 1997, available online at http://www.cleanerproduction.com/misc/pubs/OECDpaper.html 36. Heemstra, Andre R van. Principles for TNC- SME cooperation: the experience of Unilever, available online at: vi.unctad.org/SITE/TP/Data.nsf/0/f0f8f1a659065ce6c1256eaf00509061/$FILE/SME %20teb1_tnc1.doc 37. Holme, Richard, and Phil Watts, Corporate Social Responsibility: Making Good Business Sense, World Business Council for Sustainable Development, Jan 2001 38. Hopkins, Michael, Corporate Social Responsibility and SMEs Revisited, MHCInternational Corp.: February 2004.
39.

Human Development Report 2004 Statistics; available online at: http://hdr.undp.org/statistics/

40. Industri Logam Mesin Elektro Dan Aneka; available online at http://ilmea.dprin.goid/ist-sme-cluster
41.

Instituto Brasileiro de Geografia e Estatistica; available online at http://www.ibge.gov.br/english/default.php

42

42. Integrating SMEs in Global Value Chains. Towards Partnerships for Development, UNIDO, 2001 43. International Finance Corporation: World Bank Group Small and Medium Enterprise Department, available online at: http://www2.ifc.org/sme/html/sme_definitions.html
44.

Jorgensen et al, Strengthening Implementation of CSR in Global Supply Chains. World Bank Group: October 2003. World Bank Group Small and Medium Enterprise Department, available online at: http://www2.ifc.org/sme/html/sme_definitions.html

45. Kayanula, Dalitso, and Peter Quartey, The Policy Environment for Promoting Small and Medium-Sized Enterprises in Ghana and Malawi, Institute for Development Policy Management, University of Manchester: May 2000.
46.

Kuhndt, Michael, Justus von Geibler, and Andreas Villar. Challenges for SMEs in a Globalized World Economy. Industry and Environment 26.4 (Oct-Dec 2003): 7-8 Larson, Eric D., Lulz Carlos E. Rodriguez, and Tasso Rezende de Azevedo, Farm Forestry in Brazil, BioResources 94 Biomas Resources: A Means to Sustainable Development, Bangalore, India, Oct 1994 Lo, Helen. The Business Case for CSR: A Unilever Perspective. available online at: www.eabis.org/HelenLo17062004_pdf_media_public.aspx Lukac, Carlos N. Three Corporate Giants Exploit Mexicos Fragmented Distribution Channels to Achieve Competitive Advance, Business Mexico, March 1, 2004, available online at: http://www.bain.com/bainweb/publications/publications_detail.asp? id=15899&menu_url=publications_results.asp Making Global Responsibility Work for Business and Development, UN Global Compact and Swiss Business, 2002, available online at: http://r0.unctad.org/gcandswissbusiness/ May, Peter H., Valeria Goncalves da Vinha and Duncan J. Macqueen; Small and Medium Forest Enterprise in Brazil. Grupo Economia do Meio Ambiente e

47.

48.

49.

50.

51.

43

Desenvolvimento Sustentavel GEMA/IE/UFRJ: London 2003, available online at: http://www.iied.org/docs/flu/SME_pubs/Brazil_SME_paper_final_checked.pdf

52.

Mekong Private Sector Development Facility, Cambodia Gap Inc. and IFC/MPDF launch supervisory skills training for hundreds of garment factory supervisors, February 2005, available online at: http://www.mpdf.org/f-news/f2-news.jsp? ID=191&index=1

53. Ministry of Cooperatives and SMEs, Indonesia; available online at: http://www.depkop.go.id/index.php
54.

Ngewenya, Thenjiwe, and Ntando Ndlovu, Linking SMEs to Sources of Credit: The Performance of Micro Finance Institutions in Zimbabwe, International Labor Organization (April 2003) Neef, Dale, The Supply Chain Imperative. New York: American Management Association, 2004. Pacific Forest Trust: available online at: http://www.pacificforest.org/about/glossary.html

55.

56.

57. Partnership with Private Business. Rationale, benefits, risks and approaches, UNIDO, Proceedings of an Expert Group Meeting held at the Vienna International Centre on 30th, 31st October 2000.
58.

Partnerships between SMEs and Multinationals, UNDP and Deloitte Report, June 2004, available online at: http://www.deloitte.com/dtt/cda/doc/content/PartnershipsExSummary(1).pdf Post, James E., and Tanja D. Carroll, Corporate Citizenship in the Extended Enterprise: How the Global Compact Links Business and Society, Journal of Corporate Citizenship, Issue 11, Autumn 2003

59.

60. Program for Eastern Indonesia SME Assistance, IFC; available online at: http://www.ifc.org/pensa 61. Strengthening Implementation of Corporate Social Responsibility in Global Supply Chains - Corporate Social Responsibility Practice, World Bank, Oct. 2003, available
44

online at http://siteresources.worldbank.org/INTPSD/Resources/CSR/Strengthening_Implemen tation.pdf

62.

Sustainable Livelihoods and Business. World Business Council for Sustainable Development: December 2004; available online at: http://www.wbcsd.ch/web/publications/sl-regional-dialogues_080205.pdf

63. Thomson ONE Banker; Company Profile, Delta Corporation; available online at http://banker.analytics.thomsonib.com/ta/?ExpressCode=columbiau
64.

Toemion, Theo F. Indonesia Textile and Apparel Global Partnership Forum, Indonesias Investment Coordination Board: February 2004; available online at: http://www.bkpm.go.id/en/know.php?catinfo_id=1&info_id=19&t=

65. Unilever Vietnam: Winning with Small Local Enterprises, UN Global Compact Workshop, January 2004; available online at: www.undp.org/business/docs/unilever.ppt 66. Unilever, Ghana: Fortified Foods Improve Health(2004), available online at http://www.unilever.com/Images/Ghana_fortified_foods_annapurna_tcm13-5527.pdf
67.

Unleashing Entrepreneurship: Making Business Work for the Poor. Commission on the Private Sector and Development, UNDP: 2004; available online at: http://www.undp.org/cpsd/indexF.html Veracel, Lula Praises Veracels Forestry Partners Program and Says the PNI is a Government Priority, January 24, 2005, available online at: http://www.veracel.com.br/en/sala/sala0045.htm Vinh, Dao Quang. Corporate Social Responsibility in Vietnam New Phenomenon and New Trends, Ministry of Labor: December 2003

68.

69.

70. What Role for Public Policies? Round Table Discussion on CSR, Vidar Lindefjeld, chairman of the UNICE CSR Working group, UNICE, Venice, Nov 14th, 2003
71.

Web-based commentary on the ICC 9 steps on responsible business conduct, ICC (International Chamber of Commerce), May 19, 2004, available online at:
45

http://www.iccwbo.org/corporateresponsibilityguide/DATA/PDF/Corporate_Respons ibility.pdf 72. Workshop on Corporate Social Responsibility in the Promotion of Social Development: Experiences from Latin America and Asia, Inter-American Development Bank, Tokyo, Japan, July 1216, 2004; available online at: http://www.iadb.org/int/jpn/English/support_files/AsiaOverview.pdf
73.

World Investment Report: The Shift Towards Services, UNCTAD (United Nations Conference on Trade and Development), 2004, available online at: http://www.unctad.org/en/docs/wir2004annexes_en.pdf World Investment News, Interview with Ishmael Yamson, April 2001:, available online at http://www.winne.com/ghana4/vp05.html

74.

75. Why Mexicans mix cement with football, Aggregate Research Industries, July 2004; available online at: http://www.aggregateresearch.com/caf/press.asp? ID=4540&category=113&keyword=cement&order=
76.

Young, Rebekah. Small and Medium Enterprises and Sustainable Development: Large Company Engagement, World Business Council for Sustainable Development, CPPR Ottawa: April 2004; available online at: http://www.c2p2online.com/documents/Rebekah_Young-April_27.pdf

46