When CSR Credibility Meets the Supply Chain

I recently stumbled across the HBR article, McDonald’s and the Challenges of a Modern Supply Chain, authored by Oxford Business School professor Steve New. Unlike most articles on supply risk, what caught my attention was not the analyses of factory shut downs or labor violations, but rather the “soft” factor of how painful it can be to rebuild reputations over time.

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While it is useful to consider the details (so we can learn from them) about how McDonalds and other major food companies were “plunged into a food safety scandal in China,” what is most interesting is the end perception and how individual incidents can wreck havoc with formerly truest brands. As New opines, “Bad headlines about foreign operations tell consumers, ‘This company still can’t be trusted.’ And such bad news doesn’t just reduce the impact of your good work elsewhere; it means that its credibility is fundamentally undermined.”

And ultimately, he adds, “When newer, less tarnished players like Chipotle arrive, consumers can tacitly exercise the prejudices and cross the street. The lesson for other firms: If you have problems in your supply chain, don’t let the critics get there first.”

This last point is a clever generalization, but not terribly useful in and of itself. From a more pragmatic advice perspective, we might add to this:

  • Part of the business case for investing in supply chain risk management, including the monitoring and tracking of corporate social responsibility (CSR), should come down to brand perception and top-line impact from non-disruption incidents
  • “Soft” supply risk factors can be quantified, at least in part. Scenario-analysis based on potential incidents or disruptions can show top- and bottom-line impact (and the added cost of further marketing investments to overcome negative brand impacts)
  • Procurement practices and brand integrity are intertwined. I highly suspect anyone familiar with the procurement practices and supplier hammering of GM during the Ignacio Lopez era would not have bought a GM vehicle without a significant discount to sticker, reflecting the same practices of the CPO at the time
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