Journal of Business Ethics

, Volume 135, Issue 4, pp 665–681 | Cite as

Corporate Social Responsibility: Its Economic Impact and Link to the Bullwhip Effect



This paper examines the economic impact of implementing Corporate Social Responsibility (CSR) in the supply chain operations of multinational corporations (MNC). Because they have global supply chains in emerging markets, MNCs face certain operational challenges. For example, unethical operations often result in a huge loss to MNCs in the long run, even though their initial cost seems to be low. In this paper, we extend the Bullwhip Effect theory in supply chain management to the ethical operations context, and define and evaluate a special Bullwhip Effect due to Unethical Operations (BEUO). Using economic data from various sources including Ford, Toyota, and GM in the auto industry, we first estimate the indices of BEUO for the three companies and demonstrate the economic necessity for MNCs to incorporate CSR with supply chain operations. We then propose a coherent approach, blending what we term the bottom-up and proactive methods, to achieve such an outcome. The bottom-up approach requires MNCs to switch their focus on stakeholders, shifting from shareholders to consumers and workers, and on decision levels from public relationships to supply chain operations. The proactive approach recommends initializing specific CSR operations to mitigate the negative impact of BEUO. Both theoretical analysis and case studies are conducted to evaluate our developed propositions that MNCs adopting the proposed CSR operations will in the long run achieve better economic performance. Recommended actions for implementation, based on best practices, are also presented.


Economic cost Corporate Social Responsibility Operational decision Bullwhip effect Multinational corporations 


  1. Adams, J. S., Tashchian, A., & Stone, T. H. (2001). Codes of ethics as signals for ethical behavior. Journal of Business Ethics, 29, 199–211.CrossRefGoogle Scholar
  2. Amaeshi, K., Osuji, O., & Nnodim, P. (2008). Corporate Social Responsibility in supply chains of global brands: A boundary less responsibility? Clarifications, exceptions and implications. Journal of Business Ethics, 81(1), 223–234.CrossRefGoogle Scholar
  3. Anderson, R. (2010). Global Corporate Citizenship—A Trend to Watch. Accessed 16 July 2013.
  4. Asgary, N., & Mitschow, M. (2002). Toward a model for international business ethics. Journal of Business Ethics, 36(3), 239–246.CrossRefGoogle Scholar
  5. Automotive News. (2000). Questions Unanswered in Tire Mess (p. 12). 28 Aug.Google Scholar
  6. CNN Money. (2014). GM: Steps to a recall nightmare. Accessed on 28 August 2014.
  7. Belso-Martínez, J. A. (2008). Differences in survival strategies among footwear industrial districts: The role of international outsourcing. European Planning Studies, 16(9), 1229–1248.CrossRefGoogle Scholar
  8. Blanchard, O. J. (1983). The production and inventory behavior of the American automobile industry. Journal of Political Economy, 91, 365–400.CrossRefGoogle Scholar
  9. Bowen, R., & Kennedy, J. JE. (2010). Accounting for Toyota’s recalls, Foster School of Business at the University of Washington.
  10. Braithwaite, A. (2003). The supply chain risks of global sourcing, LCP consulting. Accessed 10 September 2013.
  11. Caniato, F., Caridi, M., Crippa, L., & Moretto, A. (2012). Environmental sustainability in fashion supply chains: An exploratory case based research. International Journal of Production Economics, 135(2), 659–670.CrossRefGoogle Scholar
  12. Cherukupally, A. (2011). Union Carbide and the Bhopal Disaster, Global Research, October 19, 2011. Accessed 10 September 2014.
  13. Cheung, D. K., Welford, R. J., & Hills, P. R. (2009). CSR and the environment: Business supply chain partnerships in Hong Kong and PRDR, China. Corporate Social Responsibility and Environmental Management, 16, 250–263.CrossRefGoogle Scholar
  14. Cole, R. (2011). What really happened to Toyota? MIT Sloan Management Review, 52(4), 28–35.Google Scholar
  15. Colias, M., & Bunkley, N. (2014). ‘Cardinal sin’: Former GM engineers say quiet ‘06 redesign of faulty ignition switch was a major violation of protocol. Automotive News, March 24, 2014. Accessed on August 28, 2014.
  16. Davis, M., & Heineke, J. (2012). Service science: A structure approach for the co-creation of value. Boston: Pearson Education Text.Google Scholar
  17. Ditlev-Simonsen, C. D. (2010). From Corporate Social Responsibility awareness to action? Social Responsibility Journal, 6(3), 452–468.CrossRefGoogle Scholar
  18. Doh, J. P., & Guay, T. R. (2006). Corporate Social Responsibility, public policy, and NGO activism in Europe and the United States: An institutional-stakeholder perspective. Journal of Management Studies, 43(1), 47–73.CrossRefGoogle Scholar
  19. Donaldson, T., & Preston, L. (1995). The stakeholder theory of the corporation: Concepts, evidence, and implications. Academy of Management Review, 20(4), 795–796.CrossRefGoogle Scholar
  20. Dou, E. (2013). Apple shifts supply chain away from Foxconn to Pegatron. The Wall Street Journal, May 29, 2013.Google Scholar
  21. Duhigg, C., & Barboza, D. (2012). In China, Human Costs Are Built Into an iPad, Accessed 16 July 2013.
  22. Ethical Consumer. (2013). Accessed 31 October 2013.
  23. Ethical Consumer Group. (2013). Accessed 31 October 2013.
  24. Fassin, Y. (2005). The reasons behind non-ethical behaviour in business and entrepreneurship. Journal of Business Ethics, 60, 265–279.CrossRefGoogle Scholar
  25. Finch, J. (2010). Toyota sudden acceleration: A case study of the National Highway Traffic Safety Administration—Recalls for change. Loyola Consumer Law Review, 22(4), 471–497.Google Scholar
  26. Forrester, J. W. (1961). Industrial dynamics. Cambridge, MA: MIT Press.Google Scholar
  27. Freeman, R. E. (1984). Strategic management: A stakeholder approach. Boston, MA: Pitman.Google Scholar
  28. Freeman, K. (2012). Apple hit with 250,000 signatures protesting labor conditions in China, Accessed 16 July 2013.
  29. Gonzalez, M. C., & Martinez, C. V. (2004). Fostering Corporate Social Responsibility through public initiative: From the EU to the Spanish case. Journal of Business Ethics, 55(3), 275–293.CrossRefGoogle Scholar
  30. Greenwald, J. (2001). Tired of each other. Time, 16, 50–56.Google Scholar
  31. Harris, P. (2012). Apple hit by boycott call over worker abuses in China. Accessed 16 July 2013.
  32. Healey, J. R., & Nathan, S. (2000). Could $1 worth of nylon have saved people's lives? experts: Caps on steel belts may help stop shredded tires. USA Today, August 9, p. B1.Google Scholar
  33. Higgins, T. (2014). GM Sees $1.3 billion charge as engineers put on leave. Bloomberg News. April 11, 2014. Accessed on August 28, 2014
  34. Hollon, J. (2006). Outsourcing: Get over it. Workforce Management, 85(5), 58.Google Scholar
  35. Jamali, D. (2008). A stakeholder approach to Corporate Social Responsibility: A fresh perspective into theory and practice. Journal of Business Ethics, 82, 213–231.CrossRefGoogle Scholar
  36. Kahn, J. (1987). Inventories and the volatility of production. The American Economic Review, 77, 667–679.Google Scholar
  37. Kiran, R., & Sharma, A. (2011). Corporate Social Responsibility: A corporate strategy for new business opportunities. Journal of International Business Ethics, 4(1), 10–17.Google Scholar
  38. Kotler, P., & Lee, N. (2004). Corporate Social Responsibility: Doing the most good for your company and your cause. Hoboken, NJ: Wiley.Google Scholar
  39. Krisher, T., & Durbin, D. A. (2014). 13 GM traffic deaths are tied to a 57-cent part. AP, April 1, 2014. Accessed on August 28, 2014.
  40. Laplume, A. O., Sonpar, K., & Linz, R. A. (2008). Stakeholder theory: Reviewing a theory that moves us. Journal of Management, 34(6), 1152–1189.CrossRefGoogle Scholar
  41. Lee, H. L., Padmanabhan, V., & Whang, S. (1997a). The bullwhip effect in supply Chain. Sloan Management Review, 38, 93–102.Google Scholar
  42. Lee, H. L., Padmanabhan, V., & Whang, S. (1997b). Information distortion in a supply Chain: The bullwhip effect. Management Science, 43(4), 546–558.CrossRefGoogle Scholar
  43. Li, G., Wang, S. Y., Yan, H., & Yu, G. (2005). Information transformation in a supply chain: A simulation study. Journal of Computers and Operations Research, 32(3), 707–725.CrossRefGoogle Scholar
  44. Lopez-De-Pedro, J. M., & Rimbau-Gilabert, E. (2012). Stakeholder approach: What effects should we take into account in contemporary societies? Journal of Business Ethics, 107, 147–158.CrossRefGoogle Scholar
  45. McKinsey & Company. (2006). Global survey of business executives. The McKinsey Quarterly, 3, 44–58.Google Scholar
  46. Mirrlees, J. A. (1997). Information and incentives: The economics of carrots and sticks. The Economic Journal, 107(444), 1311–1329.CrossRefGoogle Scholar
  47. Mohr, L. A., Webb, D. J., & Harris, K. E. (2001). Do consumers expect companies to be socially responsible? The impact of Corporate Social Responsibility on buying behavior. The Journal of Consumer Affairs, 35(I), 45–72.CrossRefGoogle Scholar
  48. Perez-Aleman, P., & Sandilands, M. (2008). Building value at the top and the bottom of the global supply chain: MNC-NGO partnerships. California Management Review, 51(1), 24–49.CrossRefGoogle Scholar
  49. Porter, M. E., & Kramer, M. R. (2006). The link between competitive advantage and Corporate Social Responsibility. Harvard Business Review, 84(12), 78–92.Google Scholar
  50. Prahalad, C. K. (2004). Fortune at the bottom of the pyramid: Eradicating poverty through profits. Upper Saddle River, NJ: Wharton School Publishing.Google Scholar
  51. Salsbury, J., & Davis, M. M. (2003). Death in highway: Quality problem at Ford and Firestone. Euro Asia Journal of Management, 26(2), 247–264.Google Scholar
  52. Sen, S. (2009). Linking green supply chain management and shareholder value creation. The IUP Journal of Supply Chain Management, VI(3 & 4), 95–109.Google Scholar
  53. Sethi, S. P. (2005). Voluntary codes of conduct for multinational corporations. Journal of Business Ethics, 59, 55–67.CrossRefGoogle Scholar
  54. Sheffi, Y. (2005). The tug-of-war. Harvard Business Review, 83(9), 39–52.Google Scholar
  55. Sterman, J. D. (1995). The beer distribution game. In J. Heineke & L. Meile (Eds.), Games and exercises for operations management (pp. 101–112). Englewood Cliffs, NJ: Prentice Hall.Google Scholar
  56. Tan, J. (2009). Multinational corporations and social responsibility in emerging markets: Opportunities and challenges for research and practice. Journal of Business Ethics, 86, 151–153.CrossRefGoogle Scholar
  57. Tate, W. L., Ellram, L. M., & Kirchoff, J. (2010). Corporate Social Responsibility reports: A thematic analysis related to supply chain management. Journal of Supply Chain Management, 46(1), 19–44.CrossRefGoogle Scholar
  58. Tsikoudakis, M. (2013). Supply chain disasters and disruptions can cause lasting reputation damage. Business Insurance, January 13, 2013, Accessed 22 October 2013.
  59. UNPRI. (2013) United Nations Principles for Responsible Investment, Accessed 31 October 2013.
  60. Valdes-Dapena, P. (2010). Toyota recalls total 8.1 million vehicles, CNN Money, February 4, 2010, Accessed 03 October 2014.
  61. Wee, H., Peng, S., & Wee, P. (2010). Modeling of outsourcing decisions in global supply chains. An empirical study on supplier management performance with different outsourcing strategies. International Journal of Production Research, 48(7), 2081–2094.CrossRefGoogle Scholar
  62. World Economic Forum. (2012). The shifting geography of global value chains: Implications for emerging economics and trade policy, Accessed 16 July 2013.
  63. World Trade. (2012). Supply chain survey. World Trade: WT100, 25(7), 30–35.Google Scholar

Copyright information

© Springer Science+Business Media Dordrecht 2014

Authors and Affiliations

  1. 1.Bentley UniversityWalthamUSA

Personalised recommendations