The Impact of Supply Chain Structures on Corporate Social Responsibility

Abstract

Markets are paying increasing attention to the social and environmental impacts of business. As a consequence, the problem of incentivizing upstream firms in a supply chain (i.e., suppliers) to engage in Corporate Social Responsibility (CSR) activities has become of pivotal importance. Formal contracts may not serve the purpose, as CSR activities are not necessarily verifiable. In this chapter, we posit that incentives for CSR can be provided through the supply chain structure, which consists of the distribution of ownership rights over the assets of production, and involves horizontal and/or vertical alliances among supply chain members. To this end, this chapter illustrates the effects of supply chain structure on CSR adoption using three case studies. For each case, the chapter highlights the interplay of forces that arises as a result of the supply chain structure, such as pooling, free-riding, and countervailing power, and discusses their impact on incentivizing supply chain parties to invest in CSR.