CSR and environmental criteria in supplier selection

Abstract

The supplier selection issue in today’s world does not simply depend on price anymore. Other non-price criteria such as quality, delivery and overall capability are gradually gaining equal importance. Because of the globalization of trade, the world is becoming an increasingly open and global marketplace where the intense competition is urging companies to reduce the cost and development time of a new product. Companies are forced to take every possible factor into consideration when making the strategic decision to minimize costs and product development time. That means besides taking price into consideration, companies now also has to assess the overall capability of the suppliers, such as production capability, technological capability, company reputation and other factors that are hard to be quantified, in order to make the most informed decision to strive for a balance between lowering profits and rising costs. Different companies have their own ways in carrying out the supplier selection process that aligns with their corporate strategy. This paper is interested in what criteria are used in supplier evaluation and the ranking of the criteria importance. In particular, the focus is the incorporation of corporate social responsibility (CSR) and environmental responsibility (ER) requirements into supplier selection. With the increasing awareness of CSR and ER, large international corporations have been paying more attention in selecting suppliers that are capable of adhering to the practice of sustainability. Hence, this paper aims to find out what criteria or performance indicators are adopted by companies to assess their suppliers, and how much importance CSR and ER contributes to the final decision of the selected supplier. A multi-agent system is implemented with a multi criteria decision making model to incorporate the criteria identified for evaluating supplier performance and selecting the most suitable supplier.