How to Mitigate Risk
Sustainability along the global supply chain: the case of Vietnam
Antonio Tencati, Angeloantonio Russo and Victoria Quaglia
Abstract
Purpose – The purpose of this paper is to investigate the impact that more sustainable sourcing policies
by many multinational companies are having on the suppliers located in developing countries such as
Vietnam. Questions are raised about the process through which CSR is reaching the country.
Design/methodology/approach – The research was conducted in Vietnam thanks to the support of the
United Nations Industrial Development Organization’s (UNIDO) Regional Office. The survey was carried
out on the basis of a questionnaire that was used as a support during the direct interviews and was sent
electronically when the preferred method of on-site visits was not possible. A total of 25 Vietnamese
enterprises were involved in the research.
Findings – The results achieved highlight, on the one hand, how CSR does make business sense even
in a developing country such as Vietnam and, on the other, the difficulties related to the way
requirements of sustainability are moving from Northern consumers to suppliers in Vietnam.
Practical implications – This process calls for new forms of collaboration involving firms along the
supply chain, local authorities, international players, and civil society.
Originality/value – The paper points out the unsustainability of the process through which corporate
responsibility is being imposed on Vietnamese suppliers and how CSR, having become a mandatory
requirement for access to international markets, might transform itself into a new type of technical barrier
to trade. Therefore, CSR needs to be fostered rather than imposed, through the creation of innovative
partnerships and locally-rooted solutions.
Keywords Corporate image, Social responsibility, Developing countries, Supply chain management, Vietnam
Paper type Research paper
1. Introduction
Globalization has made the urgency of corporate social responsibility (CSR) a challenge no
longer belonging exclusively to Northern enterprises (Beschorner and Müller, 2007; Deloitte
Touche Tohmatsu Emerging Markets, 2004; UNIDO, 2002). International trade environments
have been made aware of issues such as human rights and labor exploitation in developing
countries and requirements of sustainability are moving from northern consumers to
suppliers in the south along the global supply chain (Bird and Smucker, 2007).
Passing from one actor to the other along a ‘‘reverse’’ supply chain, the requirement of social
responsibility is entering the boundaries of countries like Vietnam through a number of codes
of conduct imposed by foreign clients and through international standards (e.g. SA8000,
ISO 9001, and ISO 14001). De facto, CSR is reaching southern enterprises as a mandatory
requirement for the continuation of business relationships with foreign partners. Within this
context, sound relationships along the supply chain and between local suppliers and their
stakeholders seem to be needed to foster new solutions in how firms actually achieve
sustainability targets. Therefore, innovative forms of collaboration (Albareda et al., 2008;
Tencati and Zsolnai, 2009; Zadek, 2006) might be the way to help companies in developing
DOI 10.1108/17471111011024577 VOL. 6 NO. 1 2010, pp. 91-107, Q Emerald Group Publishing Limited, ISSN 1747-1117 j SOCIAL RESPONSIBILITY JOURNAL j PAGE 91
Antonio Tencati is based at
the Department of
Management, Università
Bocconi, Milan, Italy.
Angeloantonio Russo is
based at the Department of
Management, Parthenope
University, Naples, Italy.
Victoria Quaglia is based at
AP Møller-Mærsk A/S,
Copenhagen, Denmark.
countries to address new sourcing requirements, to get support from the stakeholder
networks of which they are members, as well as to strengthen their reputation in the
international markets.
With particular reference to Vietnam, this paper aims at investigating the impact that more
sustainable sourcing policies by many multinational companies are having on the local
suppliers. In this context, it is crucial to understand the process through which CSR is
reaching the country, to investigate the effects triggered by CSR strategies on the
competitiveness of the enterprises that are managing to comply with imposed international
labor standards and regulations, to analyze the monetary and non-monetary costs of CSR,
as well as the challenges and difficulties faced by local Vietnamese entrepreneurs when
having to implement CSR strategies for the first time.
The research findings suggest that CSR does make business sense for the enterprises big
and rich enough to comply with international social standards even in developing countries
such as Vietnam. However, the process through which sustainability is reaching Vietnam is
proving to be unsustainable. The costs triggered by a top-down imposed engagement to
CSR are really prohibitive for many enterprises and the consequent incapability of meeting
social and environmental standards is starting to mean for these firms impossibility of doing
business in international markets. What was originally thought to be a way to fight abuses
and exploitation risks transforming itself into a new form of protectionism (Tencati et al.,
2008).
2. From developed to developing countries: CSR along the global supply chain
Over the last years, CSR has become a fundamental requirement for doing business for
most of the companies in the world. Claims from several stakeholders are therefore
contributing to modify the structure of the global supply chain, starting from developed to
developing countries. The requirement of social responsibility is entering the boundaries of
countries like Vietnam, and the traditional supplier relationships are assuming the form of a
‘‘reverse’’ supply chain. In more detail, three critical passages are characterizing this
process, which starts from consumers, goes through multinational companies (MNCs), and
arrives to manufacturers. Figure 1 presents the reverse supply chain.
2.1 From consumers to MNCs: first passage
The transmission of CSR from developed to developing countries begins with the
requirements deriving from ethical consumerism. Recent studies on ethical consumerism
suggest that consumers increasingly care about the characteristics of business products
and processes, encompassing the importance of non-traditional and social components
such as environmental protection, elimination of child labor and so on (Auger et al., 2003;
Pivato et al., 2008). Thus, ethical features have a substantial impact on the purchase
intentions of consumers (Castaldo et al., 2009).
Therefore, the requirements of social and environmental sustainability are firstly transmitted
by ethical consumers to businesses (Zsolnai et al., 2004), in particular to MNCs, that is, in
many cases, producers of valuable brands, companies whose production is effectuated in
countries with weak law enforcement, firms characterized by labor intensive production,
businesses with a high impact on the communities where their operations are located. These
MNCs are the first players sensitive to CSR along the supply chain. They are also capable of
Figure 1 The reverse supply chain
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exploiting the advantages deriving from globalization bringing their production activity
abroad, where there is a major availability of human resources at a lower cost.
So, such companies contract with suppliers located in ‘‘remote’’ parts of the world and in
emerging markets to manufacture their products. Globalization has also enabled these parts
of the world to be less remote and isolated, that is, to be at reach of the media. So, activities
fostered by Northern firms are more easily monitored by consumers and international
associations, non-governmental organizations (NGOs), policy makers, financial markets,
and civil society.
2.2 From MNCs to their manufacturers: second passage
Having to respond to increasing requirements of a sound supply chain, companies see
themselves obliged to pass onto their manufacturers the necessity of sustainability. This
constitutes the second passage of CSR along the global supply chain.
MNCs must prove to northern societies the soundness of their manufacturers’ working
places, otherwise their reputation could be ruined and sales will tend to decrease
(O’Higgins, 2002; Weiser and Zadek, 2000). Manufactures must prove to MNCs their
capability of complying with the required social standards, otherwise they will lose their
contracts, as MNCs are their main, and in most of the cases only, clients. The tools used by
MNCs to export CSR practices are basically two: first, their own codes of conduct and
independent monitoring schemes; second, international certifications. In the marketplace,
there are at least more than 1,000 codes of conduct and standards (The World Bank Group,
2003). The most common elements of them are wages and working hours, freedom of
association and collective bargaining, discrimination, and occupational health and safety
(The World Bank Group, 2004). The difficulties in handling so many different codes of
conduct and the discrepancies with the national legal framework constitute a major obstacle
in the implementation of sustainability. The manufacturers involved have to pay annual audits
and any required remedial action and infrastructure upgrade for the certification process.
The related costs are in most cases unbearable, if not for major enterprises, and therefore
such certifications risk becoming technical barriers to trade for the companies that cannot
afford them.
2.3 From manufacturers to raw material suppliers: third passage
In order to be considered entirely socially responsible and therefore able to trade with
northern clients, a manufacturer must guarantee that materials used for the production
derive from responsible suppliers. Raw material suppliers are considered to be the most
‘‘irresponsible’’ actors along the supply chain and a lot of pressure is put on this delicate
phase. The relation between supplier and producer is fundamental in that producing a safe
product with low impacts on the surrounding environment and society greatly depends on
the raw materials used in the manufacturing processes. In this way, CSR reaches also raw
material suppliers that have to re-think and re-design their business to be not cut out from a
demanding market.
2.4 CSR as a driver of innovative forms of collaboration
Given the above-mentioned peculiarities of the modern ‘‘reverse’’ global supply chain, a
top-down approach aimed at imposing CSR requirements is not the only way to manage the
supply chain. A new relational perspective of governance (Albareda et al., 2006; Albareda
et al., 2009) is taking the floor among researchers and practitioners as the strategic option
that might lead to more responsible practices in the society and to a more sustainable
development (Aras and Crowther, 2009; Tencati and Zsolnai, 2009). In particular,
cross-sectorial partnerships (e.g. joint ventures, local sustainable development projects,
multi-stakeholder initiatives, and alliances) among governmental organizations, civil-society
organizations (CSOs), and firms are increasingly considered as the way to achieve more
sustainable patterns of development and overcome the limits related to top-down
approaches in promoting sustainability (Ählström and Sjöström, 2005; Argenti, 2004;
Gerencser et al., 2006; Hamann and Acutt, 2003; Hartman et al., 1999; Loza, 2004;
VOL. 6 NO. 1 2010 jSOCIAL RESPONSIBILITY JOURNALj PAGE 93
Macdonald and Chrisp, 2005; Moody-Stuart, 2004; Rigling Gallagher and Gallagher, 2007;
Rondinelli and London, 2003). In this collaborative perspective partnership can be defined
as ‘‘people and organizations from some combination of public, business and civil
constituencies who engage in voluntary, mutually beneficial, innovative relationships to
address common societal aims through combining their resources and competencies’’
(Nelson and Zadek, 2001) sharing both risks and benefits.
These collaborative efforts could have a major impact on developing countries in mobilizing
and aggregating resources towards sustainability purposes especially because the
industrial base is made of small- and medium-sized enterprises (SMEs) and much of the
business is informal (Russo and Tencati, 2009). In fact, if we look at the varying context of
developing countries, in which specific tasks are required to companies, governments, and
several other organizations, there is an enormous potential, even within current corporate
structures and market systems, to think about fundamentally new, more collaborative types
of governance mechanisms and partnerships that can serve to increase responsibility and
sustainability, set progressive new policy agendas, and activate both public and private
resources to tackle key sustainable development challenges (AccountAbility et al., 2005;
Nike Foundation, 2008; Pélouas, 2004; Stakeholder Research Associates Canada et al.,
2005; Scherer and Palazzo, 2007; Zadek, 2006).
With particular reference to Vietnam, this paper aims at investigating the impact that more
sustainable sourcing policies by multinational companies are having on the local suppliers,
also influencing the relationships characterizing the global supply chain. Our research
questions are built on previous research on CSR in the international context (Beschorner and
Müller, 2007; Boda, 2002; Crowther and Caliyurt, 2006; Haltsonen et al., 2007; Sethi, 2003)
and tested through a specific research design focused on Vietnamese firms. CSR strategies
by Vietnamese enterprises and their relationships with other organizations, not only
belonging to the global supply chain, to address the sustainability challenge have been
investigated, with the aim of answering the following research questions:
B Is CSR reaching Vietnam and how?
B What are the effects triggered by CSR strategies on the competitiveness of the
enterprises that are managing to comply with imposed international labor standards and
regulations?
B What are the costs, monetary and non-monetary, as well as the challenges and difficulties
faced by Vietnamese entrepreneurs when having to implement CSR strategies for the first
time?
3. Methodology
The research was conducted in Vietnam in 2004 with the support of the United Nations
Industrial Development Organization (UNIDO)’s Regional Office (Bekefi, 2006) based in Ha
Noi, Vietnam, and through direct interviews to sector associations, such as the Leather and
Footwear Organization (LEFASO), the Vietnam Textile and Apparel Association (VITAS), the
Vietnam Promotion Agency (VIETRADE), and the Vietnam Chamber of Commerce. The
survey was conducted on the basis of a questionnaire that was used as a support during the
direct interviews mainly to the chief operating officers (COO) or their representatives, and
was sent electronically when the preferred method of onsite visits was not possible. The
questionnaire was originally formulated in English, translated into Vietnamese in a second
moment and consisted of 52 questions (see the appendix). The research saw the
involvement of 59 Vietnamese enterprises, 42.37 percent of which (25 companies) agreed to
collaborate either through direct interviews (for a total of ten, seven of which operating in the
footwear sector and the remaining three in the garment sector) or by answering the
questionnaire that was sent electronically (fifteen companies returned the questionnaire
completed, of which one was a footwear enterprise, five were garment and nine seafood
enterprises). Regarding the other 34 companies, they were excluded from the final sample in
that either it was impossible to conclude a direct interview or the questionnaire was
incomplete.
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Enterprises were selected on the basis of three criteria, the first of which was the sector of
their business activity. In particular, the research focused on enterprises operating in three
sectors: footwear (32 percent of the firms in the sample), garment (32 percent) and seafood
(36 percent). Being, after crude oil, the main sources of Vietnam’s exports (Ministry of
Labour – Invalid and Social Affairs, 2004), the enterprises operating in such sectors are
characterized by intense international business relations and are the first ones to have to
cope with the new sustainability-oriented trends and requirements deriving from foreign
markets. The direct contacts of the enterprises operating in the three sectors were obtained
from the databases of respectively LEFASO (for the footwear companies), VITAS (for the
garment companies), and the Ministry of Fishery (for the seafood companies). The
databases provided a general profile of the firms in terms of date of establishment and
dimensions (number of employees), type of ownership, export markets and most relevant
clients. Secondly, among the ones operating within the three sectors, the enterprises were
selected on the basis of their export markets. Having analyzed the profile provided by the
databases, the enterprises contacted were the ones that were characterized by international
clients (with preference for the EU and US markets). The research analyzed Vietnamese
suppliers of foreign markets and big multinational companies, therefore exposed to their
social and environmental requirements. The following chart (see Figure 2) indicates the
export markets of respondents.
Finally, the choice of enterprises was led by their dimensions (in terms of number of
employees) and the ones selected are of medium to large size, as can be observed in
Figure 3. The rationale of such a choice has been the following: Higher the number of
employees, wider the effects of CSR on the day-by-day management of the firm.
4. Results and discussion
4.1 Benefits of CSR implementation
In developed countries the acceptance of a positive correlation between profit and CSR is
somehow growing, but it is still not totally or sufficiently proven (Margolis and Walsh, 2003;
Orlitzky et al., 2003; Rubbens and Wessels, 2004). In Vietnam such acceptance does not
exist at all.
Several have been the attempts of defining a correlation between sound policies and a
better economic performance, but the debate is still very open and characterized by
different opinions (Barnett, 2007; Friedman, 1970; McWilliams and Siegel, 2000; Waddock
and Graves, 1997). On the basis of our data, what can be affirmed is that the enterprises
Figure 2 Export markets of respondents
VOL. 6 NO. 1 2010 jSOCIAL RESPONSIBILITY JOURNALj PAGE 95
involved are starting to benefit from the recent implementation of more sustainable policies
through the compliance with codes of conduct and international certifications (see Figure 4).
In fact, what can be highlighted is the impact of CSR on variables such as productivity,
quality of the final output, competitiveness, and retaining of skilled human resources (see
Figures 5 and 6).
In more detail, our findings suggest that depending on the sector different benefits are
emerging from CSR. Looking at the garment sector, an improvement in quality (75 percent)
and competitiveness (62.5 percent) are the main benefits that such companies are
experiencing. Same considerations can be argued referring to the seafood sector
(respectively, 100 percent and 77 percent), whereas companies are also managing the
chance to expand their activity into new markets (77 percent). Broader results are related to
the footwear sector, whereas companies reveal benefits associated with several functions
throughout the managerial process. The greatest relevance is recognized to productivity
improvements, such as the standardization of procedures (50 percent) and a better quality
management (50 percent). Benefits are also associated with the human resource
management, through the retention of skilled employees (25 percent) and a decreasing
number of accidents (25 percent). Moreover, companies experience advantages in the
Figure 3 Respondents by size (number of employees)
Figure 4 Main certifications in footwear, garment and seafood sectors
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management of specific relationships along the supply chain, such as the opportunity of
reaching new clients and improving client’s trust (both 25 percent).
These results are also confirmed by the analysis of the direct interviews. As declared by the
Chief of Quality Management of a garment company, ‘‘the company now works like a
system’’ and, with regard to the adoption of specific international standards, he recognized
that ‘‘having the SA8000 certification, the company has noticed an increased facility in
recruiting acknowledged and hard-working employees. This will positively affect the
productivity in a medium-long term. Only in the last six months, 200 new people started
working for our company.’’
In light of the above results, CSR is being first of all a business lesson for the companies that
had the strength to commit to it. When we think of CSR and its effects on companies, what
immediately comes to mind are concepts such as better working conditions and less
negative impact on society. CSR is actually more than that for the enterprises contacted.
CSR and its regulations that take shape in standards and codes are bringing standardized
procedures and organized behaviors. Production is starting to be planned with a
longer-term perspective, on the basis of past orders. Daily reports on the quantity of items
produced or the number of employees working per line are required by and submitted to the
clients. The quality of management increases and the understanding of business issues
such as efficiency and effectiveness is starting to enter realities where ‘‘quantity’’ was
considered the only real indicator of success. This points out how deeply CSR can change
the business model in companies never run before according to economic principles
because of a number of reasons such as a regime that owned most of the companies and a
cultural disapproval for whoever shows off profit and richness. Especially according to the
direct interviews with managers from the footwear and garment sector, once the whole
Figure 5 Benefits of CSR in the footwear sector
Figure 6 Benefits of CSR in the garment and seafood sector
VOL. 6 NO. 1 2010 jSOCIAL RESPONSIBILITY JOURNALj PAGE 97
business system gets standardized and organized, the following benefits may result as
consequences of a more integrated system:
B Decreasing number of mistakes. According to international standards, the different
stages of the production chain must be regulated in order to deliver a final product
compliant with technical and quality standards. Standardized procedures help the
employee in the implementation of her/his work and the chance of committing mistakes
decreases. Moreover, mistakes can actually be foreseen and prevented.
B Decreasing number of accidents. Standardized procedures and compulsory training
courses on the use of machines are de facto reducing the number of accidents on the
workplace. The benefit for the employees’ safety is obvious, but the benefit is not enjoyed
solely by the single worker. In fact, the costs of frequent absenteeism are extremely high
in terms of productivity and image of the firm.
B Lowering employee turnover. A lower turnover is a result of safety-related rules and
training. As the interviewed managers affirmed, compulsory working behavior imposed
by codes in order to assure the occupational safety; increased awareness of what is
dangerous; fire-emergency prevention training courses are all elements that benefit
directly the single worker, but also they are actually enhancing the overall performance of
the firm, which sees decreasing employee turnover ratios. Thus, costs caused by the
necessity of re-training unskilled workers decrease and benefits triggered by timesaving
increase.
B Higher productivity. Increased managerial skills, and a better operative capacity and
effectiveness lead to higher productivity.
Moreover, CSR does not only enable an enterprise to operate according to principles of
efficiency and effectiveness, increasing its overall productivity, but it also gives the power of
attracting and retaining skilled employees.
The Deputy Managing Director of a footwear company pointed out that ‘‘a sound working
environment is considered as the only way to attract skilled and committed workers.’’ In more
detail, because of the need of increasing production, the firm decided to build a new factory
in which potentially ten thousand employees could operate. In order to find workers willing to
leave their homes to be employed in the company a specific area devoted to facilities for the
employees (e.g. dormitories, nurseries for medical assistance, a training school, and so on)
was constructed.
Finally, an integrated management system, increased operative capacities, higher
productivity, and higher level of commitment, all result into a higher quality of the final
product: More sustainable policies lead to high quality, as confirmed respectively by 75
percent and 100 percent of the respondents in the garment and seafood sector. Quality is
what Vietnamese companies need to face the stiff competition of, in particular, the neighbor
China.
In brief, CSR strategies trigger increased productivity and quality enabling a major
competitiveness. Commitment to more sustainable policies does not only provide a license
to operate in international markets and to attract an increasing number of foreign clients; it
also gives the opportunity of creating a whole new market where sound companies can
prosper. CSR will have to be the perspective through which re-designing a strategic
positioning and re-creating a competitive arena in which certified Vietnamese companies
will be more attractive for foreign investors and clients. In this new competitive strategy, the
image that an enterprise is able to communicate is obviously fundamental, and a recognized
commitment to sound policies improves such image.
4.2 Unsustainability of CSR requirements
Evidence gained from Vietnamese companies big and rich enough to make social
responsibility an element of their business suggests that CSR is reaching Vietnam through
globalization, but the way it is reaching the country is to some extent unsustainable. From a
theoretical point of view, the passage of CSR from one actor to the other along the global
PAGE 98jSOCIAL RESPONSIBILITY JOURNALj VOL. 6 NO. 1 2010
supply chain seems obvious and logical, and no difficulties seem to occur. As emerged from
interviews, reality proves the opposite instead. An interviewed Chief of Quality Management
in the garment sector highlighted that ‘‘the criteria used to select the suppliers are imposed
by the foreign buyer.’’ Specifically, foreign companies dominate their suppliers and expect
them to have specific certifications: ‘‘There is a very strong relation between the foreign
client and the raw material supplier and this also means very competitive prices.’’
In order to assure that a product is entirely sustainable and accepted by consumers, the
integrity of its supply chain must be guaranteed. The same Chief of Quality Management
declared: ‘‘We must constantly monitor our suppliers in terms of time of delivery and quality
of the raw materials; this means additional costs for implementation.’’ In general, the
interviews and the collected questionnaires point out that in all three sectors the main criteria
adopted to select suppliers are price and quality.
The point is that the global supply chains go through several different countries, different
legal frameworks, mentalities and cultures: If these differences are not taken into account,
the supply chain management and the related introduction of CSR requirements and
policies could become unsustainable.
What resulted from the interviews and responses to the questionnaires is that the compliance
with international standards triggers:
B monetary costs, such as costs of certification, annual audits, and technical updates; and
B non-monetary costs, such as those related to reassessment (in terms of a change of
mentality and culture), monitoring (introduction and use of formal procedures, time
consumption), and training (capacity building, educational upgrading, technical skill
building).
The monetary costs triggered by CSR seem to be common and evenly impacting all the
enterprises of the three sectors, whereas non-monetary costs revealed some differences
among the three sectors (see Figures 7 and 8).
Talking about monetary costs, an interviewed manager in the garment sector revealed that
‘‘the costs of certification are prohibitive, therefore only few competitors can possibly afford
to have the certification. To what extent this is not a ‘technical barrier to trade’, given that
there is not any kind of financial assistance for these companies, could be an interesting
reflection to do.’’
Focusing on the non-monetary costs associated with CSR, results provide evidence of the
different impact that responsible behaviors might have on companies from different sectors.
Whereas the quality has a stronger influence on the value of the final product, the training
Figure 7 Monetary costs of CSR in footwear, garment and seafood sectors
VOL. 6 NO. 1 2010 jSOCIAL RESPONSIBILITY JOURNALj PAGE 99
costs represent the most important factor affecting the bottom line, as revealed in the
seafood sector (100 percent of the responding companies). Monitoring costs, on the other
hand, have the highest impact in the garment and footwear sector (respectively, 100 and 75
percent).
5. Conclusions
In this paper we investigated the impact that more sustainable sourcing policies by many
MNCs are having on the suppliers located in developing countries such as Vietnam. In more
detail, we looked for the impacts of the CSR strategies on the competitiveness of the
enterprises that are managing to comply with imposed international standards and
regulations. The results achieved point out, on the one hand, how CSR does make business
sense even in a developing country such as Vietnam. On the other hand, data and direct
interviews provide evidence of the difficulties related to the way requirements of
sustainability are moving from northern consumers to suppliers in Vietnam. In light of the
above results, implications for both practitioners and researchers emerge.
The gathered findings highlight that monetary and non-monetary costs of complying with
international standards may turn out to be unsustainable and prohibitive for many
enterprises, and especially for small- and medium-sized suppliers. CSR is a long-term
investment, expensive if considering the civil foundation and the reality within which the
Vietnamese have always operated. The inability to meet social and environmental standards,
though, could mean the impossibility of doing business in international markets. The
increasing opening of the market and the recent access to the World Trade Organization
(WTO) are making CSR an extremely important asset that cannot simply be imposed by
foreign partners. Rather, local players should be technically and financially supported in
their approach to more sustainable policies (Bird and Smucker, 2007), especially now that
the implementation of such policies has become crucial to build business relationships with
foreign clients. In this context, a relational perspective is gaining its momentum: Like in other
countries, partnerships and more collaborative models of governance could foster the
development of responsible approaches also by Vietnamese firms. However, this calls for a
deeper and broader involvement of public authorities and managers in charge of supporting
the development of more sustainable business models in the country.
Figure 8 Non-monetary costs of CSR in footwear, garment and seafood sectors
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From the public authorities’ perspective, first of all a sustainable development of CSR should
start with local capacity building. ‘‘Vietnam doesn’t need the fish, but the net,’’ affirmed the
Director of the Trade Promotion and Business Support Development Department, under the
Vietnamese Ministry of Trade: Effective partnerships and collaborations especially with
foreign companies and institutions could foster this issue.
Therefore, a major collaboration between public and private efforts, local and international
authorities, managers and workers is strongly needed. If Vietnam could become a more
enabling environment for sustainability, the several initiatives carried on in this country would
be more likely to be successful with total awareness on what has been done before and what is
planned to be done, rather than in isolation. What can be witnessed is an over-crowded aid
environment, where a number of international organizations, NGOs, and bilateral donors are
‘‘competing’’ rather than collaborating on same issues. If all these efforts started to be
coordinated together with the Vietnamese counterparts, results would be achieved more
effectively and much quicker and Vietnam would concretely benefit from the presence of
international institutions. Through a deepen collaboration among the international institutions
and a public authorities’ stronger involvement, CSR would be effectively strengthened along
global supply chains. In other words, a major engagement by the local and national bodies and
a higher level of collaboration and coordination among the international agencies are both
highly recommendable and would enhance an effective implementation of CSR in Vietnam.
At a managerial level, among all the most problematic challenge to address seems to be the
mentality and the culture at the basis of the organizations (Crowther and Davila Gomez,
2006). Many indications gained from the footwear, garment and seafood sectors reveal that
the major cost associated with new and imposed social policies derive from necessary
changes in the management system, which means changes of the whole business mentality.
The reticence of most manufacturers and suppliers to undertake CSR compliance is caused
by the insufficient understanding of the business and social utility related to the major efforts
needed to meet international requirements. Therefore, awareness of CSR benefits must be
created at a managerial and operative level; until developing countries such as Vietnam will
consider international standards as an imposition from foreign clients, the effectiveness of
CSR will be very low, and business, employees and thus society will not be able to improve.
To date, the only reason why Vietnamese enterprises – similarly to what happens in other
developing countries – are beginning to approach social issues is because otherwise they
could no longer supply foreign countries and would be excluded from international trade
markets. As declared by a representative of an international organization operating in Vietnam:
Until 1997, Indonesia was the biggest supplier. From then on, the foreign buyers moved here to
Vietnam, leaving all the Indonesian workers alone with no skills. These big MNCs do not provide
their suppliers with any kind of capacity and when they decide to move on to another country, they
leave the previous one with no hope.
What has to be considered is that CSR is ‘‘exported’’ to countries where the civil foundation,
which consists of norms, customs and laws that govern corporate practices, is shallow and
fragile (Martin, 2002). Consider, for example, how firms manage their relations with such an
important stakeholder as employees, whereas once the management has realized the
importance of corporate responsibility, the concept must first be shared with them. This may
sound contradictory: educate workers on their own rights. However, in Vietnam the limit of
eight working hours a day wanted/imposed by Vietnamese Labour Code (Art. 68.1) actually
goes against workers’ interest, as they need to work as many hours as possible during a day
and a month in order to earn enough and come back home soon. In this case the civil
foundation and the economic framework do not create the conditions enabling employees to
work eight hours a day: therefore, the implementation of CSR must take this feature into
account. Nevertheless, although the minimum wages to be paid a month were of VND
210,000 ($12) for employees working at domestic business (Decree N. 77/2000/ND-CP
dated December 15th, 2000 of the Government on Re-adjusting the Minimum Wage) and of
VND 417,000 to 626,000 ($24 to $36) for the ones working in foreign-invested enterprises
(Decision n. 708/1999/QD/TTg dated June 15th, 1999 of the Prime Minister on Minimum
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Wages of Vietnamese Labour Working at Foreign-invested Companies), managers and
employees should understand that following the rules is not a waste of time.
As clearly resulted from the collected data, increasing training costs have been triggered by
new CSR policies, especially when the sectors considered are labor intensive. In all the
cases analyzed, such ‘‘dissemination costs’’ have been entirely borne by the company but
not every firm can afford them. There was a common feeling among the entrepreneurs of
powerlessness, underpinned by the perception of being asked to shoulder all the costs of
compliance, whereas the buyers would receive the benefits.
In brief, CSR and its advantages must be concretely proven to local players through specific
initiatives. Such awareness must be tailored to the addressed country and must be sustainable,
that is, financially and structurally supported and based on local capacity building.
So, clear indications for future research as well as for public authorities’ interventions emerge
from this study. In more detail, a robust business case should be defined in order to spread
more sustainable practices among the entrepreneurs; moreover, an on-field CSR
educational agenda seems necessary and should address all the companies, including
the smallest ones. However, a methodology for demonstrating the business case in a
comprehensive and rigorous way is still a challenge, considering that the question does not
simply call for a one-size-fits-all solution (Spence, 2007).
Finally, it is not possible to generalize the Vietnam experience to all developing countries. In any
case, this research shows that CSR could make business sense in countries such as Vietnam,
but the efforts towards sustainable goals need to be fostered, rather than imposed, through the
definition of innovative forms of collaboration involving companies, local authorities,
international players and civil society at large and through the construction of locally-rooted
solutions. Many experiences in other developing countries confirm the progressive role that
this collaborative approach could play (Brugmann and Prahalad, 2007; Perrini and Russo,
2008; Porter and Kramer, 2006; World Economic Forum, 2008; Zadek, 2006).
Otherwise, what was originally thought to be a way to reduce and limit abuses and
exploitation risks transforming itself into a technical barrier to trade and a new form of
protectionism.
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Appendix
Figure A1 The questionnaire
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Figure A1
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About the authors
Antonio Tencati is Assistant Professor of Management and CSR at Università Bocconi. He is a Senior Researcher at SPACE Bocconi and a member of the CSR Unit, Department of Management, Università Bocconi. He is also a member of the Business Ethics Faculty Group of the CEMS-MIM (Community of European Management Schools – Master in International Management) Programme. His research interests include business management, management of sustainability and corporate social responsibility, environmental management, innovation and operations management. Antonio Tencati is the corresponding author and can be contacted at: antonio.tencati@unibocconi.it
Angeloantonio Russo is Assistant Professor of Management at Parthenope University. He is also Senior Researcher at the SPACE Research Centre, Università Bocconi, where he got his PhD in Business Administration and Management. His research interests are mergers and acquisitions, strategic alliances, environmental management, renewable energies, sustainability, and corporate responsibility.
Victoria Quaglia took a degree in Business Administration at Università Bocconi in 2004. Between 2005 and 2007 she was in Vietnam at Oxfam first, then at Ernst & Young. Victoria Quaglia currently works for Group Finance, M&A of AP Møller-Mærsk in Copenhagen, Denmark.
Figure A1
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