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CORPORATE SOCIAL RESPONSIBILITY IN THE VIETNAMESE FOOD INDUSTRY SITUATION AND POLICY RECOMMENDATIONS

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MINISTRY OF EDUCATION AND TRAINING FOREIGN TRADE UNIVERSITY MASTER THESIS CORPORATE SOCIAL RESPONSIBILITY IN THE VIETNAMESE FOOD INDUSTRY: SITUATION AND POLICY RECOMMENDATIONS Specialization: International Trade Policy and Law LE THI KIM PHUNG Hanoi – 2019 MINISTRY OF EDUCATION AND TRAINING FOREIGN TRADE UNIVERSITY MASTER THESIS CORPORATE SOCIAL RESPONSIBILITY IN THE VIETNAMESE FOOD INDUSTRY: SITUATION AND POLICY RECOMMENDATIONS Specialization: International Trade Policy and Law FULL NAME : Le Thi Kim Phung Student ID’s number : 1606060030 Supervisor : Dr Ly Hoang Phu Hanoi – 2019 i DECLARATION I hereby declare that this master thesis is the scientific research of my own which made on the basis of the theoretical studies, field surveys and under the direction and supervision of Dr Ly Hoang Phu The research contents and results of this thesis is completely honest These data and documents for the analysis, review and evaluation were collected from various sources which are fully listed in the reference list I am fully responsible for the content of this master thesis as well as this declaration Hanoi, 14 March 2019 Author Le Thi Kim Phung ii TABLE OF CONTENTS DECLARATION i TABLE OF CONTENTS ii ACKNOWLEDGEMENT v LIST OF ABBREVIATIONS vi LIST OF TABLES vii LIST OF FIGURES vii ABSTRACT viii INTRODUCTION 1 Research Rationale Literature Review 3 Research objectives Research questions Scope of research Research methodology 7 Thesis outline CHAPTER 1: THEORETICAL BACKGROUND OF CORPORATE SOCIAL RESPONSIBILITY 1.1 Background 1.1.1 Definition .9 1.1.2 Determinants of CSR 11 1.2 Models of CSR 13 1.2.1 Carroll’s CSR pyramid 13 1.2.2 Wayne Visser’s CSR 2.0 Model 15 1.2.3 The Consumer-driven Corporate Responsibility (CDCR) Model .16 1.3 CSR Practices in Developing Countries 18 1.3.1 Content Theme .18 1.3.2 Knowledge Type 18 1.3.3 Various drivers for CSR in developing countries 19 1.3.4 CSR Pyramid for developing countries .23 iii 23 CHAPTER 2: CSR APPLICATION IN VIETNAMESE FOOD INDUSTRY 26 2.1 Overview of Vietnamese food industry 26 2.2 Vietnam research context 29 2.2.1 CSR in Vietnam 29 2.2.2 Key stakeholders in CSR in Vietnam 35 2.3 CSR in Vietnamese food industry 37 CHAPTER 3: CASE STUDIES 40 3.1 Vietnam Dairy Products JSC 40 3.1.1 Overview of Vietnam Dairy Product JSC 40 3.1.2 Human nutrition and safety 40 3.1.3 Environment and energy .42 3.1.4 Local economic development .43 3.1.5 Employees 44 3.1.6 Support and community development 45 3.2 C.P Vietnam Corporation 46 3.2.1 Overview of CP Vietnam 46 4.2.2 Heart 47 3.2.3 Health 49 3.2.2 Home 50 3.3 Heineken Vietnam 51 3.3.1 Overview of Heineken Vietnam 51 3.3.2 Prosperity of people .51 3.3.2 Prosperity of planet 53 3.4 Vedan Vietnam 54 3.4.1 Overview of Vedan Vietnam 54 3.4.2 Social responsibility activity 54 3.4.3 Environmental protection 54 3.4.4 Employee activity 55 iv CHAPTER 4: POLICY IMPLICATION 56 4.1 Evaluation of CSR application in Vietnam food industry 56 4.1.1 Achievements .56 4.1.2 Existing issues .64 4.2 Future CSR development and challenges in Vietnamese food industry 65 4.3 Recommendations 67 4.3.1 Recommendations to the companies 67 4.3.2 Recommendations to the government bodies 70 CONCLUSION REFERENCES 72 v ACKNOWLEDGEMENT During the completion of this master thesis, I received the guidance and valuable help from the lecturers, siblings and friends With great respect and deep gratitude, I would like to express sincere thanks to: Dr Ly Hoang Phu, who wholeheartedly helped, supported and encouraged me from the initial to the final level of this dissertation He provided me with comprehensive guide from choosing the topic, outlining the thesis and editing this research Professors and lecturers, who not only spread profound knowledge and information in the fields of economy and law but generated strong motivation for me while I was taking this course as well Last but not least, I would like to express my sincere thanks to my family, my colleagues and my friends, who have always by my side encouraging, supporting, contributing valuable ideas and giving me favourable conditions for me to complete this scientific research vi LIST OF ABBREVIATIONS Abbreviation Full name ASEAN CIEM CDCR CSR FDI GDP GMP ISO HACCP SME VCCI VGCL UN UNIDO WB WTO Association of South East Asian Nations Central Institute for Economic Management Consumer-Driven Corporate Responsibility Corporate Social Responsibility Foreign Direct Investment Gross domestic product Good Manufacturing Practices International Organization for Standardization Hazard Analysis and Critical Control Points Small-and-Medium-Size Enterprise Vietnam Chamber of Commerce and Industry Vietnam General Confederation of Labour United Nations United Nations Industrial Development Organization World Bank World Trade Organization 63 Table 4.4: Summary of CSR system and activities of Vedan Vietnam Case study CSR Achievements components  Achieves KOSHER, HALAL, ISO 9001, HACCP, FSSC 22000, ISO 17025, ISO 14001 Social responsibility standards  Provides home support program to difficult activity families in Dong Nai, Ba Ria Vung Tau, Ha Tinh, and Binh Phuoc  Funds for social activities  The Environmental Safety Vedan Vietnam Environmental protection Employee quality Management System  Achieves OHSAS 18001 as occupational health and safety certification  Employees training  Social activities to the employees such as a cooking day to celebrate International Women Day, the chess games, and year-end party Source: Prepared by the researcher (2019) Vedan Vietnam is the last company which is put into case study analysis Compared to other companies, Vedan Vietnam does not establish proper CSR system although the company is subsidiary of Vedan Corporation in Japan There are three components which are highlighted in CSR framework of Vedan Vietnam, including social responsibility activity, environmental protection, and employee quality Like other companies in Vietnam food industry, Vedan Vietnam also obtains some international quality standards and the company participates into some social activities to build home to poor people The company has a system to manage environment safety although the concern is raised after the untreated waste water of Vedan Vietnam was thrown to Thi Vai River Employees’ protection is also a concern since there are no information related to workplace hazards Employee quality indicates the importance of providing social activities to employees 4.1.2 Existing issues 64 However, there are some issues related to CSR implementation in Vietnamese companies In the researcher’s opinion, CSR practices have been implemented in big companies in Vietnam, however, the quality of CSR management is still questionable It is evidenced from the fact that there are still CSR-related issues in Vietnamese food industry For example, local media reports the environmental issues in the production process of Vedan and San Miguel in several years ago, posing the concern of CSR practices are not placed in high attention of the firms’ managers (Bui, 2008) There are a reports urgently address the issues from harmful chemicals used in food processing such as milk products with contraceptive substance and melamine found in food products (Mai et al., 2013) and the many noodles and fresh fruits suppliers are found to over use prohibited chemicals (Xuan and Ha, 2014) The Ministry of Health of Vietnam provides a report with criticism of food poisoning found in different policies and it causes 43 deaths and thousands of affected people Moreover, the Ministry of Health often collects the samples of foods from the market and more than 10% of the samples containing harmful chemicals (Mai et al., 2013) Besides of using chemicals in food processing, the companies in Vietnam has been throwing the waste and the chemicals to the environment A famous example refers to the story of Vedan Company whether the company puts more than 100,000 cubic of untreated waters into Thi Vai River The throwing of untreated water is also found in Miwon Company Seriously, both Vedan Company and Miwon Company are foreign-based and their violation to environmental protection is a concern In summary, the CSR violation is not very new in Vietnam even though Vietnamese government issues new regulation on food safety and environmental protection under a Food Branding Programme and Strategic Plan for Rural Development (Vietnam Trade Promotion Agency, 2014) Vietnamese enterprises are still not fully aware and not really interested in CSR, making the implementation of CSR still relatively difficult First of all, the understanding of enterprises about CSR is incomplete because of the enterprise only focus on generating the profit and CSR has not been put into their business plan The second factor that limits the implementation of CSR is the application of 65 international codes of conduct require high monetary investment and efforts while most of the companies in Vietnam are in small and medium business scale Meanwhile, Vietnamese companies are in the lack of financial and technical resources to implement and to maintain CSR standards Moreover, the implementation of CSR is not supported by proper legal system 4.2 Future CSR development and challenges in Vietnamese food industry The future CSR development and challenge refer to the application of CSR system in small and medium companies Currently, only large firms with being listed in stock exchange market are concerning about CSR implementation There are a big gap between big companies and small ones, posing the gap in CSR awareness and action plans The focus on CSR in smaller companies is true since small and medium companies are still outnumbered in Vietnamese business entities However, the qualification of the owners and their attitudes towards CSR activities are key challenge Since the owners are not perceived well about the important and the benefit of CSR, they are unlikely to integrate their business with ethical behaviors The researcher perceives that future CSR development is along with the raise of the digitalization Vietnam is amongst the countries with high Internet penetration rate and the fast growing number of the consumers who want to purchase product online In this situation, online consumers often rely on the information in the Internet and social media in order to decide purchasing or not purchasing the products and services from particular companies It is denoted that unethical actions which are conducted by the companies are easily to capture and share with the support from social media (i.e Facebook and YouTube) The companies must be aware of the impact from social media influence and it may destroy the companies’ image and lowering their profits The customers today are more environmentally responsible and they are eager with the business to be harmful to the environment It is believed that large companies use their power as customers to drive improvements in responsible business practices through their global supply chains, 66 by setting increased expectations around transparency, holding suppliers accountable for environmental performance and human rights issues, and collaborating on industry-wide initiatives to address system-level challenges from human trafficking to water conservation In addition, CSR implementation will gain more attention from C-suite level The trend of investing in innovative technology, redefine business models, and support policies that can address critical climaterelated challenges is also dominating the future of CSR Finally, social relationship is being more sophisticated, leading to the difficulty of applying appropriate CSR strategies Therefore, the companies which want to apply CSR must conduct the scanning and analyses on social situation so that they can apply appropriate CSR strategies The companies today get familiar with business strategic planning but they are still far off the integration of CSR into their business strategies However, the integration is not easy since the implementation of CSR is depended on many factors and the capabilities of the employees and the infrastructure and technologies to support the implementation Regarding to food industry, it is perceived that the future CSR focuses on the establishment of specific framework for CSR activities in food industry in which it addresses the importance of CSR activities setup across value chain process, from farmer to processor to retailer and to consumer Future CSR takes into account the issues related to retailer power abuse It is defined as a situation in which small farmers and suppliers are being controlled by big retailers and therefore they control the quality of productions Future CSR should focus more on food safety and it is done under the monitor of the government or independent organizations For example, the widespread use of Hazard Analysis Critical Control Point (HACCP) help to protect the government from harmful products Future CSR also witnesses the development of Occupational Health and Safety (OH&S) and Safe Work Act to further protect the employees against harmfulness from daily works Vietnamese government also pushes a lot of action to ensure that the CSR system is implemented and maintained in local companies Vietnamese government takes the role of issuing national policies and guidance as well as the 67 communication through mass media in social economic development and it is determined as the foundation for CSR implementation in Vietnam The role of the government towards further development of CSR in Vietnam is highlighted through the establishment of some governmental associations and unions For example, the establishment of Women Union, Trade Union, and Youth Union enable the provision of protecting the rights of women and young workers as well as providing the supports to disabled people in the society In addition, the government’s efforts are shown through the policies implemented by existing governmental bodies For example, the Vietnam General Federation of Labor collaborates with the Ministry of Labor and the Invalids and Social Affairs of Vietnam to issue out labor standards 4.3 Recommendations 4.3.1 Recommendations to the companies The first set of recommendations is given to the owners of Vietnamese food manufacturing companies The top managers of the companies must be trained and perceived well about the role of implementing CSR system and related activities beside of seeking for profitability During the case study research, it is showing that CSR helps food processing companies to reach sustainable development even if the cost to build proper CSR system is high When developing CSR system, the companies must determine the key stakeholders towards its business and operations in food manufacturing process i.e the suppliers of food materials, box to package foods Throughout the analyses of different case studies, there are common stakeholders, including the employees, the suppliers, the investors, the customers, the environment, and the community The identification of key stakeholders must be specified in a document and the companies may want to develop a CSR scorecard in which the CSR related to each stakeholders to be captured and scored The combined score allows the companies to understand their CSR strengths and weaknesses and therefore formulating suitable plan to reform the CSR activities For the employees, the companies need to design suitable salary and compensation system in which the salary level must be competitive with average salary in the market and the bonus must be paid upon on actual working 68 performance of the employees against their target However, salary and compensation are not the reason of retaining the employees The companies must provide good training system to the employees The training quality is measured through the number of training hours and the number of trainees The training feedback must be constructed and it helps the companies to understand what the training quality In addition, the companies should develop clear process of occupational safety In the case study of Vinamilk, Heineken Vietnam and CP Vietnam, it is observed that these companies develop three common quantitative metrics of occupational safety, including occupational disease rate, leave day rate, and injury rate The companies must ensure that 100% of the employees are being protected from the equipment and machines used during production process as well as being avoided by fire and hazardous In overall, the companies must learn from Heineken Vietnam to construct and to measure two indicators, namely the employee engagement index and the performance enablement index Obtained results from the two indexes are then compared with the industrial benchmarks There is a recommendation of the companies must provide insurance policies with 100% insurance coverage The condition and the process of insurance claim must be specified and published to all employees Beside of the employee management, the companies should develop the process of managing their suppliers To that, the companies should build an evaluation process in which each supplier’s performance is measured and mapped with risk level The audit must be developed frequently and randomly to ensure that the suppliers to critically follow the companies’ requirements In addition, the companies should develop their owned system to control the quality of raw materials In case of Vinamilk, this company develops a process to ensure that 100% final products are going through immune system before selling to the market The companies may want to develop a loop process in which the suppliers and the distributors are tightly correlated with each other The companies should provide training programs to the farmers or the suppliers to ensure that they understand the companies’ policies and the training programs are designed to help the farmers/the 69 suppliers to boost their productivity The companies may want to follow a special training program to adult children and assist them to become the next suppliers as part of family business The investors are important stakeholder in the companies’ business since they provide monetary capitals to fund for the business activities For small scale companies, the number of investors is small However, when the business scale of the companies is growing, there are more investors participated into the companies’ management In this context, the companies should choose a framework in which all investors are integrated together in order to ensure that their interests are balanced The information related to the companies’ business performance and operational performance must be transparent and these information are published to all investors The customers are the most important stakeholder of the companies They purchase the companies’ products in exchange of monetary value The first recommendation is that the companies must be very honest in the ingredients used in production process and the ingredients must be specified in the product label The companies should provide clear communication of not using harmful chemical since Vietnamese customers are more and more concerning to their health and they are staying away of harmful products The companies must develop a plan of acquiring international standards (i.e HACCP, FSSC 22000, Halal, ISO 9001:2008, ISO 17025, BRC, GAP) in case of they are not available In addition, the policy related to product recall and exchanged must be setup in case of product issues happening When the companies business, their operations affect negatively to the external environment There are two major areas of greening the business process of the companies At first, the company should develop the plan of saving energy and water resources in which the business operations must be reviewed and the devices with high energy consumption must be disposed and replaced by higher technologies The company should have a long term plan of shifting the energy sources to renewable energies The companies should develop a code of conduct related to environmental protection with clear sanction for the violation The 70 companies should purchase a system to control energy usage in overall businesses and use the consultant services to prepare a roadmap for energy saving The companies which are environmentally responsible will receive support from the public and the State, paving the way for development in the present and in the future The last stakeholder is the community The business of the companies is socially responsible in case of the companies contribute to improve living standards of people The companies should develop a social program to bring gifts to poor people in mountain areas of Vietnam The companies should provide timely supports to the people who are affected by natural disasters In addition, the community program is expanded to the sponsorship to poor students and it helps these students to go to the school The company should also collaborate with the universities in Vietnam to provide the job change for the students even when they are still in education process 4.3.2 Recommendations to the government bodies The government bodies must develop and improve the legal framework related to CSR in order to create a solid basis for CSR implementation It is denoted that current legal framework and laws focus on the protection of the workers and the customers, protecting the customers with detail guideline of food hygiene and good safety standards, avoiding environmental pollution However, these documents are still very general Therefore, the government bodies should review legal system to ensure that the codes must be developed in detailed with clear statement In addition, all legal documents related to CSR must be reviewed periodically with the joint effort from different ministries to ensure that the documents are being updated to cover new aspects of CSR The government should also develop clear sanction for the violation of the laws and it must be specified to reduce the potential harmful actions from the companies It is recommended that when a new legal document is issued, the government should publish it to the public along with detail guideline for the implementation 71 The government should encourage the CSR implementation in the companies For example, a tax exempt is available to the companies with basic CSR functions Moreover, it is recommended that tax exempt level is increased when the companies integrate more items into their CSR system The tax exempt should be aligned with the environment safety level As mentioned in previous section, the companies should develop and apply the technologies into their business and operations in order to reduce energy and water consumption as well as to decrease the CO2 emissions The government can provide the incentive to those who qualify the national standards in term of CO2 emissions or based on how much energy and water saved every year The government in provincial level can provide a team to help small SMEs to build CSR system This team also takes the responsibility of raising the awareness towards the importance of CSR The government should establish an independent unit like Speak Up and the unit will collect the issues from the people in order to early detect the companies with the unethical behavior The Ministry of Education and Training should develop CSR courses in both graduate and post-graduate level to ensure that the students are able to understand the importance of CSR 72 CONCLUSION Through the thesis, the author realized that the importance of CSR implementation in business for sustainable development This study is developed with the main objective of studying analyze the general conclusion of how CSR has been applied in the Vietnamese food industry, in addition, the thesis also addresses the administrative role of government in regulating and managing CSR actions A large body of literatures is collected in order to get certain understandings about CSR It helps the researcher to understand more about the definitions of CSR and its roles to the business of the companies To explore how CSR activities to be conducted in Vietnamese food companies, the overview and the trend of Vietnamese food industry is explored and it confirms rapid growth in the industry In addition, the market is participated by many players in the context of consumer behavior towards healthy and safety food products is becoming more important Moreover, Vietnamese consumers are getting ethical towards the companies’ business and operation whether it is making any harmfulness to the environment To study further about how CSR activities in Vietnamese food companies, the researcher collects four case studies, including Vinamilk, CP Vietnam, Heineken Vietnam, and Vedan Vietnam Among these companies, Vinamilk is local-based company and it successfully develops a comprehensive CSR framework The researcher perceives that Vedan Vietnam has poorer CSR system compared to Vinamilk, CP Vietnam and Heineken These companies develop CSR system in which both qualitative and quantitative indicators to be developed Focused areas of Vinamilk, CP Vietnam and Heineken are quality and safety food products and they are confirmed by international quality standards and the control towards the suppliers, the creation of jobs and training to the employees, social programs to support disadvantage people, the application of renewable energy, waste water treatment, reduce energy and water usage through advanced technologies From the examination of four case studies, the recommendations are given to both the companies and the government bodies to further improve CSR implementation and CSR practices in Vietnamese food companies 73 To sum up, the conclusion part answers research questions and presents a comparison on four case food companies Furthermore, the author indicates some limitations of the thesis as the study concentrates on large listed companies without the inclusion of Vietnamese SMEs, and the collected data are not diversified as expected REFERENCES Published References Ackerman R.W (1973), “How companies respond to social demands”, Havard Business Review, 51 (4) Andel W., Voogd S (2010), The Effect of Environmental Corporate Social Responsibility on Consumer Behavior, MA Thesis, Erasmus University Rotterdam, Rotterdam Arli D.I., Lasmono H.K (2010), “Consumers’ Perception of Corporate Social Responsibility in a Developing Country”, International Journal of Consumer Studies, 34, pp 46-51 Baron, D P., 2005 Corporate Social Responsibility and Social Entrepreneurship Working paper series, Stanford University Dawkins, J., 2004 The Public’s views of Corporate Responsibility, 2003 White Paper Series, MORI Dentchev N.A (2005), Corporate Social Performance: Business Rationale, Competitive Threats and Managemenet 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20 Nguyen Thi Thu Ha, Tran Quoc Trung 2016, STRENGTHENING SOCIAL RESPONSIBILITIES OF VIETNAMESE FISHERING AND EXPORT PROCESSING ENTERPRISES 21 Nguyen Vo Thuc Quyen, 2013 CORPORATE SOCIAL RESPONSIBILITY IMPLEMENTATION BY VIETNAMESE ENTERPRISES, LAHTI UNIVERSITY OF APPLIED SCIENCES 22 Nigel Twose and Tara Rao 2003, Strengthening Developing Country Governments’ Engagement with Corporate Social Responsibility: Conclusions and Recommendations from Technical Assistance in Vietnam 23 Pham Duc Hieu, "CORPORATE SOCIAL RESPONSIBILITY: A STUDY ON FACTORS AFFECTING CSR IMPLEMENTATION AND CSR DISCLOSURE IN VIETNAM" University of Commerce, Ha Noi 24 Pham Van Duc (2010), “Corporate Social Responsibility in Vietnam: Some pressing Theoretical and Practical Issues”, Journal of Philosophy, (14), pp 3-14 25 Phillips R., Freeman R.E., Wicks A.C (2003), “What Stakeholder Theory Is Not”, Business Ethics Quarterly, 13 (4), pp 479-502 26 Rana, P., Platts, J., Gregory M (2009), “Exploration of Corporation Social Responsibility (CSR) in Multinational Companies within the food industry”, Queen’s Discussion Paper Series on Corporate Responsibility Research, No.2/2009 27 Reinhardt F.L., Stavins R.N., Vietor R.H.K (2008), “Corporate Socical Responsibility Through an Economic Lens”, Review of Environmental Economics and Policy, (2), pp 219-239 28 Thi Ha Lan Do, Corporate Social Responsibility in the Vietnamese Garment and Food Industries, 2018 29 Vo Thi Mai Ha - Hue University (Vietnam), Does Corporate Social Responsibility (CSR) matter to Vietnamese Consumers? A Qualitative Study of Modern Food Retailers 30 Wood, J.D., 1991 Corporate social performance revised Academy of Management Review 31 World Bank (2003), Public Policy for Corporate Social Responsibility, World Bank 32 World Business Council for Sustainable Development, 2004 Cross Cutting Themes – Corporate Responsibility, Retrieved 30 November 2009, from http://www.wbcsd.org Electronics References 33 http://www.bbc.co.uk/news/world-asia-pacific-16567315 34 http://www.ceres.org/bicep 35 http://www.csrwise.com 36 http://english.thesaigontimes.vn/Home/business/other/22963/ 37 www.gso.gov.vn/default_en.aspx?tabid=774 38 https://www.mckinseyquarterly.com/The_business_of_sustainability_McKin sey_ Global_Survey_results_2867 39 http://vtc.vn/su-that-ve-san-pham-cua-vedan-viet-nam-tai-cac-sieuthi.4.230186.htm 40 http://www.thesaigontimes.vn/116927/An-toan-ve-sinh-thuc-pham-Bo-Y-tekeu- kho-quan!.html 41 http://suckhoedoisong.vn/thoi-su/lam-gi-de-doi-pho-voi-noi-lo-an-toan-thucpham- 20150814135934479.htm 42 http://www.us-cap.org 43 https://www.worldbank.org/ ...Hanoi – 2019 MINISTRY OF EDUCATION AND TRAINING FOREIGN TRADE UNIVERSITY MASTER THESIS CORPORATE SOCIAL RESPONSIBILITY IN THE VIETNAMESE FOOD INDUSTRY: SITUATION AND POLICY RECOMMENDATIONS. .. analyzing the corporate social responsibility, roles of the implementing the SCR and some matters of implementing the SCR in Vietnam To more detail, Corporate Social Responsibility in the Vietnamese. .. by Vietnamese food companies? Scope of research Regarding the content of the dissertation, it focuses on the real situation of CSR in the Vietnamese Food Industry and policy recommendation The

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