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corporate social responsibility and business ethics management and challenges of the international fashion industry to fulfill sustainable development goals

CORPORATE SOCIAL RESPONSIBILITY AND BUSINESS ETHICS MANAGEMENT AND CHALLNEGES OF THE INTERNATIONAL FASHION INDUSTRY TO FULFIL SUSTAINABLE DEVELOPMENT GOALS LITERATURE REVIEW DORINA KÖRTVÉSI BUDAPEST BUSINESS SCHOOL DOCTORAL SCHOOL OF ENTREPRENEURSHIP AND BUSINESS Table of Contents Introduction Globalisation and the fasting developing world brought several changes regarding the business and corporate sectors Enhancing economic growth, ensuring decent work conditions, achieving business success on a more and more competitive market are one of those factors that appear among business priorities, especially among SMEs (Rotar, et al., 2019) Companies and industries have produced services and goods and humans have consumed without being socially and economically aware of the future impact in a sustainable, long-term way Until nowadays, the driving force of their activities was identified as the profit ( (Boubakary & Moskolai, 2016)), but business success no longer relies only on maximising short-term profits (Cech & Dohnalova, 2015) A new element of companies’ overall strategy has emerged, becoming one of the standard business practices, the Corporate Social Responsibility (CSR) (Fraser, 2015) According to (Kenneth & Paul, 2013) CSR is a set of perspectives being involved into the core strategy and the business’ operation such as social, environmental, ethical concerns, preserving their economic mission and creating shared value for owners, shareholders, stakeholders, and employees as well Economic growth brings to the table sustainable development therefore SDGs have a growing importance in business activities, most notably in shaping CSR and business ethics strategies (Rosati & Faria, 2019).Both sustainable development and CSR show synergies with business ethics based on empirical researches (Bryan, et al., 2010) The ethical approach in sustainability 2 refers to the meeting of needs of the present without compromising the ability of future generation, involving vulnerable people with special needs (Behringer & Szegedi, 2016), while the CSR - business ethics interconnection outlines further development besides the economic mission of corporate sector putting a greater emphasis on behaviours, activities and express the need for ethical responsibilities respecting the interest and needs of the abovementioned communities (Godfrey, et al., 2016) The fashion industry is the second-largest polluter (McFall, 2019)– and the EU, as an impacted region is not exceptional either Furthermore, human rights issues, lack of equal opportunities and fair and ethical working conditions, an enormous amount of exploitation natural resources are only some of those global issues targeted by SDGs to improve occurring in the fashion industry, which seeks cooperation from the government, corporate sector, NGOs and individuals (UN, 2019) It plays a diverse role in the European Union, providing job opportunities for million people, and generating approximately 170 billion EUR yearly (STATISTA, 2019) The manufactured and distributed products face different government regulations, employment opportunities, and environmental conditions The relevance of my topic crucially connects to the lack of a common framework with a clear interpretation and ‘requirements’ of CSR strategies and business ethics for SMEs in the fashion industry as far as companies located in different EU countries have diverse voluntary CSR actions according to their historical, cultural, political background or agreements between other enterprises and nation-states My literature review intends to provide a holistic framework based through a methodological summary of empirical researches introducing different theoretical and methodological approaches of CSR interpretation in international fashion industry at SMEs level Keyword research To obtain data and access empirical researches, I have applied keyword research on the Scopus webpage, as the largest international database with peer-reviewed literature I searched for published scientific papers, written in English, with the following words, which serve as the main theoretical pillars of my research: (1) sustainable fashion, (2) Sustainable Development Goals (SDG) fashion industry, (3) business ethics and corporate social responsibility (CSR) in SMEs, (4) sustainable fashion and business ethics, (5) sustainable fashion and corporate social responsibility (CSR) I have chosen the mentioned keywords as far as my research focus is on the CSR and business ethics interconnection in the international fashion industry to realise and achieve sustainable operation at an SME level However, I gathered data related to CSR, business ethics and sustainable practices in general to understand their definitions, functions and role but I focused on a narrower scope 3 Each abstract was codified according to the articles title, author(s), year of publication, journal, keywords, the main focus area, research design and methodology/approach, country specialization (if there were any) In case of keywords, the only limitation I applied is defining the field of study as business, management and accounting The most extensive findings were resulted by the sustainable fashion keyword provided access to 2200 resources, therefore it required further specializations In this case, I limited the database searching from 2015 January to December 2020 intending to find resources that might show any matches with the Sustainable Development Goals In order to not to bypass any important and outstanding literature or research that might be launched before 2015 in this specific field, I also investigated the most cited articles with sustainable fashion keyword Each resource was analysed whether they essentially cover the topic Altogether 20 scientific were found being out of the study’s scope, investigating the sustainable fashion industry from a resource-energy-water nexus, microfiber pollution, fibers production with eco-friendly flame-retardant finishes, reducing CO2 emission by third party logistics, additive manufacturing processes, waste-centric analyses, aesthetic mediation, etc., not involving information about business models, business operation, internal or external practices and values that tightly relates to my research topic The keyword research resulted in a total of 130 scientific journal articles, books and conference proceedings from 2000 to 2020, and from 2015 to 2020 in case of sustainable fashion keyword, therefore the literature review is based on these 130 articles critical analysis Table Keyword research results with specifically narrowed scope 4 Keyword Relevant articles “sustainable fashion” 89 “Sustainable Development Goals (SDG)” and “fashion industry” “business ethics” and “corporate social responsibility in SMEs” 16 “sustainable fashion” and “business ethics” 10 “sustainable fashion” and “corporate social responsibility (CSR)” 23 I further categorized the found research articles into different sub-groups by the publishing journals and their rankings on the business, management and accounting field but distinguishing the CSR or business ethics, the sustainability-related and any other management and scientific journals based on the current Scimago database putting them into the table by alphabetic order, remarking with blue the highest number of articles per journal in each section Table Analysed articles, categorised by scientific journals based on Scimago database (2020) CSR and business ethics related journals R Sustainability related journals R Other management and scientific journals R Corporate Communications (1) Q Environmental Engineering and Management Journal (1) Q Benchmarking: An International Journal (1) Q2 Corporate Governance (1) Q International Journal of Clothing Science and Technology (6) Q Business Horizons (2) Q1 5 Corporate Ownership and Control (1) Q Journal of Cleaner Production (34) Q Central European Business Review (1) Q2 Corporate Social Responsibility and Environmental Management (2) Q Journal of Fashion Marketing and Management (14) Q Cogent Business and Management (1) Q2 Employee Responsibilities and Rights Journal (1) Q Research Journal of Textile and Apparel (5) Q Engineering, Construction and Architectural Management (1) Q1 Journal of Business Ethics (8) Q Sustainability Accounting, Management and Policy Journal (2) Q Industria Textila (1) - Journal of Management Governance (1) Q Sustainability (4) Q International Review on Public and Nonprofit Marketing (1) - Small Business Economics (1) Q Utilities Policy (1) Q International Business Review (2) Q1 Social Responsibility Journal (9) Q International Journal of Production Economics (5) Q1 International Journal of Productivity and Performance Management (1) Q1 International Journal of Retail & Q1 6 Distribution Management (2) 7 International Journal of Workplace Health Management (1) Q2 Journal of Business Research (7) Q1 Journal of Business Strategy (1) Q2 Journal of Product & Brand Management (3) Q1 Journal of Retailing and Consumer Services (3) Q1 Marketing Intelligence & Planning (1) Q2 Nordic Journal of Working Life Studies (1) - Qualitative Market Research: An International Journal (1) Q2 Supply Chain Management: An Q1 International Journal (2) Summarizing Table above, the gathered and analysed research articles were published in 37 scientific journals, 19 with Q1, 12 with Q2, with Q3, with Q4 qualification, and with no rankings according to the Scimago Based on the first column, it is identifiable that outstanding journals on the field of CSR and business ethics already published several articles about SMEs’ CSR agendas and practices, namely the Social Responsibility Journal and Journal of Business Ethics are the most outstanding The middle column represents specifically the sustainability and fashion related articles, among Journal of Cleaner Production and Journal of Fashion Marketing and Management seem to be the most open ones, proving that there is an already existing literature review, however, the number of empirical researches is relatively small The third column contains those scientific journals in business, management, and accounting field, considering the Journal of Business Research and International Journal of Production Economics that publish the most articles mainly in connection with their narrower management field, sacrificing slight attention to sustainable fashion SMEs Furthermore, the articles are distinguishable according to the applied research methodology into qualitative and quantitative researches 74% of the examined articles can be classified as qualitative research, showing an imbalance between the two research methodological approaches The focus and the level of the empirical researches In general, the analysed empirical researches, literature reviews and case studies mostly investigate the large and multinational companies’ CSR (Looser & Wehrmeyer, 2016), (Ndubisi & Nygaard, 2018) or (Guedes, et al., 2017) and sustainability activities (Wu, et al., 15) or (Goworek, 2011) Analysing the general framework of CSR and business ethics in SMEs cases, the number of the found articles is much less compared to international brands and companies The most relevant ones were written by (Avram & Kühne, 2008), (Baldo, 2010), (Arend, 2013), (Fernandez & Camacho, 2015), (Fassin, et al., 2015) It was challenging to disclose literature relating to fashion industry SMEs, especially that focus on any sustainability approaches, and if I did so, these findings are mostly case studies and not empirical researches (Testa, et al., 2017) (Cuc & Tripa, 2018), (Wanniarachchi, et al., 2020) 8 The CSR empirical researches mainly cover the following corporate function areas: environmental protection, social innovations, leadership and management, health protection, working conditions and employees welfare, occupational safety and worker law, human resource management, accountability and transparency, financial performance, marketing and communication, consumer protection and loyalty Based on the collected articles, I attempted to create different groups according to their research direction, taking into consideration whether they provide a comprehensive literature or introduce a definitive perspective, defining their policies in their particular political and environmental investigating elements that might contribute to ethical infrastructure, establishing stakeholder maps, conducting researches on owner-managers’ mental models, measuring their organisational engagement: 9 - Trends such and sharing and circular economy are considered as some of the prominent entrepreneurial approaches in fashion industry that target to address social and environmental issues, however it would be necessary to bridge the gap between theory and actions (Todeschini, et al., 2017) (Mishra, et al., 2020) provide an extensive literature on diverse stakeholders and drivers of moving forward the circular economy system through the transition theory lens, (Claxton & Kent, 2020) discuss different sustainable strategies to achieve a closed-loop fashion value chain putting the emphasize on the designers’ role - Several articles discuss the influencing power of social media These articles deal with consumer perceptions of sustainability (Ritch, 2020) (Colucci, et al., 2019) investigated the interconnection between the company sizes and their effectiveness of communication, with the examination of altogether 219 small and large companies Stakeholder management and monitoring considered as integral part of effective fashion brands communication (Arrigo, 2018) and to react to external pressure (Khurana & Ricchetti, 2015) and (Li, et al., 2020) - Most of the articles analyse the collaborative and sustainable fashion consumption (Bhaduri & Ha-Brookshire, 2015) for example, tested the differences between male and female consumers’ evaluation on sustainability claims, furthermore, illustrate the power of information sharing to achieve transparency, similarly to (Ritch, 2015) who drawing a parallel between consumers’ decision making and sustainable fashion marketing activities (Neumann, et al., 2020) and (Ribeiro, et al., 2015) say sustainability efforts ought to strengthen consumers’ protection, equity trust and loyalty - Beside the apparel industry items’ consumption, supply chain management appeared in several research articles (Li, et al., 2016) identify supply chain and green sustainability programs as the two most sensitive fields within fashion industry, that positively contribute to companies’ mitigation on financial performance (Talaya, et al., 2020)’s exploratory case studies’ findings highlight the availability and importance eco-friendly practices at SMEs level, while (Nayak, et al., 2019) demonstrate the pressure on the Asian supply chain management at a global scale with stakeholders and retailers involvement to enhance smart raw material usage, introduce innovative technology and transportation alternatives (Wanga, et al., 2019) - (Gaiardelli, et al., 2013) classified traditional and green service offerings, combining them into one single model to create innovative business examples being able to address social and economic challenges (Cuc & Tripa, 2018) and (Fung, et al., 2020) discussed the fashion industry’s product development processes in connection with businesses’ triple bottom line concept, supply chain management and recycling practices (Armstrong C.M., et al., 2015) introduced Finland example, specifically how local consumers chose alternative clothing products, and how innovative business models can reduce the industry’s ecological footprint - There are only a few research papers investigating the sustainability and CSR reporting system, that might be understandable as far as internal audit systems are mostly designed for large companies because SMEs are heterogeneous in term of firm size, resources and management style (Jenkins, 2006) (Kozlowski, et al., 2015) put fashion industry’s sustainability into a global context and evaluated 14 clothing brands as members of Sustainable Apparel Coalitions (Arend, 2013) survey-based research measured the U.S located SMEs’ ethical behaviour through their self-reporting system (Anon., 2018) using the standardized Sustainability Report business tools, argued the positive contribution of audit system to effective communication, boosting sustainable activities Reports analysation were frequently associated with sustainability indicators, e.g American Costumer Satisfaction Index (Wanga, et al., 2019), Sustainable Business Excellence Index (Metaxas, et al., 2015) - (Fassin, et al., 2015) discuss the macro level variables in European countries such as culture, language and traditions as decisive factors of sustainability and CSR activities of SMEs, taking into consideration different government regulations and EU directives, while (Niua, et al., 2017) specifically analysing how governments’ subsidiaries and restrictions might change the supply chain structure, building barriers against the green initiatives of the fashion industry The level of the investigated literature is as widespread as their subjects CSR analysations are frequent at a global scale, intending to investigate the general context of social responsibility and sustainable acts The core of the studies majority is a multinational company As far as I limited my keyword research to small and medium size enterprises, the results contain international, and national studies, furthermore there is a representative amount articles relating to fashion brands, but organisational investigations were also gathered, although the 10 10 the Italian SMEs fashion brands focus on lifecycle pattern to support proactive environmental actions The applied data collection mostly involves semi-structured in-depth interviews (Mishra, et al., 2020) to get a comprehensive picture about with actors and drivers in sustainably functioning fashion SMEs and to investigate future development directions and the level of creativity (Poldner & Dentoni, 2016) on how to run a business responsibly (Mukendi, 2020), as far as the literature on SME CSR and sustainability is limited (Claxton & Kent, 2020) The samples are varying between 10-100 person in general, and mostly covers managers of one or several brands or consumers Systematic review of contents from the corporation official websites is a popular way to measure and code the sustainability and CSR communication (in case of large, multinational companies) (Kozlowski, et al., 2015), (Mejías, et al., 2019) and (Fung, et al., 2020) used different internationally acknowledged sustainability indicators to measure traceability and assess system and capacity buildings for a better supply chain management Mejísa and the co-authors, based their research on an AHP multi criteria decision-making approach and in all cases the narrative methodology was discovered Overall, it can be said that qualitative methods target to create or illustrate a desirable business environment where organisations and corporations can apply effective CSR practices and concentrate on ethics-driven decisions, underpinning a mutual communication with internal and external stakeholders, furthermore, the papers attempt to reform and restructure the already existing attitude, behaviour and practices in order to meet the requirements of the society and The most challenging fact is there is a lack of common interpretation either if we talk about social responsibility or sustainability, the boundary between financial and economic interest is still not negligible, and it is important to channel the consumers’ interests into the daily business operation of the companies in order to achieve not only intangible, but tangible results 5.2 Characteristics of quantitative researches The diversity in quantitative methodology is not typical relating to the topic Authors applied surveys to measure the internal consistencies (Arend, 2013) combined the survey research with hierarchical OLS to investigate U.S SMEs ethical interpretations and performances, also to measure the entrepreneurial orientation and how dynamically sensitive they are to ethical changes (Parguel, et al., 2019)’s betweensubjects experiment relates to fashion luxury brands to see whether luxury companies deal with CSR practices or this special segment only target the satisfaction of the fashion’s symbolic role? The results were analysed based on ephemerality-scarcity dual-route model, indicating the managerial behaviours and involvement in CSR communication Consumer behaviour, satisfaction and decision-making is also likely to be measured by surveys (Neumann, et al., 2020), (Legere & Kang, 2020), (Rahman & Koszewska, 2020) researches were driven by understanding purchase intention, and perception of social responsibility from a consumer perspective and how self-concept might shape and influence 18 18 the apparel items choices.(Shirvastava, et al., 2020) provides alternative solutions for consumers such as second-hand clothing shops and rental online platforms that might result in a log-term way to switch to circular economy and raise sustainability awareness, similarly to (Wanga, et al., 2019), (Evans & Peirson-Smith, 2018), (Jacobs, et al., 2018), (Bhaduri & HaBrookshire, 2015) enhancing the customers green-thinking, while (Yung & Tun-Min, 2015)’s paper covers a wide spectrum of sustainability strategies and efforts align with brand equity with a stimulus-organism-response model (Roy, et al., 2020) investigate the apparel manufacturers in developing countries with reactive and proactive examples of supply chain management to provide evidence for firms implementing sustainability-driven practices The circle of samples is larger (50-500 person) in general than in case of qualitative analysis that is explainable with the design and the nature of surveys Studies’ conclusion - not focusing on consumers - of quantitative analysis is frequently result statements that relate to the size of company as a determinant factor: the bigger the company is, expectably the more effective CSR or ethical operation – although, fundamentally having a Code of Ethics or internal audit system does not result distinctly an ethically or sustainably functioning business - is identified It leaded to the verification that overviewing quantitative analysis was useful in terms of practices, but less effective to get a comprehensive picture about SME sector Surprisingly, the number of articles investigating reports in fashion companies is slight Conclusion The literature review elaborates and analyses articles, focusing on the following fields: Business ethics and CSR activities in SME sector, CSR in apparel industry in general, Sustainable fashion SMEs The concept of CSR among SMEs is relatively new, although several valuable and comprehensive literature reviews were found The necessity of a push toward responsibility and sustainability in apparel industry is widely acknowledged as well, therefore scientific papers tend to be published in mainstream academic journals However, studies already promote sustainable business models, restructured supply chain management, communication tools, alternative purchase options, circular economic examples and CSR practices for the apparel sector, in European countries, no literature was found analysing the Central-Eastern European region, except Austria I have defined “SME”, “fashion” and “CSR” within one research as a cross-section No or limited numbers of literature analyse the fashion SMEs with harmonised corporate social 19 19 responsibility practices in Hungary, not mentioning the lack of SDG awareness that originally target each sector and level to help sustainable transition and development, not neglecting the that general practices are designed for large companies and SME sector should be differentiated The future direction of my study would be to investigate: - SMEs general approach of sustainability within the fashion industry, their operation, way of thinking, vision and mission, structuring a wider framework to discover how they see the Hungarian market circumstances and conditions to run a responsible business - Focus on the internal audit system of the given company, in terms of social responsibility, business ethics, integration of sustainability measures in evaluation, environmental training, and resource efficiency, not leaning on reports, but internal values - Harmonizing their activities with Sustainable Development Goals to get an insight whether the Hungarian fashion market might be matched with the international movement at any point - Research collaboration from other European countries, where sustainable fashion SMEs and slow fashion models might be well-developed, e.g Germany or Nordic countries, to form best practices and recommendations The formulated research questions: - Is sustainability reflected in the market operation and strategic decisions of Hungarian fashion small and medium-sized businesses? 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