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[Podcast] The Correlation Between Social Sustainability and Supply Chain Performance – A Case of SMEs in Vietnam

27 December, 2024

Keywords: sustainable development, social sustainability, supply chain, small and medium enterprises.

With the increasing public awareness of social issues, the importance of sustainability in the supply chain has improved significantly over the past few decades. The Vietnamese government has announced the “National Sustainable Development Orientation” to implement the Sustainable Development Goals (SDGs). Although there have been many studies on sustainable development in recent years, there has been little research on how companies and stakeholders cooperate to achieve common goals. Therefore, the author from University of Economics Ho Chi Minh City (UEH) conducted the research project “The correlation between social sustainability and performance in the supply chain – A case of small and medium enterprises in Vietnam” to determine the relationship between social sustainability and performance in small and medium enterprises (SMEs) in Vietnam.    

The UEH authors have applied and modified the measure criteria from previous studies and applied the PLS-SEM model in the current study. The results showed that sustainability has a significant impact on supply chain performance as well as enhancing integration among members. Furthermore, policy makers and managers need to pay more attention to issues related to social sustainability to achieve common goals. In conclusion, businesses should apply sustainable values ​​to improve employee welfare, working conditions, safety and health care as well as develop local communities to achieve sustainable development goals.

Research context

The United Nations and its partners in Vietnam have been attempting to achieve 17 Sustainable Development Goals to address pressing issues facing Vietnam and other countries around the world (United Nations, 2022). The Sustainable Development Goals (SDGs) call on countries around the world to work together to eliminate poverty, to protect ecosystems and the global environment, and to ensure that all people can live in peace and prosperity. Vietnam has transformed the Global Agenda 2030 into a National Action Plan to implement 17 Sustainable Development Goals and 115 specific targets in line with the country’s development conditions and priorities. On September 25, 2020, the Government issued Resolution No. 136/NQ-CP on sustainable development. The Resolution sets out 17 goals for Vietnam by 2030.

Currently, the private enterprise sector in Vietnam contributes 40% of GDP and attracts over 50% of the workforce; on the other hand, mainly small and medium enterprises (Ministry of Planning and Investment, 2022). According to the Association of Small and Medium Enterprises in Vietnam, the country currently has approximately 800,000 enterprises, of which small and medium enterprises (SMEs) account for over 98%. In recent years, SME has been affirming its important role as a driving force for local economic development. The development of SMEs has created jobs, improved people’s lives, ensured social security, and contributed increasingly to local socio-economic development. Despite playing an important role in local socio-economic development, SMEs face many difficulties and challenges. Most SMEs have low levels of technology and management, weak ability to connect, to cooperate in business, and to participate in value chains. In particular, the number of small and medium enterprises accessing bank capital to develop production and business is currently modest.

Related Theories

*Stakeholder theory view (STV)

STV is defined as the combination of a company achieving its business objectives for its stakeholders while maintaining ethics and values ​​in the management of the organization (Barney and Harrison, 2020). According to De Gooyert et al. (2017), sustainable activities have a positive impact on performance in the supply chain. Furthermore, suppliers, customers, and stakeholders in the supply chain must cooperate and accompany each other in important activities listed as strategic decision making, promoting social, economic, and environmental sustainability in the community and locality (Mohammed & Muhammed, 2017). In addition, businesses regularly participating in social activities, ensuring safety and benefits for workers will help businesses enhance their reputation with their partners and customers; as a result, their business performance and brand will be improved. Therefore, STV can explain how social sustainability can enhance performance in supply chains.

Figure 1: Three main pillars of sustainable development

Source: Carter and Rogers, 2008.

*Stakeholder resource-based view (SRBV)

SRBV focuses on supporting and accompanying stakeholders as one of the important strategies that helps a company outperform its competitors (Sodhi, 2015). SRBV emphasizes that all participants in the supply chain, including suppliers, employees, and consumers, must be treated fairly and ethically. Therefore, this theory proves that sustainable development will bring significant performance to the business (Tate & Bals, 2018). In other words, managers should take responsibility for any social concerns in the supply chain as they can lead to disruptions and reduced business performance. For example, ensuring the safety of workers as well as the safety of the company’s products will bring high-quality service and efficiency to business. To analyze the relationship between social sustainability and performance in the supply chain, the author applied the theoretical model of SRBV (Figure 1).

Hypothesis development

According to Braveman & Gruskin (2003), equity is not simply a moral value, this refers to a framework that guides the provision of justice in all areas of society. In the context of sustainability, equity refers to ensuring that everyone is treated equally and has equivalent rights. Equity not only limits the disparity in equal employment opportunities among ethnic, religious, and gender groups but lays the foundation for a positive and sustainable business environment. Equity becomes an important prerequisite, helping to shape a global society where everyone has the opportunity to develop and to advance. In addition, equity is not only a basic human right but also a prerequisite for a peaceful, prosperous, and sustainable global society (Yawar & Seuring, 2017). According to the 17 Sustainable Development Goals (SDGs), equity and empowerment are fundamental to all aspects of achieving sustainable development goals (Turker & Altuntas, 2014). In addition, the author has summarized studies related to social sustainability and supply chain performance on the Web of Science (Appendix 2). Based on this, the following hypotheses are proposed:

H1. Equity positively affects supply chain performance.

In the supply chain, philanthropy means supporting local society and improving the quality of life. It can be done through educational groups, public and private charities, or non-governmental organizations (Kogg and Mont, 2012). Previous studies have shown that social sustainability and human acceptability are correlated (Ciriello et al., 2015). Nowadays, businesses often actively participate in charity programs, support and help the community and society to attract the participation of all members in the supply chain, promoting social prosperity (Pagell, 2004). Therefore, the impact of philanthropy on performance in the context of sustainable supply chain development needs to be further studied. The following hypothesis has been put forward:

H2. Philanthropy positively impacts supply chain performance.

Employee rights can be defined as the ideals and the norms that are applied uniformly to most workers in countries around the world (Braveman & Gruskin, 2003). In addition, employee rights can impact business relationships; therefore, companies should focus on their business partners and employees (Sancha, Gimenez & Sierra, 2016). Managers should pay more attention to attracting and motivating their employees, and businesses should behave ethically and responsibly. Nowadays, there is increasing attention to social concerns around the world (Huq et al., 2016). By promoting employee rights, businesses can improve their supply chain performance and financial performance (Hutchins and Sutherland, 2008). The following hypothesis was proposed:

H3. Employee benefits positively impact supply chain performance.

Safety is not only a state of being free from risk but also represents a state of being protected. In the context of the supply chain, the concept of safety is defined by the working conditions of employees ensuring that they are protected from risks and unhealthy environments. This increases the safety of employees and helps businesses avoid risks and unsafe conditions, as well as unwanted accidents that may occur around the work area (Ahi & Searcy, 2015). Improving the working environment, health and safety of employees is both a social responsibility and an important step to facilitate employees to work effectively and safely (Kim & Narasimhan, 2002). Furthermore, through improving the working environment, health and safety care is considered essential to achieve a maximum level of performance from employees, improving the efficiency in the operations of the entire supply chain (Mentzer & Konrad, 1991).

H4. Safety positively affects supply chain performance.

Based on the above hypotheses and theoretical bases, the research model is proposed in Figure 2.

Figure 2: Proposed research model

Source: Author’s proposal, 2023

Results and data analysis

*Descriptive statistics, reliability and discriminant validity

The data in this study were collected in 2022, the total time to collect data from respondents was approximately 6 months. In total, 245 responses were received. In addition, after screening to meet the above conditions, 228 responses from 228 companies were retained and used for further analysis. Details of the sample characteristics are presented in Table 1.

Table 1. Sample characteristics

Feature Regularity

(N = 228)

Percent (100%)

Company operating duration

Under 5 years 65 28.5
6 to 10 years 91 40
Over 10 years 72 31.5
Company investment capital
Small Enterprise 93 40.7
Medium Enterprise 135 59.3
Industry
Manufacturing 36 15.7
Supplier 40 17.5
Transportation 59 25.8
Retailers and distributors 61 26.7
Warehouse 18 7.8
Service 14 6.5
Respondent’s working experience
Under 5 years 48 21
6 to 10 years 93 40.7
Over 10 years 87 38.3
Respondent’s position in the company
Middle-level managers 147 64.5
Senior executives and managers 81 35.5

Source: Author’s calculations, 2023

Hypothesis model testing

Following the recommendation of Hair, Ringle & Sarstedt (2011), the author tested the model with 5,000 samples to ensure that the path coefficient estimates were stable. The PLS-SEM results are shown in Table 2.

Table 2. PLS-SEM

Hypothesis β Standard deviation T Statistics P value Result
H1 0.468 0.094 9,819 0.000*** Accept
H2 0.697 0.053 19,532 0.000*** Accept
H3 0.378 0.045 7,608 0.000*** Accept
H4 0.303 0.036 5,324 0.000*** Accept

Source: Author’s calculations, 2023.

Conclusion and policy implications

This study demonstrates that social sustainability strategies can connect all stakeholders in the supply chain and improve supply chain collaboration, resulting in positive outcomes. The author suggests that managers should prioritize employee welfare, working conditions, and health care as well as the development of local communities.

Through the understanding of social sustainability in emerging markets, this study fills the existing research gap by explaining the different aspects of social sustainability in supply chains (Mani, Gunasekaran et al., 2016). This finding is consistent with that of the previous researches on the relationship between social sustainability by other previous authors (Yawar & Seuring, 2017; Huq et al., 2016; Duong & Ha, 2021). In addition, this study confirms that companies that regularly support their employees and contribute to the local community will enhance their corporate reputation and credibility. Customers are willing to purchase products and services from companies that demonstrate their commitment to sustainable development.

In addition, the results of this study indicate that social sustainability and supply chain performance are closely linked. Managers should pay more attention to the importance of sustainable practices and how they can impact supply chain performance. In addition, managers should collaborate and encourage business partners, including suppliers, stakeholders, and consumers, to contribute to the community and act towards the common sustainable development goals of the country.

The full-text article on The Correlation Between Social Sustainability and Supply Chain Performance – A Case of SMEs in Vietnam can be accessed HERE.

Author: Dr. Duong Ngoc Hong – University of Economics Ho Chi Minh City.

This article is part of the series spreading research and applied knowledge from UEH with the message “Research Contribution For All”. UEH cordially invites readers to wait for the next UEH Research Insights newsletter.

News and photos: The Author, UEH Department of Communications and Partnership