Hewlett-Packard’s Global Citizenship Program
Social and Environmental Responsibility (SER) program: The Model of CSR Alliance with Profit, the Corporation’s Ultimate Goal

IRGN423
Corporate Social Responsibility
Winter 2012
Eileen Hur

	
  

	
  

Table of Contents

I.

HP’s Approach to Corporate Social Responsibilities: Global Citizen Program·······································3II.

Measuring the Credibility of Global Citizenship Program in terms of Labor Standard

1.

Self-monitoring ················································································································································52.

Third Party Involvement···································································································································73.

i.

Non Profit Partnership with the Business of a Better World (BSR)ii.

Private-Private Bonding: Electronic Industry Citizenship Coalition

Profit Management and CSR···························································································································9i.

Consumer Composition and Sensitivity to CSR

ii.

Investors Sensitivity to CSR

4.

Government Regulation··································································································································135.

International Standard: International Trade-Non Tariff Barriers···································································15

III.

Conclusion···············································································································································16

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Hewlett-Packard’s Global Citizenship Program: The Model of CSR Alliance with Profit, the Corporation’s Ultimate Goal

I.

HP’s Approach to Corporate Social Responsibilities: Global Citizen Program

Hewlett-Packard (HP) is known as one of the initiative models for the corporate social responsibility (CSR)
and one of the successful models of the CSR. Like many other firms, the start was a philanthropic measure ofcharity and donation to the local community. This idea of being responsible business to its community has been
expanded to the Global Citizen Program with the expansion of its business. This Global Citizen Program by HP
is designed to cover broad spectrum of management in general but with the concerns of social responsibility
which including issues of ethics and compliance, environmental sustainability, supply chain responsibility,
social innovation, and privacy.1	
  This has been great brand building strategy, which led to the 9th place in overall
consumer evaluation.2 Greenpeace also marked HP as the most environmental friendly electronics in 2011 by its
Green Electronics Reports Card.3 However, these rankings credibility by the organizations should also need to
be examined. One positive feature of the Greenpeace would be its financial status is purely based on donationsof individuals and supports from related foundations. Though still its independence should be closely examinedthrough separate project.

This inside monitoring procedure has been increasing its transparency through the annual reporting, later
HP made those report available online, which was the starting point for HP’s active involvement in CSR.
However, this extra effort was the consequences of the HP’s scandal with its poor management of the suppliersin 2004 including the relation with Faxconn.4 Also, even after the system of HP has been evaluated as a
successful model of the CSR, still the corporate strategy embedding the issues mostly in two major sectors of
the CSR: environment and labor standard. In 2007 Greenpeace accused HP for using toxic chemical for its

	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
1

	
  http://www.hp.com/hpinfo/globalcitizenship/commitment/global_citizenship_strategy.html	
  	
  http://thecro.com/files/100Best2011_List_revised.pdf	
  3
http://www.greenpeace.org/international/Global/international/publications/toxics/2010/version16/Ranking%20t
ables%20Oct%202010-­‐HP.pdf	
  4
	
  http://www.ethicaltrade.org/news-­‐and-­‐events/blog/anne-­‐lindsay/foxconn-­‐suicides	
  
2

3	
  
	
  

	
  

products and the same problem lasted till 2009, Greenpeace exercised the protest against the HP, by giving HP
public shame by painting HP’s rooftop.5

However, compare to labor issue, environmental concern is still under better control. Most of active
problem solving measures related to CSR are focused on the environmental measure. For even its web site
provides separate section for its sustainability measure. However, this is not because HP aims for higher
environmental standard but with better environmental standard, the company can achieve better profitablemodel. It is well stated in HP’s website and its annual report, its environmental measure is more focused on the
consumer sustainability. Also it could be seen from their first move, which started from recycling of ink
cartridges and the further developments are related to improvement of energy efficiency of the products which
is one of the important criteria for the customers of its products. Like quality control of the company, theenvironmental measure aliens well with its profit strategy which is strong drive force for the company by itself.

On the other hand, like many other global manufacturing firms, HP also heavily relies on the China’s low
cost labor to increase their profit and its competitiveness in global market through the strategy of keeping the
product cost low. This management strategy has been a prevention of the improvement of the labor standard in
China. In 2004, IBM, Dell, and HP have been accused for sweatshop conditioned and it has not been improved
and those companies, including HP do barely show effort to improve the condition of their global suppliers. 6
2008 global economic recession only worsened the problem. Not only companies do not improve working
condition with better facilities or reasonable working hours with higher cost, but these companies’ high need forcheap labor holds back even Chinese government from enforcing the labor standard for its people to keep its
business conditions friendly to the global firms. It is not surprising that Faxconn has been a great part of HP’s
supply chain , which now has more fame over Apple’s shady supplier from China, yet even with the recognitionof the labor condition problem, there has been no active measure practiced to improve the working condition
but waiting for Chinese government to implement proper regulation.7

	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
5

	
  http://www.greenpeace.org/usa/en/multimedia/videos/Hewlett-­‐Packard-­‐-­‐Hazardous-­‐Products-­‐/	  	
  http://www.guardian.co.uk/technology/2012/feb/20/foxconn-­‐apple-­‐china-­‐wages	
  7
	
  http://www.fpif.org/articles/labor_rights_in_china	
  
6

4	
  
	
  

	
  

Unlike sustainability, other issues of CSR are not truly integrated with the profit model of HP. All
electronics producers are competing for the lowest price, and this low price is heavily relying on global supply
chain with lower criteria or regulation over working conditions. Considering the industry trends, the mostproblematic concern with HP’s case would be pursuing the labor standard over its supply chain. This paper will
be focusing on measuring the HP’s effort to improving the labor condition and its credibility focusing on its
Social and Environmental Responsibility (SER) program; what is the driving force of pursuing better labor
standard and how HP trying to meet that criteria along with its own model of CSR. The most important concern
would be how and why HP makes the credible actions with its promises to the society.

II.

1.

Measuring the Credibility of Global Citizenship Program in terms of Labor Standard

Self-monitoring

Most of the HP’s model of Global Citizen
Program is rely on its own self-monitoring system.
Self-monitoring is not a new concept for companies.
Most of the time companies are self-monitoring
system for the quality control without special
concern, most of the time this self-monitoring is trusted by the society. This kind of self-monitoring is credible
because the credibility problem with the product quality control will directly harm the company’s profit inshort-term, while ruin the whole brand image of the company in long-term. Since the quality of the product ismost of times, the most important criteria for the customer’s choice which is hard to build the trust while easy tolose. Therefore, the dishonest reporting will potentially drive the company out of the industry or harm thecompany in unrecoverable way like Toyota failing quality control in 2010.
Compare to that, the issues of reporting CSR has lower cost. Now the credibility becomes questionable
since the cost of implementing the CSR measure to the management system or production process might cost

5	
  
	
  

	
  

more than the cost of mal-reporting. Only possible direct cost would be the brand image that has been built
throughout the PR.

To increase the credibility of its CSR measure, HP adopted auditing. HP is placed audits over their global
supply chains, and put extra effort to the region with comparatively lower standards or requirements. In addition
to that, since the production process involves multiple tiers of value chain, HP implemented the auditing
requirement by its code not only to their direct suppliers but also to the subordinate suppliers for its first tiers. 8
This way, HP can spread its management ethic with relatively low cost with better efficiency. HP, however, themethod of the audit is informed auditing where auditors visit scheduled before their visit, it is hard to generalize
the result to the all the production facilities. Even though the audit is informed, since HP constantly andfrequently put audits to its suspicious practices, the self-monitoring can get more effects as a diagnostic measurefor the CSR concerns.

By the self-monitoring measure itself, the HP’s model should be considered as the corporate strategy. CSR
is another type of the brand building strategy which can differentiate your company from others producing
relatively similar product. Even though HP has put consistent effort for pursuing the measure of CSR, with only
the measure of self-monitoring, the effort stays at the level of cheap-talk. Even though HP has been making thisclaim costly, by building the image of higher moral ground compare to other firms in the industry which will
provide higher moral expectation to the customers increasing the burden for the future accusation, still themethod needs extra caution with its credibility until it proves that the system has the true integration with thecompany’s business model by the examining the relation with the targeting customers and investors of thecompany.

	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
8

	
  http://www.hp.com/hpinfo/globalcitizenship/environment/supplychain/ser_program.html	
  

6	
  
	
  

	
  

2.

Third Party Involvementi.

Non Profit Partnership with the Business of a Better World (BSR)

To make complement for the self-monitoring system, HP conducts many of its CSR project with theBusiness of a Better World, nongovernment and nonprofit organization. There is also ongoing project with BSR
improving the working condition of supply chains especially targeting those in China. In 2007, HP, with thecollaboration with BSR and China Training Institute, developed the Focused Improvement Supplier Initiative(FISI), a program that provided 40 top tier HP suppliers with the tools and resources to improve CSR
management within their facilities.9 This project is not only focusing on passive improvement of working
condition, but also by educating the workers and management positions, this project tries to change the cultureof the working environment general in China; productivity, working hours, wages and benefits, worker
communications, management systems, root cause analysis, Chinese laws and regulations, the environment,
health and safety, and the European Union's Restriction of Hazardous Substances and Waste Electrical andElectronic Equipment directives. 10 For HP, third party involvement is finding partner for the implementation of
their measure or conducting the research project with the concerns with its business practice than the monitoring
itself.

Occasionally, third party nonprofit auditors involve with the process of the auditing global supply chain.
However, this does not necessarily mean that there is more independence and credibility. BSR takes part ofaudits since HP is a member of the organization, that paid membership label the as socially responsible. Since
the business membership is given to the organization that pays its annual fee according to its size of thebusiness,11 the true independent relation of the third party does not exist in this relationship between HP and
BSR. With the financial dependence, the organization becomes more like an agent of the company. This
principle-agent relation between two entities becomes more evident considering the composition of the board

	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
9

	
  http://ctichina.org/v2/en/node/150	
  	
  http://ctichina.org/v2/en/node/150	
  11
	
  https://www.bsr.org/en/our-­‐network/eligibility-­‐dues	
  
10

7	
  
	
  

	
  

directors in BSR. Most of the board positions are filled by private firms’ management position, which provesthat this organization is created by the needs of the private firms to label them as a socially responsible company.

Because of the financial dependence, the organization’s involvement is not going to improve the credibility
the system of monitoring. However the organization function as the networking herb for the private firms
which provides the CSR network among companies, help them to cooperate among the issues and reach theagreement that helps avoiding the race to the bottom with distrust among companies and force themselves to thebetter sustainable and socially responsible performances under the competitive market. However, BSR helps HP
to conduct the project related to CSR.

ii.

Private-Private Bonding: Electronic Industry Citizenship Coalition

2004, HP, Dell and IBM released an Electronics Industry Code of Conduct to promote industry standards
for socially responsible business practices across their global supply chains.12 Electronics Industry Code of
Conduct is the voluntary measure that the participants make a commitment to follow the Electronics Industry
Code of Conduct. This code is pursuing the better standards to the working conditions in the electronics
industry supply chain, which makes sure that the working conditions are safe and the workers are treated withrespect and dignity, and that business operations are environmentally responsible and conducted ethically.13
This code by itself is a quite improvement that enforcing the implementation of better standards of laborthrough not only first but second and third tire of the chain. Since this action was direct response to theaccusation of sweatshop working condition over the suppliers in the China.

The code contains basic commitment for the treatment and the condition of the labor force. Even if the code
contains through and strict standards over the labor and the communication process requires the companies to
responsible for the issues in regular basis, this commitment lacks the legal binding. Without proper enforcement

	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
12

	
  http://www.eicc.info/	  	
  http://www.eicc.info/eicc_code.shtml	
  

13

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measure, there is not clear cost for the companies considering the facts that there is no way the consumers candirectly recognize or evaluate the participation of the company’s commitment. Again, this measure of private
voluntary binding does not put extra pressure or cost over the company. Even HP claims that they have beenworking with Faxconn since 2004, to improve the treatment still Faxconn is one of big suppliers in China andHP still enjoys the benefit of cheap labor with the excuse of the keeping its competitiveness in the market.

3.

III.

Profit Management and CSR

Consumer Composition and Sensitivity to CSR

Almost 70 percent of the HP’s revenue comes from theproduct targeting individual consumers.14 This indicates that
consumer can exercise pressure to the company effectively
through their choice of product. Also, HP’s general profit
composition by sector shows that most of their profit relies on thesales of personal computer, the products directly targeting
individual customers. Because HP’s profit model is highly
dependent on the individual consumers, the change in consumer
behavior can make difference of the company’s performance.

With the effective effort to form a collective action, the consumers can create the force to enforce thecompanies to change its behavior or accelerate the change. However, not many of electronic consumers are
sensitive to the CSR factor of products, even the UCSD bookstore targeting specifically high educated group of
consumers still does not have indicators available for these issues. Therefore, there is not enough incentive for

	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
14

	
  http://media.corporate-­‐ir.net/media_files/irol/71/71087/AR11/HTML2/default.htm,	
  Financial	  Highlights	
  

9	
  
	
  

	
  

the company to put effort to change behavior which could possibly help differentiate it from others in themarket. Since the product differentiation is not designed well enough, HP has no special feature across theirproducts. This allows large availability of the substitutive products available in the market, relatively low
loyalty of the customers. Consumers with low loyalty can affect action of the consumers and the company.
Unless, there is direct harm to the consumers, consumer groups are reluctant to make collective action topressure company. In addition to this, if there are lots of substitutes, the consumers would rather just choose
alternative. Although consumers tend to change their action easily with their choice, there is no indicatoravailable yet CSR factors are not serious concern of the consumers, there is less chance of pressure from theconsumers will be created. HP products are more vulnerable or sensitive to the consumers’ indirect signal. Since
the change of the consumption can affect the short term profit, also going to affect the investment considering
its effect to the financial statement and later the overall growth of the company, though for the company, it isclear that consumers will not react to the change which will only cost more for the production. There are salient
consumer groups who can make the change through their action, but not yet organized enough. This makes theleeway for the companies only react to provide low cost product to secure its market compatibility. 15

Another factor that needs to be considered is that the HP’s
consumer composition among the region. More than half of therevenue shows high concentration on the America continent
followed by Europe.16 Compare to Asia, these regions has
relatively longer consumer exposure with the concept of CSR
which means informed choice can be expected.	
  However as European Commission pointed out through its A
renewed EU strategy 2011-14 for Corporate Social Responsibility, the consumer attention to CSR has been
growing, still the improvement is not containing enough sufficient awareness. Also the information is notavailable in regular basis yet this acknowledgement involves price premium, consumers do not have enough

	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
15

	
  http://www.humanresourcesjournal.com/2012/02/foxconns-­‐wage-­‐increases-­‐may-­‐impact-­‐world-­‐electronics-­‐
industry/	
  16
	
  http://media.corporate-­‐ir.net/media_files/irol/71/71087/AR11/HTML2/default.htm,	
  Financial	  Highlights	
  
	
  

10	
  
	
  

	
  

incentive to make informed and better choice by themselves.17 Therefore European commission, by setting up a
new action plan, tries to improve the consumer action more effectively where this kind of specific effort is not
yet found in developing regions.

Another important concern, as it mentioned in the concerns in European Commission report, would be theinformation availability. Only sign for the CSR concerns that the customers can find is the fact that the productis the Energy Star qualified. This means that the product is made to use less energy and meets strict energy
efficiency guidelines set by the Environmental Protection Agency and U.S. Department of Energy.18 However,this environmental concern is more leaning towards the process of operation of the product rather than its
production process like CO2 foot print or other possible environmental concerns including toxic element safety.
More importantly, there is no indicator for other concerns like labor condition of the production process. It isbecause the energy efficiency of the product has more direct relation with the function and the usage of the
product. With higher efficiency the consumer can benefit by lower operational cost. This indicates that the mostof the consumers, who buy the HP product individual level, do not have enough concern about CSR
performances; rather the customers are less tolerant to the increase in price of the products. Therefore, there is
not enough extra outside pressure for the company to make credible label or commit its product with extra costof the product management.

Consumer pressure for the socially responsible action has been improving yet not very effective. First, theindicator is not available or easy to recognizable compare to organic food or fair trade coffee. For the overall
electronic goods, there is no general agreement or standardized label indicating the companies’ performanceover CSR. In addition to that, considering the consumption pattern of the consumers, it is hard to expect that theadditional information about the CSR performance would affect the choice of the products. This only gives
incentive to the companies to stay at low standard of CSR.

	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
17

	
  http://ec.europa.eu/enterprise/newsroom/cf/_getdocument.cfm?doc_id=7010	
  	
  http://www.energystar.gov/index.cfm?c=products.pr_how_earn	
  

18

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IV.

Investors Sensitivity to CSR

Individual stockholders or investing banks are sensitive to overall performance of the company. Therefore,
CSR performance it only matter when the company’s profit fluctuate with the CSR criteria violation. However,the consumer group of HP is more likely to be reluctant to the CSR issue not related to the quality of the
product. Yet highly sensitive to the price of the product, if the price of the product increases, the consumers will
penalize the company no matter the reason of behind the escalation. This tendency can be revealed through thereporting process. The financial statement, the report that directly targeting investors, does not contains thecompany’s performance in CSR yet if the individual investor who has interest can reach to the separate report,
Global Citizenship report that HP provides. This information discretion shows that not in general investors
sharing the same concerns about the CSR issues.

HP has been through several scandals with accusation by the nonprofit organizations relating to the several
different CSR issues. However, these scandals did not affect the stock price of the company or its profit. Stockprice fluctuation is volatile to the economic condition and general performance of the company, but notsensitive to the CSR performance or even the scandals.

19

	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
19

http://ycharts.com/companies/HPQ/price#series=type:company,id:HPQ,calc:price,,id:HPQ,type:company,calc:profit_margin&zoom=10&startDate=&endDate=&format=real&recessions=false	
  

12	
  
	
  

	
  

As the graph indicates, the stock price did not hugely fluctuated with the scandals in past ten years,
including 2004 Faxconn labor issue and 2007 and 2009 protest of the Greenpeace against the hazardous
material. None of these events actually affected the stock price or even the profit of the firm. Rather the profit
and stock price fluctuate with the economic conditions like 2008 US economic recession.

Again, even with the investors, HP provides more information about its environmental concerns which has
more relativity with its profit model and market change. Financial Statement and Annual Report of HP 2011
contains separate section about its sustainable model and the development. Though other concerns with the realissue that has huge effect on their cost of production, the labor standard implementation has no information on
the information provided directly to the investors. The investors even though they have more power andincentive to change company’s performance or behavior since the investors has more direct relation with the
management of the company, yet do not recognize the labor issue as a serious problem in terms of company’s
performance or even not inquiring the information about the issues of the CSR to the companies. Therefore, thisindifferent attitude of the consumers and investors set the distance between CSR and the profit management
process of the company. They do not incentivize the company to act socially and environmentally responsiblyway, even lowering the company’s cost of its commitment over CSR performance. This leads to long history of
low labor standard abuse or other CSR standards violation outside of the legal binding.

4.

Government Regulation

The US government has strict regulatory measure in labor standard and its implementation and monitoringis under serious judicial binding. Also the value chain of the production places knowledge-intense sector or
management sector of the business near in California or the branches in Europe where you can get the benefit of
agglomeration of the research institution and human resources in this area. Not only with the better regulation
but also with the demand for quality working environment to keep the human resources in the company, HP has
to provide better condition in these areas. With the high standard, not only drive the company more self-

13	
  
	
  

	
  

regulatory but also makes government more responsive to this labor conditions and requirement. This publicprivate bonding actually provides the best regulatory system which does not require any extra monitoring.20

However the manufacturing labor-intense sector of the business often placed in developing countries, so far
represented by China, these local governments do not have incentive to protect the workers from multinationalfirms. The strong drawing factor of multinational firms’ investment to these countries, which can boost up theireconomy, has been the cheap wage combined with low regulation. For last 20 years the only country that canmeet all these criteria has been China. Now with the economic growth, there is increasing demand for the better
condition of work. However, for local government with the competition with other developing countries like
Vietnam or Indonesia for the wages and the business conditions, there is not enough incentive to put regulation
enforcement to protect the workers from illegal over working or underpayment. The free market competition
among the developing countries works as a force to lowering the standard.

One positive sign fromthe HP model would be that
HP intensely put more of its
audits to this region. Again,
this is not because HP ismore ethically acknowledged
but it has incentive to do so
considering the cost and the efficiency of the production. First, it is cheaper to improve the working condition
compare to moving entire manufacturing plants to other developing countries considering the sunk cost. Also it
is not only this cost gets even bigger considering the cost of adjustment to the culture and network building in
the region. Second, if the company leaves behind its production line, it will potentially leave the company’s
strategic information in terms of technology and management. This will let Chinese local competitors catch up
even faster in the global market. Third, even though the skills that requires for the assembly line is trivial, the

	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
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  http://www.hp.com/hpinfo/globalcitizenship/09gcreport/society/supplychain/audit.html	
  

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time and the cost that would take is at least two months so considering all the factors, HP would prefer to staywith China and be responsive to its workers with improved condition or enforce its suppliers in the China toensure better condition of working. This management decision will change to the effort to improve theconditions in work until the improvement cost exceeds the cost of moving. This is also can be explained by theinternational trade regulation procedure.

5.

International Standard: International Trade-Non Tariff Barriers

Another driving factor of raising labor standard would be the legal non-tariff barriers between the trade
blocs. Countries, with the global trend of free trade, are now using non-tariff barriers to impose legal
discrimination towards the products produced in developing countries with low wage and regulation. A lot of
trade disputes are over the issue of disguised restriction. Environment and safety of the product is bid issue
forcing companies to prove the safety if not countries can exercise its emergency measure banning theimportation of the product for safety of citizen or conservation of endangered species.
This manipulated form of the protection measures are often criticized by developing countries, fordiscriminatory measure and market protection to products produced in these regions to the products from thedeveloped countries tend to have low environmental criteria. Also these disputes become more like disputes
between Europe and America considering the origin of the production multinational firms with supply chains.
Without meeting the standard, there is no way for the company’s product can possibly enter the market.
International law and regulation is matter of market accessibility of the region. With further study, the actual
development of the law could be measured.
However, the labor standard yet has less specified criteria since it is hard to prove the actual harm and costwith scientific measure. Often times, still the measure requires higher labor standard or sustainable measure of
the production with less emission of greenhouse gases. International Labor Organization (ILO) set up specified
requirement for the protection measure for the human rights in terms of labor. However the nature ofinternational institutions, it does not have enough authority to enforce the measure by itself. Though theseregulations combined with the market accessibility, it creates the incentive to change firms’ behavior through

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building a connection with the CSR measure to its profit model. It is cheaper to put effort to improve working
conditions and put proper process of monitoring over the production and its supply chains than losing wholemarket share in the specific region.
The most suitable case for this would be the European Union (EU).	
  The EU clearly states that it will firmly
impose the promoting core labor standards with the minimum criteria of ILO, and decent work for all in its
trade policy. Also EU routinely adopts the cooperation initiatives and incentives to better working conditions in
the trade agreements it negotiates.21
Since one third of the HP’s revenue is from this region, there is clear incentive and the cost that makes theprocedure of HP’s Global Citizenship program more credible than by itself. By false reporting, the company is
not only jeopardizing its short-term revenue, but potentially jeopardizing its investors’ interest over company,
which can possibly drive the company out of the business. Now with the international law and regulation withthe practical interest of the trading blocs, the company firmly internalized the policy to its profit model. This
internalization gives the authority to the international organizations even without the procedure of enforcement.

V.

Conclusion

Overall the CSR demand for the electronic industry is relatively low. Still HP set up relatively good system
to pursue its philanthropic value to the business and response to the social demand for socially responsible thecompanies. However, the Global Citizenship program of HP is still questionable in many ways since theprogram still not fully blended with its profit management model. However with the combination ofinternational organizations and national interest of the market protection, companies can internalize the CSR
measure to the management procedure.

With the consumption pattern with the high price elasticity, and the numerous other substitutes for its
products, HP has more pressure to drive its production cost down even with the ignorance to the violation of thelabor standard. Not only with the consumer relation, but also with the investors only show interest to the overall

	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
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  http://ec.europa.eu/trade/wider-­‐agenda/labour/	
  

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financial performance of the company, HP has no incentive to make credible promises about the issues of CSR
by itself where other producers still enjoying the benefit of low lost labor with less care. By emphasizing other
CSR measures, the company can still represent itself as socially responsible like HP’s emphasizing on theenvironmentally sustainable management through variety of medium. Energy efficiency is more likely drive thecost of the production down at the same time, with the energy efficient products, HP can satisfy more of
consumers, which gives more compatibility in the market. This proves that if the value of CSR has morealliance with the company’s profit model, will incentivize company to act more responsive to the issue.

Clearly for the labor condition, not like the environment or quality control, there is no self-driven force or
the incentive for the companies like HP to put proper monitoring system or better regulation. This is because
these criteria of better working condition is lying against its profit model while there is not enough outsidepressure to drive company to pay more money or attention in t the direction of the socially responsible
management considering HP’s profit model.

With low incentive, HP enjoys the brand of CSR with the least possible amount of effort with the least
amount of the cost. HP’s measure towards labor standard is heavily relies on the self-monitoring system withthe code of conduct that HP have and other electronic industries agreed on. With the involvement of the outside
parties, HP can claim better credibility and objectivity of its measure. Though the independence of all thepartnerships and third party involved in monitoring and research still questionable. Since the organizations
financial source comes from the membership fees which membered companies pay annually, the organizations,rather adding the credibility to the existing procedure, help to competitors in the market to avoid hidden action
problem among the companies themselves.

Even with all the race-to-bottom effect, still there is enough evidence that HP impose its effort to impose
better condition of work. It is not because HP is innately sensitive to the company ethic. But it is because law
and regulation with the market accessibility, drive companies more responsive and responsible to the measureoutside of the high legal binding for labor standard voluntarily self-regulatory to the local branches suppliers.
Therefore, the credibility of the HP’s Global Citizen program has better credibility not by its own self-

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monitoring system or third party involvement but because international market requires and forces the company
to responsible. This enforcement earns power because the fear of losing the market share would be much higher
cost for the company than adding operation cost for better condition. However, the international measure is stillrequiring minimum, further development of the labor standard could be expected with the private-private
network among competitors in terms of human capital procurement. Since the company’s profit fluctuates withthe consumer choice, the method to change consumer prioritization of the shopping criteria would be great force
to raise the criteria. This research could possibly be reviewed with the comparison to the organic food market or
consumer safety issues; what made consumption pattern changed and how could this measure can be applied tothe electronic industry.

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