Current status of CSR in the realm of supply

management: the case of the Korean

electronics industry
Ki-Hoon Lee
Centre for Sustainability Management, Leuphana University Lueneburg, Lueneburg, Germany, and
Ji-Whan Kim
Samsung Global Environment Research Centre, Seoul, Korea

Abstract
Purpose – The purpose of this study is two-fold: to survey research on supply management and corporate social responsibility (CSR) reported over the
past two decades; and to carry out an empirical study of the current status of supply management and CSR in the Korean electronics industry.
Design/methodology/approach – The study is based on an explorative approach, wherein “triangulation” is adopted, combining quantitative and
qualitative methods. A questionnaire survey with a 132-company sample is employed as a quantitative method and the telephone interviews with 23
samples are used as a qualitative method. By adopting a triangulation approach, rich data and explanatory power can be obtained to answer the
research question.
Findings – The results of the study show that “environmental” pressures and standards are widely accepted and implemented for supply management
in the Korean electronics industry. However, “social” pressures and standards are still not commonly used and there is a lack of implementation in the
entire supply chain in the industry. The main reason for adopting CSR standards is to identify risks and problems in the supply chain, and to avoid or at
least reduce the consequences for the final manufacturer. Although most manufacturers in the Korean electronics industry demand certified
environmental standards such as ISO 14001 from their suppliers, there is generally a lack of integration of social standards in supplier management or
requirements.
Practical implications – Companies today face a growing number of restrictions from national legislations and international standards influencing
the environment, labour standards, and human rights issues. Within the Korean electronics industry as a whole there appears to be consensus that it is
not easy being “socially responsible”. Vague notions about CSR issues for supply management practices have not provided suppliers with adequate
guidance as they seek to improve their performance vis-à-vis company standards. The development of evaluation standards to assess suppliers can be a
critical factor in improving a firm’s performance. Another critical factor is documenting all CSR activities for external requirements such as auditors.
Originality/value – This study is the first empirical attempt to explore CSR adoption and implementation in supply management in the Korean
electronics industry.

Keywords Supply chain management, Corporate social responsibility, Standards, Electronics industry, South Korea

Paper type Research paper

Introduction (Ragatz et al., 1997). However, the modern competitive

The strategic importance of supply chain management has
been growing during the past two decades. The literature on
supply chain management recognises that the supply chain
should be managed strategically, and should be based at the
centre of a competitive analysis (Croom et al., 2000; Macbeth
and Ferguson, 1994; Cox, 1997). Companies in general do
not seek to achieve cost reductions or profit increases at the
expense of their supply chain partners. Rather, they utilise the
supply chain to make themselves more competitive as a whole
(Macbeth and Ferguson, 1994; Croom et al., 2000).
Traditionally, suppliers have a large and direct impact on
cost, quality, speed, and responsiveness of buying companies
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Supply Chain Management: An International Journal
14/2 (2009) 138– 148
q Emerald Group Publishing Limited [ISSN 1359-8546]
[DOI 10.1108/13598540910942000]
business environment requires reconsideration of the supply
chain and products.
Recently, we have witnessed public boycotts of companies’
products on the bases of social responsibility and commitment
including globally recognised companies such as Shell, Nike
and Gap. The issues of child labour, low wages, pollution of
local environments and human rights have been raised in these
cases. From a business perspective, all these cases concern local
supplier management (Locke and Romis, 2007). In particular,
headquarters’ global supply management strategy has not been
equally applied or managed at all international operating sites
(Henkle, 2005). In a similar vein, the Sony Electronics
electronic game product PlayStation One (PS1) had been
banned in the European market due to an environmental
regulation restricting the level of cadmium (0.1 per cent). The
PS1 showed an excessive level of cadmium (0.5 per cent) in the
connection line from the second- and third-tier global
suppliers. These cases imply that rapidly growing social and
environmental pressures and standards have direct and indirect
impacts on supply chain management and the competitiveness
of corporations.

138
 Current status of CSR in the realm of supply management
Ki-Hoon Lee and Ji-Whan Kim
Products in the electronics industry incorporate raw
materials and parts from a wide range of suppliers. Focal
companies are responsible for their products and are
increasingly being asked to supervise their suppliers in
“doing the right thing” regarding environmental and social
issues. Reflecting this fact and other global trends, Korean
electronics manufacturers are at the beginning stage of
managing their suppliers’ activities with respect to
environmentally and socially responsible practices. Product-
related general requirements are usually stipulated under the
buyer’s or final manufacturer’s guidelines. For example, Sony
Electronics, after experiencing the case of PS1, called all its
suppliers and proposed “a green partnership” that would
include environmentally sound procurement guidelines and
requirement standards. Similarly, Samsung Electronics
introduced the S-partnership for environmentally safe and
sound procurement and business-to-business under
“Samsung Standards” demanding stricter environmental
regulations at the international level.
Although the ongoing debate on corporate social
responsibility in the last three decades has focused on
whether companies should or should not take corporate
social responsibility (hereafter CSR), the concept of CSR
appears to have been generally accepted into business
society. One of the most common concepts of CSR is the
triad of economic, environmental, and social responsibilities,
as in the popular slogan “the triple bottom line” (Elkington,
1998).
Companies that have exemplary records in economic,
environmental, and social dimensions can market their efforts
to customers, shareholders, employees and other
stakeholders, including suppliers. The role of supply chain
management is the key interface with suppliers and supply
chain intermediaries such as transportation and logistics
service providers. This key interface can play an important
role in a company’s CSR efforts (Koplin et al., 2007). Global
branded companies such as Samsung Electronics and LG
Electronics are under the eyes of the public and the media. As
final manufacturers, they adopt state-of-the-art CSR
standards or codes of conducts including ISO 14001,
SA8000, AA1000, and the UN’s Global Compact.
However, there has as yet been no explicit consideration of
how and why CSR-related first-tier supplier activities are
undertaken in some cases. Then, under what conditions and
why do (or why don’t) first-tier suppliers of large final
manufacturing companies adopt specific CSR efforts in which
the supply chain can be engaged?
This paper attempts to find some answers to the question
above. The study presents evidences from an exploratory
survey and telephone interviews that were carried out by the
authors concerning the implementation of policy to address
environmental and social issues as well as standards at the
level of first-tier suppliers in the Korean electronics industry.
Literature review
CSR and supply management
Never before has there been such pressure on companies to
address social and environmental responsibilities, and never
before has there been such a wealth of opportunity to be
derived from doing so. Companies that embrace corporate
responsibility recognise that their social and environmental
impact has to be managed in just the same way as their
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Supply Chain Management: An International Journal
Volume 14 · Number 2 · 2009 · 138 –148
economic or commercial performance. Getting started, or
putting corporate responsibility principles into practice, can
be difficult, however, and many companies struggle to justify
the management of social and environmental affairs in terms
of business benefits.
Many aspects of businesses are not directly involved in the
manufacturing process and the social and environmental
impacts of their products may not be apparent to
management as well as customers. An increasing number of
companies, however, know that the responsibility for their
products begins when they are conceived, designed, and
ordered. From an environmental perspective, the
responsibility includes resource extraction, transportation,
production, packaging, distribution, sales, consumer use, and
disposal. From a social perspective, the responsibility includes
equal employment, working conditions, health and safety
standards, child labour, and human rights. Each element in
the whole manufacturing process is associated with
environmental and social standards and requirements and
companies are expected to account for all of them.
In the business and society literature, it has been argued
that specific dimensions of CSR include safety (Wokutch,
1992), human rights (Jennings and Entine, 1999), the
environment (Fryxell and Dooley, 1997), philanthropic
donations (Wokutch and Mallot, 1998), and local
community considerations (Mallot, 1998). In the supply
management literature, it has been stated that activities
associated with CSR include the recruitment of minority
employees, environmental concerns, and on the job safety
(Murphy and Daley, 1990). In the business and environment
literature, environmental management refers to the
management of corporate interaction with, and impacts
upon, the environment. In particular, CSR issues of supply
management in the environmental management literature
include environmental supply chain management (Handfield
et al., 1997), environmental logistics strategies (Murphy et al.,
1996), and environmental purchasing (Min and Galle, 1997;
Carter et al., 1998, 2000).
On behalf of the Korean Electronics Association, in 2006,
one of authors conducted a research study on the current
understanding of the electronics industry with respect to CSR
and electronic industry supply management in (see Tables I
and II). According to Lee (2006), the industry is aware of six
international rating outputs regarding CSR. These include the
Dow Jones Sustainability Index (DJSI), Financial Times
Stock Exchange for Good Index (FTSE4Good Index),
Accountability Rating, The Global 100, Oekom Research
Rating and the Sustainable Investment Research International
(SiRi) Rating (see Table I).
Furthermore, Lee (2006) identified the current CSR
awareness and importance in the Korean electronics
industry supply chain (see Table II). According to Lee, an
increasing number of senior managers recognised social
performance issues. Among the issues, human rights and local
community communication showed higher levels of
recognition than labour and suppliers. Regarding
environmental performance issues, senior managers in the
electronic industry consider environmental management at
foreign operating sites to be important. This implies that
managing and developing suppliers for CSR at internationally
operating sites are strategically important aspects for the
Korean electronics industry.
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Ki-Hoon Lee and Ji-Whan Kim Volume 14 · Number 2 · 2009 · 138 –148

Table I Summary of the most identified international CSR indexes and rating in the Korean electronics industry
Oekom
The Global Research
Category DJSI FTSE4Good Accountability rating 100 rating SiRi International rating
Main organisation Dow Jones FTSE AccountAbility (UK) Corporate Oekom Sustainable Investment Research
Index (USA) International Knights Research International Group (Switzerland)
(UK) (Canada) (Germany)
Year established 1999 2001 2004 2005 1999 2000
Rating items Economic (24) Governance Stakeholders/governance/ Environmental Environmental/ Community/customers/corporate
Environmental (17) sustainability management (50) social governance/employees/
(2) Social (30) strategy/information Social (50) environment/human rights and
Social (22) Environmental disclosure supply chains
(13)
Rating organisation SAM Group EIRIS (UK) CSR Network (UK) Innovest Oekom SiRi Company (Switzerland)
(Switzerland) (USA) Research
(Germany)
Source: Lee (2006)

Table II The awareness/importance of CSR in the Korean electronics industry

Weight
Category Contents (per cent)
General/common CSR policy/organisation CSR organisation, vision, policy and management 7
Social Labour Human/labour management system and indicators
Working conditions
Worker health and safety 8
Human rights Human rights protection, employee welfare, education and training
Non-OECD country working site human rights 17
Supply management Supplier CSR management
Supplier CSR operation and policy 5
Local community communication Donation, social contribution
Customer policy, standard and service
Local community and NGO communications 14
Economic Management structure Corporate governance, management committee function, corporate
performance, legal compliance, stakeholders 16
Business ethics Ethical policy and code of conduct
Social, environment and ethical issues 4
Environmental Environmental policy and Environmental policy and organisation, management system
management 8
Site environment Foreign working sites and factories environmental management indicators
and performance 15
Product environment Product environmental regulation compliance, supply chain management
Product environmental policy and management system 7
Total DJSI/FTSE4Good/Global 100/Accountability 100
Source: Lee (2006)

It may be concluded that CSR issues in the Korean
electronics industry broadly cover economic, social, and
environmental dimensions. In particular, the issues of labour,
human rights, local community communications,
management structure and business ethics, environmental
policy and management, site environment, and product
environment are considered as factors having a certain level of
impacts on supply chain CSR efforts.
The Electronic Industry Code of Conduct (EICC) and
supply chain CSR
By observing a complex and rapidly evolving area of CSR, the
business community is becoming aware of the urgency and
importance of CSR and supply management. Notably, in the
electronics industry, focused guidelines for CSR in supply
chain management have been adopted. For example, the
Electronic Industry Code of Conduct (EICC) was introduced

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Ki-Hoon Lee and Ji-Whan Kim
in October 2004 to 25 global electronic products
manufacturers including Philips, HP, Sony, Apple, MS and
IBM. When the British NGO Catholic Agency for Overseas
Development (CAFOD) pointed out the employees’ working
conditions at major suppliers for global brands HP, Dell, and
IBM in January 2004, these three companies came to agree
that they needed respond in a single voice to external
demands and critiques rather than to act independently.
Other US companies including Celestica, Flextronics, Jabil,
Sanmina SCI, and Solectron supported this approach. HP,
Dell, and IBM, along with five other electronics companies,
officially launched the body of the Electronic Industry Code
of Conduct (EICC) in October 2004. Currently, 30 electronic
companies are members, including the Korean corporation
Samsung Electronics. The EICC established five categories of
the Code of Conduct, including:
1 labour;
2 health and safety;
3 environment;
4 management systems; and
5 ethics.
The objective of EICC is to ensure the establishment of the
social and environmental CSR standard in the electronics
industry supply chain[1]. As a result, every company adopting
EICC can be part of a consistent and credible voice to
demand external CSR requirements from NGOs, buyers, and
credit rating institutions (e.g. Innovest, SAM).
Capacity building for suppliers now becomes a vital point
for EICC compliance. While repeated failure to meet
standards is grounds for supplier dismissal, companies are
advised to engage their suppliers before reaching to the
dismissal point by facilitating compliance and thus improving
performance. Successful supply management for CSR is not
complete without publicity. Industry-wide shifts in
procurement will not happen until companies feel the need
to compete on a social and environmental level, not just an
economic one. Without public awareness of corporate social
responsibility efforts, competitors will not be encouraged to
develop programs of their own.
Supply chain CSR and global CSR standards
By responding to international CSR-related requirements,
many companies adopt international standards and/or their
own codes of conduct for suppliers. There are many reasons
for applying those standards and codes:
.
to meet legal compliance requirements;
.
to build trust and credibility;
.
to gain certification;
.
to gain stakeholder confidence; and
. to improve management systems through the use of
standards.
Seeking cheap labour and raw materials from emerging and
developing countries, multinational companies utilise global
and local sourcing in different parts of the world. The
expansion of supply sourcing in different countries involves
economic, environmental, and social responsibilities and risks
(Teuscher et al., 2006). Global brands such as Nokia,
Samsung, Toshiba, and LG are under the scrutiny of the
public watchdog internationally. Frequent problems regarding
CSR issues occur in earlier stages of the supply chain, as
original equipment manufacturers in the electronics industry
have no direct contact with the final suppliers (Koplin et al.,
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2007). One solution to avoid CSR-related risks throughout
the supply chain can be the adoption of related standards or
codes. As McIntosh (2003) introduces the most widespread
CSR-related standards, referred to as “the global eight”[2],
we observe that only five standards among these are adopted
in the Korean electronics industry, with some exceptions.
These include the UN’s Global Compact, AA1000, SA8000,
ISO 14001, and the GRI Guideline (see Table III).
UN Global Compact[3]
The Global Compact Initiative aims to create a more
sustainable and inclusive global economy. The “ten
principles” of the Global Compact in the areas of human
rights, labour policy, environmental protection and anti-
corruption policy are derived from the Universal Declaration
of Human Rights, the International Labour Organisation’s
Declaration on Fundamental Principles and Rights at Work,
the Rio Declaration on Environment and Development, and
the United Nations Convention against Corruption.
AA1000[4]
AA1000 is an assurance standard that covers an organisation’s
disclosure and associated sustainability performance. Its goal
is to secure the quality of sustainability accounting, auditing
and reporting. It is continually under development by
AccountAbility, an international membership-based
professional institute established in London in 1996.
SA8000[5]
SA8000 is the first global certification system for supply chain
labour standards. This is a voluntary standard developed by
Social Accountability International (SAI), which is based on
ILO conventions. SA8000 offers a stand-alone certification
solution for managing aspects of corporate responsibility and
certifiable standards that is delivering auditable compliance
for manufacturers and purchasers in the supply chain.
ISO 14001[6]
ISO 14001 is one of the most widely adopted standards in the
area of CSR and is recognised as an international standard for
environmental management. ISO 14001 was developed in
1996 by the International Organisation for Standardisation
(ISO). ISO standards are developed by technical committees
made up of experts on loan from the industrial, technical and
business sectors that have requested standards.
Currently, an ISO social responsibility standard (ISO
26000) has been proposed and scheduled for early 2010. ISO
26000 will provide guiding principles on social responsibility.
GRI (Global Reporting Initiatives)[7]
GRI was established in September 2002 in order to
contribute to sustainability reporting standardisation. The
GRI guidelines adopt the triple bottom line approach, and
Table III Classification of environmental and social standards
CSR standard Environmental Social Certificate
UN Global Compact U U
AA1000 U
SA8000 U U
ISO 14001 U U
GRI Guidelines U U
Sources: UN Global Compact, AA1000, SA8000, ISO 14001 and GRI
Guidelines
 Current status of CSR in the realm of supply management
Ki-Hoon Lee and Ji-Whan Kim
develop key and additional indicators under the three
categories of economic, social and environmental
dimensions. More than 200 multinational companies have
adopted the GRI’s sustainability reporting guidelines since
2003.
By adopting and implementing these standards for supply
chain management, companies can prove that they are willing
to take responsibility and move towards CSR. Such standards
are meant for a wide variety of companies and have to be
accepted on an international basis. However, they are often
not specific enough for highly dynamic industries such as the
electronics industry. For this reason, some global brand
companies have established sets of standards for their own
industries, which are referred to as “codes of conduct”. The
EICC in the electronics industry is a good example.
By establishing a code of conduct, a company can avoid or
at least reduce negative effects on the final manufacturer and
brand owner. Although an increasing number of
manufacturers in the electronics industry demand certified
environmental standards (ISO 14001) from their suppliers, it
appears that there is a lack of integration of social standards in
supplier requirements (Welford and Frost, 2006; Lee, 2007;
Nawrocka, 2008). Also, it is very rare that environmental and
social standards are enforced in supplier selection and the
operational purchasing process (Koplin et al., 2007).
The overall goal of the survey is to gain insight into the
following:
.
whether first-tier suppliers in the electronics industry use
environmental and social (or CSR) standards;
.
if they do, then what kinds of CSR standards are applied;
and
.
what the drivers/motivations are for having managing
suppliers adopt CSR standards.
Since the field of CSR in supply chains is very young and has
only become a research issue in recent years, few empirical
surveys and related studies have been carried out thus far
(Seuring et al., 2004).
Research methods
Based on a literature review, it can be stated that the specific
sphere of CSR in supply management has only recently
emerged as a research topic, and few empirical studies for
first-tier suppliers in supply management have been carried
out until recently. To understand the current situation and
lend insight into specific CSR issues among the first-tier level
suppliers in the Korean electronics industry, “an explorative
approach” is chosen in the present work. According to Forza
(2002), the adoption of an explorative study provides the
opportunity to gain first insights into a field. In this study, 153
companies, all first-tier suppliers of large branded Korean
manufacturing companies including Samsung Electronics,
Samsung SDI, Samsung Electro-mechanics, LG Electronics,
LG Philips LCD and LG Innotek, were questioned. The first-
tier suppliers devoted a substantial portion of their business to
the large manufacturing companies mentioned above. Within
the electronics industry, the same companies also supply other
electronics manufacturers in the market.
This exploratory approach utilised both quantitative and
qualitative methods including a document review,
questionnaire survey and telephone interviews to gather
data. The use of multiple methodologies permits triangulation
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of the data to improve the validity of the findings, and enables
greater inferences from the results (Miles and Huberman,
1994; Yin, 2004).
The choice of context is grounded on the industry’s highly
international orientation and exposure to the issues of CSR.
The choice of methodology is further supported by our access
to rich and comprehensive empirical sources. In order to
achieve the goals of the survey, a questionnaire survey was
designed and is shown in Appendix 1. Considering that this
study is aimed in a future-oriented direction to explore the
first-tier level suppliers regarding CSR standards and codes in
supply management, openness and flexibility are very
important to research the study topic. Hence, the
questionnaire survey was designed from an extensive
literature review.
After the survey method was chosen, the selection of
sample was importantly considered. A sample is defined as “a
small part or quantity intended to show what the whole is
like” (Concise Oxford Dictionary, 1998, p. 1220). In business
and management studies, a sample refers to a group of people
selected from a larger population to be included in the study.
In order to choose a sample, the authors employed a sample
frame or a list of sample units from which the sample was
drawn. The sample frame in this study is the membership list
of the Korea Electronics Association. To make business
contracts with major final manufacturers in the market,
suppliers become a member of this association. For this study,
target organisations should have top management teams that
have been involved in strategic decision-making that included
CSR issues.
We used the listed members of suppliers on the Korea
Electronics Association. All the companies contacted are also
first-tier suppliers of large branded Korean manufacturing
companies including Samsung Electronics, Samsung SDI,
Samsung Electro-mechanics, LG Electronics, LG Philips
LCD, and LG Innotek. Initially, we contacted the entire
sample of 153 companies and received 132 positive responses,
which reflects fairly strong interest to participate in the study.
Within this study, 132 companies, all members of the Korea
Electronics Association, mainly stationed in Korea, were
surveyed. One hundred and eight companies returned fully
filled valid questionnaires (return ratio of 82 per cent). Within
the electronics industry, the same companies also supply other
manufacturers in the market. The questionnaire was
standardised and consisted of four parts:
1 CSR standards and codes in the company;
2 CSR standards and codes imposed on the suppliers of the
surveyed company;
3 drivers for adopting CSR standards in the company; and
4 important CSR standards and issues for supply
management for the next three to five years.
The questionnaire survey was conducted between March
2007 and May 2007. A compilation of the respondents by job
titles is shown in Table IV. In addition, the questionnaire
included contact details for further correspondence. As a part
of the exploratory approach, telephone interviews were to
follow. In order to obtain an in-depth understanding of the
research topic, the authors contacted the survey respondents,
and a total of 23 among 108 accepted to participate further.
Thus, 23 telephone interviews were conducted. Each
telephone interview lasted for about 30 minutes. The
telephone interviews entailed questions about the current
 Current status of CSR in the realm of supply management
Ki-Hoon Lee and Ji-Whan Kim
Table IV Composition of respondents by position
Position Number
Corporate executive officers
Corporate vice executives/presidents
Directors of CSR/compliance officers
Directors of EHS affairs
Director of purchasing/marketing
Total
situation regarding CSR standards and codes of conduct, and
the motivations and barriers for adopting CSR standards in
the supply management (see Appendix 2).
Analysis
Adoption of CSR standards in supply management
The respondents uniformly indicated that they had
implemented at least one set of CSR standards and codes in
their supply management. The most implemented standard is
ISO 14001; 92 per cent of the companies are certified
according to ISO 14001 as an environmental standard. The
second most implemented standard is SA8000; 12 per cent of
the companies are certified according to SA8000 as a social
standard. Other international standards such as AA1000,
Global Compact and GRI guidelines seem less popular (see
Figure 1). The respondents were not aware of these standards
or codes, and some respondents even wrote to enquire about
the standards.
The survey finds that environmental standards are
commonly used, requiring implementation of ISO 14001 for
suppliers. In addition, adopting ISO 14001 in supply chain
management seems to be an easy task for most suppliers. In
contrast, the outcome of social standards is rather weak. The
social standards SA 8000 (12 per cent) and AA1000 (0.6 per
cent) are adopted by relatively fewer companies.
Telephone interviews also confirmed the findings from the
questionnaire survey: that is, social issues are still trailing
Figure 1 Adoption of CSR standards in supply management
Supply Chain Management: An International Journal
Volume 14 · Number 2 · 2009 · 138 –148
environmental issues by a large margin in terms of
implementation of standards. Among CSR standards and
codes in supply management, ISO 14001 is the most
11 frequently used by the interviewees. In contrast, social
21 standards such as SA8000 or AA1000 are used much less.
18 One of the interviewees said:
We know the environmental management and related system is important to
32
keep a certain level of compliance of regulations and legislations. But we
26 don’t know exactly what the social standards are targeting.
108
In addition, a common issue noted by senior managers
interviewed is that they have a number of different codes of
conduct to which they have to adhere depending on the
number of different customers they have.
Additional information that respondents provided indicated
that the international standard of social responsibility (ISO
26000) will be introduced in 2008, and SA8000 and AA1000
are considered unpopular and unimportant. In other words,
most companies adopt a “wait and see” attitude for the trend
of social standards.
Drivers for adopting CSR standards
When the issue of drivers for adopting CSR standards in the
company is questioned, the most important driver for
adopting CSR standards is legal requirements: 67 per cent
of respondents indicate that they adopted CSR standards
because national regulations and legal requirements required
them to do so. Also, 56 per cent of respondents stated that
customers or buying companies require the adoption of CSR
standards. Not surprisingly, marketing risks (49 per cent) and
brand risks (42 per cent) are considered important factors for
adopting CSR standards (see Figure 2).
The results of the telephone interviews also revealed that
customer requirement is an important factor for adopting
CSR standards in supply management. Most final
manufacturing companies face a variety of environmental
and social legislation internationally. For example, companies
in the electronics industry are beginning to be aware of EU
directives on Restriction of Hazardous Substances (RoHS)
and Waste Electrical and Electronic Equipment (WEEE). In
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 Current status of CSR in the realm of supply management
Ki-Hoon Lee and Ji-Whan Kim
Figure 2 Reasons for adopting CSR standards in supply management
order to comply with this legislation, final manufacturing
companies should work together with their suppliers,
particularly first-tier suppliers, to ensure that all raw
materials and parts are safe for producing final products.
Therefore, internationally branded companies require
guidelines for suppliers regarding environmental and social
standards. From a supplier perspective, it is important to
maintain business relationships with key clients. Therefore,
the first-tier suppliers in this study have a high priority for
customers’ requirements as well as legal requirements
regarding CSR in supply management.
However, most senior managers admitted during the
telephone interviews that the adoption of CSR standards
and codes is often limited by budget constraints and a lack of
qualified personnel. According to the respondents, limited
financial resources are a major constraint for addressing the
issue. Also, most of the managers interviewed agreed that
many of the codes of conduct have contradictory elements
with regard to working hours and overtime, the minimum
wages for full-time and part-time employees, and what
constitutes a hazardous activity.
Many of the senior managers interviewed also commonly
pointed out that the real driver for adopting CSR standards
and codes is risk reduction. They commonly noted that all
companies cannot afford to be seen or even perceived as doing
anything to harm people or the environment in the supply
chain. A bad reputation caused by accidents directly harms
business contracts, marketing, and sub-sourcing, and
damages the corporation’s brands and the trust they have
established with their business customers. For example, de-
listing suppliers that fail to meet certain CSR criteria could
limit the pool of potential suppliers or create higher
dependency relationships if careful consideration is not
given to the other aspects of supply management.
Benefits/advantages of adopting CSR standards in
supply management
As a further question, whether CSR standards in supply
management can provide benefits or advantages in addressing
environmental and social affairs is addressed. Several options
for the answer were offered, and respondents were asked to
mark the appropriate topics (see Figure 3). For the majority
of the companies, environmentally related issues are the main
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Volume 14 · Number 2 · 2009 · 138 –148
concern. Products and environment (83 per cent) and saving
natural resources (54 per cent) are highly ranked as benefits
for adopting environmentally related CSR standards and
codes. In fact, Samsung Electronics and LG Electronics very
recently launched their own codes of conduct by requiring a
“green partnership” with their first-tier suppliers in order to
maintain high standards of environmentally sound practice
and product quality. As social issues, health and safety (81 per
cent), working hours (31 per cent), and consumer protection
(26 per cent) follow as important advantages gained from
implementing CSR standards in supply management
(Figure 3).
According to the senior managers interviewed, there was
consensus among some of the leading branded companies
that there is a need to move towards relationships based on
trust. Compliance with codes of conduct such as the EICC
seemed to be treated as a non-economic purchasing criterion
that could be traded for other non-economic purchasing
criteria such as quality and timely delivery. Many suppliers
want to cut down costs and time to prepare and adopt CSR
standards and codes requested by large companies or buying
companies, and spend this saved money on training workers
and on improving working conditions. However, most senior
managers complained that many large customers often push
down prices, and put more demands on them to improve
workplace practices, health and safety, and environmental
performance.
Overall, the analysis of benefits and advantages for adopting
CSR standards reveals that normative reasons (i.e. the “right”
things to do) are the predominant reasons for the sample
companies to commit to CSR in supply management.
Environmental and social responsibility and ethical reasons
count very high in this context. However, as the telephone
interviews revealed, cost and price issues remain as
challenging factors for considering CSR standards and
codes in supply management.
Strategic issues for adopting CSR standards in supply
management for the future
We also asked if the companies were planning to adopt CSR
standards for supply management in the subsequent three to
five years, and which issues should be included for
implementing CSR standards. The survey found that GRI
 Current status of CSR in the realm of supply management
Ki-Hoon Lee and Ji-Whan Kim
Figure 3 Benefits/advantages of adopting CSR standards in supply management
guidelines (68 per cent) and ISO 26000 (57 per cent) are
expected to be strategically important CSR standards for
supply management in the near future (see Figure 4).
Additional notes and information from respondents indicate
that international standards such as GRI and ISO 26000 can
bring global recognition for clients or buying companies. This
may imply that the adoption of these CSR standards can bring
competitive advantage in the future.
In addition, CSR performance measurement (51 per cent)
and corporations having their own codes of conduct (40 per
cent) follow as important factors to implement CSR standards
for supply management in the future.
The survey findings indicate that a majority of companies
in the Korean electronics industry are well aware of
environmental standards and have little problem meeting
environmental standards for supply management. However,
social standards are still not a popular issue for most
domestic companies. It can be argued that if legal
requirements demand related issues, companies may be
prepared to implement social standards as a part of CSR
compliance.
Figure 4 Strategic issues for adopting CSR standards in supply management for the future
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Conclusion and managerial implications
Companies today face a growing number of national
legislations and international standards governing the
environment, labour standards, and human rights. The
Korean electronics industry as a whole seems to be united
in the position that it is not easy being “socially responsible”.
However, companies can contribute to building a sustainable
economy by proactively innovating products and services that
are not only commercially attractive and environmentally
sound but also socially positive.
Since the media often highlights the garment and footwear
sectors with cases of Nike, Adidas, and Levis as well as many
other companies in South-East Asia, CSR standards and
codes in this sector are well developed and activities relatively
advanced. Interestingly, a common code of conduct has not
been promoted in the electronics sector until recently. Based
upon different international CSR-related standards and
codes, the EICC was introduced internationally in October
2004. In the Korean electronics sector, only Samsung
Electronics joined this, in 2007, at the beginning stage of
developing the EICC in the supply chain. From a first-tier
 Current status of CSR in the realm of supply management
Ki-Hoon Lee and Ji-Whan Kim
supplier perspective in the Korean electronics industry, it is
important to understand and be aware of internationally
applicable CSR standards and codes in order to respond to
customer companies (final manufacturing companies). At the
same time, first-tier level suppliers also need to manage sub-
suppliers under customers’ codes. Thus, the main challenge
for CSR in supply management is moving towards capacity
building on the grounds of establishing longer-term trusting
relationships.
This study explored supply chain CSR in the Korean
electronics industry by employing an explorative approach
with a questionnaire survey and telephone interviews. The
results of the survey showed that CSR-related actions and
implementation of environmental and social standards are
emerging issues for suppliers in the Korean electronics
industry. Overall, respondents rated environmental standards
as important issues. Environmental standards such as ISO
14001 are commonly accepted and implemented while social
standards such as AA1000 or SA8000 have rarely been
adopted thus far.
In addition, the telephone interviews revealed important
implications for supply management for CSR. Most of the
interviewees agreed that there is a lack of commitment and
organisation to handle CSR issues and supply management at
the corporate level. Without clear organisational commitment
and an operating management system, it is not easy to clearly
define the boundary of responsibility for adopting CSR
standards in supply management. More importantly, the
question of how to develop CSR implementation steps and
strategies integrating different business functions and
departments (e.g. marketing, procurement, manufacturing,
design, planning and strategy) into corporate management
systems should be answered at an earlier stage of CSR
adoption in supply management. In addition, the questions of
who is going to take responsibility and who will be in charge
of the CSR issues in supply management must be addressed
by companies that are considering adopting CSR in their
supply chains.
The interview analysis also revealed that there is a common
understanding regarding the need for evaluation and
monitoring of supplier CSR performance. Vague notions
about CSR issues held by supply management practices do
not give suppliers adequate guidance as they seek to improve
their performance vis-à-vis company standards. The
development of evaluation standards to rate suppliers can be
a critical factor of any effort to improve performance and also
for businesses should document their efforts for external
requirements including auditors. Supplier audit performed by
a buying company has strong potential to become widely used
in supply chain management. In addition, there is a need for
increased capacity building including training and skill
development. The study also revealed that there is a time
lag between buyers’ demands for changes and realisation of
them. For suppliers, it takes time to change operations,
including rebuilding production lines, changing salary levels,
and lowering overtime levels. Thus, capacity building to fulfil
the time lag may make suppliers more attractive to customers
or buyers concerned with CSR in the supply chain.
The main purpose of adopting CSR standards is to identify
risks and problems in the supply chain, and to avoid or at least
reduce the consequences for the final manufacturer. Most
manufacturers in the Korean electronics industry demand
certified environmental standards such as ISO 14001 from
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Supply Chain Management: An International Journal
Volume 14 · Number 2 · 2009 · 138 –148
their suppliers. In comparison to this, there is a lack of
integration of social standards in supplier management or
procurement requirements. Although some electronics
companies have launched their own codes of conduct, no
other companies require a certified standard such as AA1000
or SA8000. In addition, these standards have not been fully
integrated into the operational purchasing processes.
Therefore, companies may lose customer trust, brand
reputation, marketing opportunities and corporate image if
they do not expand their CSR activities and standards into the
entire supply chain. In this sense, environmental and social
standards and codes secure minimum performance or
conformity by suppliers.
For sustainable supply chain management, it is important
to find the process of setting environmental and social
demands favouring a collaborative relationship between
buyers and suppliers. By doing this, managing supply chain
CSR is both cost effective and efficient, because it enables
both the buyer and supplier to identify the most important
issues to address.
Environmental and social management issues in relation to
manufacturing companies have received widespread attention
from a variety of stakeholders. Increasing numbers of
investors, shareholders, NGOs and customers are watchful
of corporate activities regarding CSR performance and
activities. In the long term, many companies will be forced
to take into account the demands of stakeholders regarding
issues of environmental and social problems, not only in their
markets but also along their entire supply chain. To survive
and be competitive in the market, companies will have to
extend CSR through the whole supply chain. By means of
CSR standards and codes, companies may minimise
reputational risks, market risks and sourcing risks.
For further study and development, it is worthwhile to note
that CSR in supply chain management remains strongly
imbued with a moral imperative. In some cases, proactive
suppliers may act beyond compliance, in conjunction with
philanthropic and moral leadership. By understanding a
normative approach, where companies have a duty to be good
citizens and to “do the right thing” in business society,
academics and practitioners may obtain different insights
from strategic and risk-focused CSR in supply management.
Notes
1 Details of the EICC can be found at: www.eicc.info/
downloads/EICC_English.pdf
2 The United Nations Global Compact, the ILO
conventions, the OECD guidelines for multinational
enterprises, ISO 14001, AccountAbility 1000 (AA1000),
the Global Reporting Initiative (GRI), the Global Sullivan
Principles and Social Accountability 8000 (SA8000).
3 Details can be found at: www.unglobalcompact.org
(accessed 10 May 2007).
4 Details can be found at: www.accountability21.net/
uploadedFiles/publications/Assurance%20Standard%20-
%20Full%20Report.pdf (accessed 10 May 2007).
5 Details can be found at: www.sa-intl.org/index.
cfm?fuseaction ¼ document.showDocumentByID&node
ID ¼ 1&DocumentID ¼ 136 (accessed 20 April 2007).
6 Details can be found at: www.iso.org/iso/iso_catalogue/
catalogue_ics/catalogue_detail_ics.htm?csnumber ¼
 Current status of CSR in the realm of supply management
Ki-Hoon Lee and Ji-Whan Kim
31807&ICS1 ¼ 13&ICS2 ¼ 20&ICS3 ¼ 10 (accessed 20
April 2007).
7 Details can be found at: www.globalreporting.org/NR/
rdonlyres/ED9E9B36-AB54-4DE1-BFF2-
5F735235CA44/0/G3_GuidelinesENU.pdf (accessed 10
May 2007).
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Appendix 1. Main survey questions
1. CSR standards and codes in your company
Is your company aware of CSR standards or codes regarding
supply management in the following items? (please mark all
appropriate items).
A ISO 14001
A SA8000
A AA1000
A GRI Reporting Guideline
A Global Compact
A Others (please indicate).
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Ki-Hoon Lee and Ji-Whan Kim Volume 14 · Number 2 · 2009 · 138 –148

Does your company adopt CSR standards or codes 4. Important CSR standards and issues for the next 3-5
regarding supply management? If so, please mark all years
appropriate items. If you are considering strategically important CSR standards
A ISO 14001 or issues for the next 3-5 years in supply management, please
A SA8000 mark all appropriate items.
A AA1000 A CSR performance measurement
A GRI Reporting Guideline A Supplier monitoring system
A Global Compact A Own codes of conduct
A Others (please indicate). A GRI Guideline
Do your clients require CSR standards or codes regarding A ISO 26000
purchasing contracts and supply management? If so, please
mark the frequently asked CSR standards or codes in Appendix 2. Telephone interview guide
following items (please mark all appropriate items). 1 Personal information
A ISO 14001 1.1 What department do you work in?
A SA8000 1.2 How long have you been working in the company?
A AA1000 1.3 What is your position?
A GRI Reporting Guideline 2 Supplier information
A Global Compact 2.1 What is the name of the company?
A Others (please indicate). 2.2 What products are produced in it?
2.3 Who are the major clients of the company?
3 CSR standards and codes of conduct
2. CSR standards and codes imposed on the suppliers of 3.1 Have you heard of CSR standards and/or codes of
the surveyed company conduct? If so, how does your company manage these
Under your client’s guideline of CSR standards and codes, issues?
does your company impose the same CSR standards and 3.2 Do any clients require CSR standards and/or codes of
codes on your suppliers? (Yes/No). conduct compliance including audits?
If yes, please indicate the most frequently applied CSR 3.2.1 If so, what or how do clients demand of your
standards and codes. company?
3.3 Do you think that CSR standards and/or codes of
conduct can help to improve your company’s
3. Drivers for adopting CSR standards in the company performance?
When your company decides to adopt CSR standards and 3.4 Do you think that compliance with CSR standards
codes, what are the main driving factors among the following and/or codes of conduct can help to improve your
items (please mark all appropriate items)? company’s purchasing contracts from your clients?
A Response to customers 4 Motivations and barriers
A Legal requirements 4.1 When your company decides to adopt CSR standards
A Prevention of brand risks and/or codes of conducts, what are the main factors
A Prevention of sourcing risks influencing the decision?
A Prevention of marketing risks 4.2 Do you expect any benefits from adopting CSR
A Others standards and/or codes of conducts?
If your company identified main drivers for implementing 4.3 What, if any, are the main difficulties you face in
adopting CSR standards and/or codes of conducts?
CSR standards and codes, do you also identify any benefits or
advantages for adopting CSR standards and codes? If so,
please mark all appropriate items. About the authors
A Product and environment Ki-Hoon Lee is a Professor of Sustainability Management at
A Saving natural resources Leuphana University Lueneburg, Lueneburg, Germany. He is
A Product quality based at the Centre for Sustainability Management. Ki-Hoon
A Working conditions Lee is the corresponding author and can be contacted at:
A Working hours lee@uni.leuphana.de
A Health and safety Ji-Whan Kim works for Samsung’s Global Environment
A Consumer protection Research Centre as a Chief Researcher. He is a leader of study
A Others (please indicate). for corporate environment management practices.

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