Journal of Business Ethics (2009) 85:179185 DOI 10.

1007/s10551-008-9937-3

Springer 2008

Corporate Responsibility in Scandinavian Supply Chains

Robert Strand

ABSTRACT. This article examines corporate responsibility in the supply chains of four of the largest Scandinavian multinational corporations IKEA, Nokia, Novo Nordisk, and StatoilHydro and offers two key findings. First, these Scandinavian companies have all implemented responsible supply chain practices where suppliers in developing nations, and the communities of these suppliers, are engaged as key stakeholders and treated as partners. Second, these supply chain practices all share the common bond of having honesty and the establishment of trust-based relationships at their foundation. As a result, these Scandinavian companies have developed a cooperative advantage in their ability to form successful, long-term partnerships in their respective supply chains. KEY WORDS: cooperative advantage, corporate responsibility, CSR, partnerships, Scandinavia, supply chain, sustainability

Introduction IKEA, Nokia, Novo Nordisk, and StatoilHydro have all demonstrated a balance of strong environmental and societal performances as indicated by the Dow Jones Sustainability Index, FTSE4Good, and other related indicators. These balanced performances are supported by these Scandinavian com-

panies progressive approaches to managing their supply chains where suppliers are engaged as partners and sustainable practices are encouraged. IKEA has demonstrated a competency in forming cooperative third-party partnerships with organizations including UNICIF and WWF to address issues of corporate responsibility including child labor and sustainable forestry. StatoilHydro has demonstrated a competency in encouraging economic spin-offs in developing regions, offering the promise of sustainable local economic development in some of the most challenging regions of the world. Novo Nordisk and Nokia have demonstrated robust supplier assessment procedures that encourage environmental and social responsibility in the supply chain while fostering an environment of trust and collaboration. This article reviews these progressive Scandinavian supply chain practices and their role in the Scandinavian cooperative advantage.

IKEA IKEA is arguably the most well-known Swedish export with its distinctively blue and yellow stores appearing in 24 countries throughout the world and achieving $29 billion in annual revenue (IKEA, 2007). Scandinavias history of innovative design lends itself to support the rst component of IKEAs (2007) mission to offer a wide range of well designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them. However, Scandinavias standing as one of the most expensive regions of the world does not bode well for producing goods at low prices. Sweden, Norway, Finland, and Denmark all rank within the top 15 most expensive countries of the world (Aneki.com, 2007). So like others in its

Robert Strand teaches corporate responsibility and business ethics to MBA students at the University of Minnesota. He was a US Fulbright Scholar to Norway where he researched these topics across Scandinavia having partnered with IKEA, Nokia, Novo Nordisk, and StatoilHydro while based at the Norwegian University of Science and Technology (NTNU). His professional business experience includes roles in strategy, marketing, manufacturing, and supply chain with IBM and Boston Scientic.

180

Robert Strand WWF on supply chain conservation and sustainable forestry. Chris Elliott of WWF stated IKEAs and WWFs common goal is better care and protection of the worlds forests. By joining forces both organisations have been strengthened. Together with IKEA it has been easier to inuence forest companies and local authorities. IKEA has derived benet from our network of contacts and local knowledge, which we have built up through many years of operation in countries like China and Russia. We are making a joint effort to support forest managers in achieving responsible forestry. IKEA employees and staff from local WWF ofces are working together in a number of projects. One result of this cooperation is the establishment of brigades with the mission to stop the trade of illegally felled timber along parts of the Chinese-Russian border (IKEA, 2007). IKEAs Thomas Bergmark further commented on the benets of this cooperative partnership, having stated IKEAs long term goal is to source all the wood from veried, well managed forests. The cooperation between WWF and IKEA supports the implementation of IKEAs forest action plan and IKEAs choice of WWF as a partner is based on their competencies and positive and inspiring approach (WWF, 2007).

competitive space, IKEAs supply chain has migrated to low-cost regions of the world to produce its lowcost goods; like others with supply chains in developing regions, IKEA faces a host of environmental and societal challenges. IKEA has responded to these challenges by calling for cooperation with credible, well-informed partners (IKEA, 2007). IKEA modestly discusses these challenges and its partnership approach. CEO Andres Dahlvig stated As IKEA needs to learn more it seemed natural to contact the organizations that work seriously with environmental and social issues. Cooperating with them has taught us a lot. I hope that IKEA, in turn, has contributed to the search for workable solutions for how to prevent child labor or protect certain areas of forest (IKEA, 2005). UNICEF and Save the Children are two such credible partners that IKEA has forged a strong relationship with to combat child labor issues. These two organizations co-sponsored What Works for Working Children (Boyden et al., 1998) which found that in the face of child labor problems, a hasty pull-out by a large company (prompted by the threat of a consumer boycott, for example) can inict greater harm on the children who are left behind. These children may be forced into alternative means of generating money such as prostitution. In ways that would not be feasible without the credibility of an organization such as UNICEF backing it, IKEA has made real long-term commitments in regions where child labor problems exist by staying rather than pulling out. Susan Bissell of UNICEF stated I wish more companies had the courage to follow IKEAs example: stay on and actively work on the problems and take genuine social responsibility. IKEA is a sponsor of UNICEF, its true, but we regard IKEA as a cooperation partner rather than a contributor. Together we go to the bottom of the extremely complex problems of child labor (IKEA, 2004). Regarding environmental responsibility, IKEA has a long history of conservation and sound environmental practices stemming from its frugal founder. In his A Furniture Dealers Testament, Ingvar Kamprad (1976) stated Wasting resources is a mortal sin at IKEA Waste of resources is one of the greatest diseases of mankind Use your resources the IKEA way. Then you will reach good results with small means. IKEA has partnered with

StatoilHydro StatoilHydro is a Norwegian company that was born of the Norwegian offshore oil boon of the late 1960s. Norway has since become the worlds third largest oil exporter (CIA, 2007), and StatoilHydro has grown along with it, laying claim to a market capitalization of more than $100 billion (StatoilHydro, 2007a). This growth, however, has not occurred solely from the reserves beneath the frigid Norwegian waters. Today, StatoilHydro (2007a) nds itself operating in 40 countries around the world. A great many of these countries are developing nations, such as those of Western Africa, that face extreme economic, environmental, and societal challenges. As part of the extractive industry, oil companies are in the business of extracting natural resources from the places in which they operate. By in large, oil companies can bypass the local communities and

Corporate Responsibility in Scandinavian Supply Chains build supply chains through their existing networks to feed their operations in developing regions. This presents the oil companies the luxury of being able to operate in relative isolation from the challenges of the communities from these developing regions. In theory, the revenues that the oil companies pay to the local governments should positively impact the local communities. However, these countries of developing regions tend to rank at the bottom of Transparency Internationals corruption list, and so in reality this may often not be the case (StatoilHydro, 2007c; TICPI, 2007). Rather than relying solely on externally based supply chains, StatoilHydro has chosen to engage with the communities to locally source materials and services where possible. This offers greater promise for sustainable local economic development to these communities. Noting this, StatoilHydro (2007b) stated that it aims to make sustainable investments that create and maximize shared value investments that benet our shareholders and the host countries where we operate. We do this by creating local content and generating positive spin-offs from our core business in support of the development ambitions of host countries. We proactively recruit locally, demonstrating that we are a good employer offering a safe working environment, attractive training opportunities, and building on local competence. We promote local sourcing and work with local businesses as suppliers and contractors where they exist, and invest in developing sustainable and competitive local enterprises. StatoilHydros approach of contributing to the sustainable economic viability in the communities where the natural resources exist is a page fresh from the chapter of Norways own economic development. Norway (and Scandinavia as a whole) was until recently a very poor region (ORourke and Williamson, 1995). In the early twentieth century, new hydroelectric technologies made it possible to harness the great waterfall resources that Norway possessed. Norway invited foreign companies to come that possessed the competencies to harness these natural resources while requiring that these foreign companies utilize Norwegian workers and materials and support infant domestic industries (Moses, 2005). Moses (2005) points to this having a three-stage effect where the Norwegian rms rst gained access to foreign industrial technologies, then access to foreign

181

know-how through the import of foreign craftsmen to support these industrial technologies, and third, industrial domestication where a generation of Norwegian craftsmen and entrepreneurs learned directly from the foreign technologies and craftsmen. When Norway discovered offshore oil in the late 1960s, these three stages played out again. Fast forward 40 years and Norway now has world-class competencies in offshore oil production. Foreign companies that originally invested in Norway continue to share in the benets of Norwegian oil production and enjoy operating in a stable, friendly region. This has been a long-term winwin. Thus, perhaps it comes naturally to StatoilHydro to develop local competencies in the communities where the natural resources exist. This may also pay immediate dividends to StatoilHydro in the form of reduced risk of employee kidnappings or sabotage by local communities in developing regions if these communities feel as if they too are beneting from the extraction of their natural resources. In 2007 the Dow Jones Sustainability Index (DJSI, 2007a) named StatoilHydro as the oil and gas supersector leader1 stating that it remains the global sustainability leader among the oil and gas producers. It continued to state that the company stands out on social issues, in particular in human capital development. In addition to developing human capital within its own employees, StatoilHydro is helping to develop the human capital of the suppliers in the developing regions it does business.

Novo Nordisk Novo Nordisk is a world leader in diabetes care. This multinational Danish company has employees in 79 countries with marketing efforts in 179 countries (Novo Nordisk, 2007a). Novo Nordisk states the high expectations it holds for itself in environmental and social performance, and it clearly expresses that this expectation extends to its suppliers. At the same time, Novo Nordisk stresses that this must be achieved through a trusting partnership between Novo Nordisk and its suppliers and is meant to be a collaboration rather than a oneway mandate. Given Novo Nordisks (2007b) supply base is increasingly shifting toward developing regions of the world, this collaboration is

182

Robert Strand In its naming of Novo Nordisk as the 2007 bestin-class in the healthcare supersector, the Dow Jones Sustainability Index stated the Novo Nordisk is leading the trend towards responsible global sourcing. It continued to state that Novo Nordisk has committed to issue sourcing standards globally that will cover the whole range of relevant categories: general compliance with laws and regulations; environment; health and safety; labor practices; ethics; sub-suppliers; and clinical trials and animal testing (DJSI, 2007b).

increasingly both challenging and important for the companys environmental and social performance. In its publication titled Doing Business with Novo Nordisk Responsible Sourcing Standards for Business, Novo Nordisk CEO Lars Rebien Srensen stated Supply chain relationships are more integrated and interconnected today than ever before, which in turn requires our business partners to share accountability for promoting standards of behaviour across the entire supply chain. We hope that you will contribute to our efforts in promoting responsible practices throughout our supply chain around the world. We look forward to working with you so that together we can raise the bar for performance (Novo Nordisk, 2007c). Within this publication, it also states To achieve these [environmental and social responsibility] goals Novo Nordisk has established minimum standards that we expect our business partners to adhere to when doing business with us. We expect our business partners to minimise the impact of their operations on the environment, secure the safety of their workers, ensure fair and timely remuneration of their workforce, ensure the welfare of experimental animals in research, and act with integrity while doing business. We recognise that many of our business partners operate in different legal and cultural environments, and that interpreting and implementing these requirements may be challenging. We therefore strongly encourage our business partners to initiate dialogue and engage with Novo Nordisk if compliance with these standards cannot be achieved (Novo Nordisk, 2007c). Novo Nordisk has developed a robust supplier partnership program supported by its suite of supplier engagement and assessment tools. Within these tools and procedures, Novo Nordisk has integrated the principles of the United Nations Declaration of Human Rights and the United Nations Global Compact (2007c). This suite includes procedures for supplier assessment that communicate Novo Nordisks expectations for environmental and social performances and offers guidelines for how suppliers can best achieve these performances. Novo Nordisk makes this suite available on its website for others to review and adopt (2007d). Novo Nordisk is deliberate in its communication that this suite is to facilitate a partnership based on trust between itself and its suppliers rather than a policing mechanism.

Nokia Named for the River Nokia in southern Finland next to which its original pulp mill was located (Nokia, 2007a), Nokia traces its roots back to 1865 when it was a forestry and power production company (Haikio, 2002). It has since maneuvered to become the global market share leader in electronic communication devices (Nokia, 2007b). It follows that Nokias (2007f) supply base reaches across the globe with signicant contract manufacturers and suppliers in 30 countries. Like other electronic device manufacturers, this supply chain is extended into many developing nations. Nokia has developed a robust supplier partnership program with a suite of tools that Nokia can use to communicate its expectations for environmental and societal performances with its suppliers. Nokia also performs on-site assessments during which time it directly engages with the suppliers to review environmental, health and safety, and labor issues and how Nokia and the supplier can work together to continuously improve performance in these areas. During 2006, Nokia conducted over 100 such on-site assessments (Nokia, 2007b). Regarding these assessments, Nokia stated We carry out regular supplier assessments as a tool to help promote good performance and also to monitor compliance. This is not, however, a policing activity. We see on-site assessments as an opportunity to raise awareness, identify potential risks and share best practices (Nokia, 2007e). Nokias ability to collaborate with its suppliers via these supplier assessments aided through Nokias own employees training. Nokia discussed this as Building capabilities within our own organization

Corporate Responsibility in Scandinavian Supply Chains and our suppliers is important for sustainable improvements Raising awareness and competencies within our own sourcing organization is an important aspect of supplier network management. In 1999 we started environmental training for our purchasing and sourcing personnel and then in February 2002 we began providing training on labor conditions issues (Nokia, 2007d). Nokia has also embraced cross-industry collaborative efforts with companies that it competes with but may share common suppliers. Nokia is an active participant in the Global e-Sustainability Initiative (GeSI) that is an industry-wide collaboration established through the Electronic Industry Code of Conduct (EICC) to promote environmental protection and social development in the supply chain. In 2006, the GeSI facilitated industry-wide collaborative learning and capability building activities, the development of the online tool E-TASC, an audit process that includes corrective action monitoring, and various stakeholder events (Nokia, 2007b). It is becoming increasingly apparent that training and capacity building amongst companies in the supply chain are important for driving sustainable improvements from a social and environmental perspective. Therefore as part of the GeSI SCWG we are also currently investigating other potential projects (Nokia, 2007d). Nokia further described the importance of partnerships in its overall strategy. Collaboration is a key ingredient in Nokias growth strategy. We work with other companies, research institutions, authorities, and industry organizations to further the competitiveness of our company and the strength of our industry as a whole (Nokia, 2007c).

183

Discussion The willingness and ability by these Scandinavian rms to engage and form collaborative partnerships with their suppliers are indicative of these Scandinavian companies stakeholder approach. Stakeholder theorist R. Edward Freeman credits important developments in stakeholder theory as having come from Scandinavia, acknowledging the contributions of Swedish Scholar Eric Rhenman (Freeman, 1984; Jones et al., 2002). In a 1964 publication, Rhenman

contributed that stakeholders in an organization are the individuals and groups who are depending on the rm in order to achieve their personal goals and on whom the rm is depending for its existence. Rhenman identied suppliers a key stakeholder and stated that the very survival of the rm depended on the crucial task of the management to take care of the stakeholder balance where the key stakeholders are engaged and better understood (Nasi, 1995; Rhenman, 1964). These collaborative partnerships between the Scandinavian rms and their suppliers are based on the establishment of open and trusting relationships. The ability to form these relationships is predicated on the Scandinavian rms abilities to demonstrate honesty in their desire to form a partnership with the suppliers. The suppliers must trust that such things as on-site assessments are not solely to police or gain information to leverage in negotiations (for example, to reduce prices). The Scandinavian region as a whole has a high degree of trust that has likely aided these Scandinavian rms competency in establishing trust. For example, the four countries that lay claim as the origin of these Scandinavian companies all nd themselves within the top 10 of Transparency Internationals least corrupt countries in the world (TICPI, 2007). Thus, Scandinavian rms are in the advantageous position of being recognized as a trustworthy and favorable partner to do business with. This cooperative advantage will likely be of increasing benet to these Scandinavian companies. IBM CEO Sam Palmisano (2006) wrote that trust will be a fundamental component for integration and collaboration to occur between multinational corporations and the local communities around the globe that they do business in. He continued to state We need new ways of establishment of trust based on shared values that cross borders and formal organizations. This will mean signicant changes in organizational culture, new forms of partnership among multiple enterprises and segments of society and new standards for managing a complex market place. These Scandinavian companies have successfully established trust with their suppliers through their environmental and social responsibility programs, and as a result they are building stronger and more engaged supply chains.

184 Note

Robert Strand
IKEA: 2004, Social and Environmental Responsibility Brochure, http://www.ikea-group.ikea.com/corporate/ PDF/Brochure.pdf. Accessed 1 June 2006. IKEA: 2005, IKEA Social and Environmental Responsibility Report 2005, http://www.ikea-group.ikea. com/corporate/PDF/SandEReport2005_August.pdf. Accessed 15 June 2006. IKEA: 2007, IKEA Facts & Figures Ikea Group 2007, http://www.ikea-group.ikea.com/corporate/PDF/FF 2007_english.pdf. Accessed 15 Oct 2007. Jones, T., A. Wicks and R. E. Freeman: 2002, Stakeholder Theory: The State of the Art, in N. Bowie (ed.), The Blackwell Guide to Business Ethics (Blackwell Publishers, Oxford), pp. 1937. Kamprad, I.: 1976, A Furniture Dealers Testament, in B. Torekull (1999), Leading by Design: The IKEA Story (HarperBusiness, New York, NY). Moses, J.: 2005, Norwegian Catch-Up: Development and Globalization Before World War II (Ashgate Publishing Limited, Aldershot, England). Nasi, J.: 1995, A Scandinavian Approach to Stakeholder Thinking: An Analysis of Its Theoretical and Practical Uses, 19641980, in J. Nasi (ed.), Understanding Stakeholder Thinking (LSR-Julkaisut Oy, Helsinki), pp. 97115. Nokia: 2007a, Nokia Frequently Asked Questions, http:// www.nokia.com/A4126383. Accessed 1 Aug 2007. Nokia: 2007b, Nokia Our Story Continues, http:// www.nokia.com/NOKIA_COM_1/About_Nokia/ Sidebars_new_concept/About_Nokia_broschure/nokia_ about_eng.pdf. Accessed 1 Aug 2007. Nokia: 2007c, Nokia Cooperation, http://www. nokia.com/A4126372. Accessed 1 Oct 2007. Nokia: 2007d, Nokia Training Supply Chain Corporate Responsibility, http://www.nokia.com/ A4252219. Accessed 1 Oct 2007. Nokia: 2007e, Nokia Supplier Assessments Supply Chain Corporate Responsibility, http://www.nokia. com/A4252220, Accessed 1 Oct 2007. Nokia: 2007f, Nokia Locations Supplier Network Management Supply Chain Corporate Responsibility, http://www.nokia.com/A4252214. Accessed 1 Oct 2007. Novo Nordisk: 2007a, Novo Nordisk in Short, http:// www.novonordisk.com/investors/novo-nordisk-inshort/novo-nordisk-in-short-default.asp. Accessed 31 Oct 2007. Novo Nordisk: 2007b, Novo Nordisk Responsible Sourcing, http://annualreport.novonordisk.com/howwe-perform/responsible-sourcing.asp. Accessed 31 Oct 2007. Novo Nordisk: 2007c, Doing Business with Novo Nordisk Responsible Sourcing Standards for Busi-

Statoil, not StatoilHydo, was named as the DJSI supersector leader for the oil and gas sector. Statoil and the oil component of Norsk Hydros business completed a merger during Q3 of 2007, at which time Statoil changed its name to StatoilHydro. It is a safe assumption that the product of this merger would have still garnered the supersector leader status, as Norsk Hydro is a supersector leader in its own right in the basic resources supersector (DJSI, 2007c).

Acknowledgments
The author would like to thank Dr. Annik Magerholm Fet and Dr. Rolf Lunheim of the Norwegian University of Science & Technology (NTNU) and Dr. Norman Bowie of the University of Minnesota for their guidance and mentorship. This work was supported in part by the US-Norway Fulbright Foundation, the Research Council of Norway via the Corporate Responsibility in the US and Norway (CRUSAN) project, and the Lois Roth Endowment.

References
Aneki.com: 2007, Most Expensive Countries to Live in, http://www.aneki.com/expensive.html. Accessed 15 Oct 2007. Boyden, J., B. Ling and W. Myers: 1998, What Works for Working Children (Save the Children/UNICEF, Stockholm). CIA: 2007, CIA World Factbook Rank Order Oil Exports, https://www.cia.gov/library/publications/ the-world-factbook/rankorder/2176rank.html. Accessed 31 Oct 2007. DJSI: 2007a, Sustainability Leader Oil and Gas Statoil, http://www.sustainability-indexes.com/djsi_pdf/Bios08/ Statoil_08.pdf. Accessed 31 Oct 2007. DJSI: 2007b, Sustainability Leader Healthcare Novo Nordisk, http://www.sustainability-indexes.com/djsi_ pdf/Bios08/NovoNordisk_08.pdf. Accessed 31 Oct 2007. DJSI: 2007c, Sustainability Leader Basic Resources NorskHydro, http://www.sustainability-indexes.com/ djsi_pdf/Bios08/NorskHydro_08.pdf. Accessed 31 Oct 2007. Freeman, R. E.: 1984, Strategic Management: A Stakeholder Approach (Pitman, Boston). Haikio, M.: 2002, Nokia The Inside Story (Financial Times Prentice Hall, London).

Corporate Responsibility in Scandinavian Supply Chains

ness Partners, http://annualreport.novonordisk.com/ images/2006/PDFs/Doing%20business%20_brochure_ UK.pdf. Accessed 31 Oct 2007. Novo Nordisk: 2007d, Novo Nordisk Supplier Toolbox, http://suppliertoolbox.novonordisk.com/background/ background.asp. Accessed 31 Oct 2007. ORourke, K. and J. Williamson: 1995, Education, Globalization and Catch-Up: Scandinavia in the Swedish Mirror, Scandinavian Economic History Review XLIII(3), 287309. Palmisano, S.: 2006, How Multinationals Have Been Superseded, Financial Times (June 12). Rhenman, E.: 1964, Foeretagsdemokrati och foeretagsorganisation (Thule, Stockholm). StatoilHydro: 2007a, StatoilHydro Business Update 3Q 2007, http://www.statoilhydro.com/en/InvestorCentre/ Presentations/Downloads/StatoilHydro%20business%20up date%20(before%20numbers%20are%20consolidated).pdf. Accessed 31 Oct 2007. StatoilHydro: 2007b, Spin-Offs, http://www.statoilhydro. com/en/EnvironmentSociety/Society/Pages/Local ContentAndSpin-offs.aspx. Accessed 31 Oct 2007.

185

StatoilHydro: 2007c, The Future is Now Statoil and Sustainable Development, http://www.statoil.com/ STATOILCOM/hms/svg02793.nsf/Attachments/Bae rekraftigENGny.pdf/$FILE/BaerekraftigENGny.pdf. Accessed 31 Oct 2007. Transparency International Corruption Perception Index (TICPI): 2007, Corruption Perceptions Index 2007, http://www.transparency.org/policy_research/surveys_ indices/cpi/2007. Accessed 31 Oct 2007. WWF: 2007, WWF and IKEA Conservation Partnership, http://www.panda.org/about_wwf/what_we_do/ forests/our_solutions/partnerships/ikea/index.cfm. Accessed 1 Oct 2007.

University of Minnesota Carlson School of Management, 3546 Emerson Avenue South 2, Minneapolis, MN 55408, U.S.A. E-mail: stra0438@umn.edu