Corporate Responsibility in Global Supply Chains

Many leading corporate responsibility efforts are the result of stakeholder pressure on companies to improve labor conditions in their global supply chains. Since the 1990s, industries ranging from apparel, sporting goods and toys, to food, manufacturing and technology, have sought to demonstrate responsibility through supply chain compliance programs. Supply chain best practices – codes of conduct, independent monitoring, public reporting, and collaboration with nongovernmental organizations – have shaped stakeholder expectations of corporate responsibility initiatives generally, often setting the bar for other companies and industries.

Supply chain best practices continue to emerge. Key challenges for today’s leading companies include:

• Moving beyond monitoring to focus on supplier training and education;
• Addressing “code and monitoring fatigue” by consolidating brand, industry and multistakeholder compliance efforts; and
• Finding ways to demonstrate (and reward) improved social and environmental performance al all levels of global supply chains.

Current issues in the sourcing world were the focus of Intertek’s Ethical Sourcing Forum North America earlier this month. Intertek provides auditing, testing, quality assurance and certification services for multinational companies, so the conference had a decidedly corporate perspective, emphasizing current corporate compliance efforts and attracting attendees responsible for supply chain management.

The opening panel provided a valuable survey of current trends by three experts on the challenges of responsible sourcing.

Marcela Manubens, Senior Vice President, Global Human Rights & Social Responsibility at Phillips-Van Heusen, noted that:

• Leading compliance efforts continue to move beyond monitoring to emphasize training and education that seeks to create a culture of human rights compliance at all levels of the supply chain;
• Collaborative social compliance efforts are triggering antitrust concerns; and
• Committed consumers are the missing piece of the sustainability puzzle. In industries like apparel that compete intensely on price, will consumers reward the companies that take compliance seriously?

Auret van Heerden, President and CEO of the Fair Labor Association (FLA), from his perspective leading a multi-stakeholder effort to end sweatshop conditions in factories worldwide, pointed out that:

• Multinationals are still the sole source of regulation in most sourcing markets. Auret expands on this point in his FLA blog.
• Supply chain monitors in the field need to ask more than “what is happening?” and start asking “why?” Companies need diagnostic tools, metrics and key performance indicators that can identify the root causes of labor abuses, and accurately measure performance improvements over time.
• Less “top-down” control of supply chain monitoring can lead to greater compliance. Locally sustainable compliance solutions, such as local bodies that prioritize compliance issues, should be a goal of responsible sourcing efforts.

Finally, Doug Cahn, a consultant and former head of human rights programs at Reebok, emphasized the challenge for companies of managing monitoring data and highlighted two technology-driven compliance tools:

• The Fair Factories Clearinghouse; and
• The recently launched Clear Voice Hotline, an alternative to factory-controlled grievance procedures.

The growing use of technology as a compliance tool is an emerging theme:

• Craig Moss, Director of Corporate Programs and Training, at Social Accountability International noted that the development and acceptance of key performance indicators is being driven to a large extent by their adoption by corporate IT departments. The implication for corporate responsibility managers: make sure your social compliance indicators can be measured and are included in data management efforts.
• Web-based platforms are accelerating collaborative compliance efforts. The Electronic Industry Citizenship Coalition (EICC) and the Global e-Sustainability Initiative, for example, are developing a joint supply chain risk management tool. The Fair Labor Association is also developing a web portal for sharing factory assessments, training and performance indicators.

If companies managing global supply chains continue to lead the way on matters of corporate responsibility, as they have over the past fifteen years, technology-driven solutions are likely to become more relevant for all companies seeking to meet stakeholder expectations for responsible management.

(Full disclosure: I presented an historical overview of working hour standards, commissioned by Intertek, at an Intertek conference in 2004.)

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Posted on: March 24, 2008
Posted by: Anthony

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