Rethinking Corporate Social Compliance in the Supply Chain
Managers are increasingly under pressure to ensure that their products bear attributes like “fair”, “ethical”, “green”, or “social”. Hereby, it becomes clear that solutions cannot just be found in the manager’s company, but in the company’s end-to-end supply chain. This has led companies to audit every company along their global supply chains against the own standards, which resulted in a large volume of auditing. The Rana Plaza building collapse, however, tragically showed that this top-down approach seems to fail. Departing from this observation, a new EY report, Human Rights and Professional Wrongs (pdf), provides an excellent summary of the problem and a set of recommendations for improvement. For example, the authors recommend to use third-party certifiers and auditors more strategically, to prevent orders from factories that have not had their status assessed, and to maintain longer relationships with a smaller number of suppliers. These recommendations could help to sharpen a blunt sword.
The Story of a Fair Mouse
If you believe that today’s post is about little rodents that behave equitably, then you have most probably not heard about NagerIT’s project to build fair computer mice. (Although the German term “nager” translates literally as “rodent”.) NagerIT took supply chain transparency to an extreme, disclosing the entire supply chain of their Fair Mouse (pdf) on their website, thereby highlighting suppliers with unknown details on working conditions. The Fair Mouse project reveals how difficult it can be to produce a product that is 100% fair: NagerIT admit that they stay with “the problem of the mining of the metals (except solder tin) and the assembly of the remaining components, which [they] still can not obtain from alternative (fair) suppliers”. However, a good start has already been made. The story of the Fair Mouse is, of course, a little like the story of the Fairphone, recently presented here by its founder.
Ethical Supply Chain Management
Ethical supply chain management is among the most neglected areas of our field. One of the issues covered by ethical SCM are animal rights, which are not covered by social supply chain management, a closely related area. An interesting application of ethical SCM comes from KAT, the Association for Controlled Alternative Animal Husbandry, “the inspection body in Germany and neighbouring EU countries for the scrutiny of eggs from alternative forms of hen rearing (free-range, barn and organic rearing)”. The system helps to put visibility into the supply chain. According to KAT, “[v]irtually all eggs offered for sale on the German market in the food retail trade bear the KAT inspection label”. You can, for example, use the code 0-DE-1234567 to test the system and will then be able to see pictures of the farm and also a map. “What is on the egg?” has also been released as a free app for mobile phones.
Angora Wool
Last week, a shocking video, created by People for the Ethical Treatment of Animals (PETA), was published. The images cast a dark shadow over global garment supply chains. In response, brands like H&M and C&A halted manufacturing of items containing Angora wool. This case, again, demonstrates the importance of ethical aspects in supply chain management.
A Moral Revision of Electronic Supply Chains (Guest Post by Bas van Abel, Fairphone)
To make the supply chain more transparent, Fairphone opens up the entire system to understand what shapes our economy. I am happy to share the following guest post by Bas van Abel, CEO and founder of Fairphone. Thank you for contributing to my blog.
Business practices in the supply chains of the electronics industry are in urgent need of moral revision. What do we know about the production of complex electronic devices and the people who make them? By making a phone, Fairphone wants to uncover and expose each link in the supply chain and step-by-step make interventions to improve the way things are made. Instead of hiding behind the complexity of the supply chain, Fairphone wants to unveil the problems associated with the smartphone production like poor labor conditions, the use of conflict minerals and the rise in electronic waste. To do so, we are searching for solutions by engaging in partnerships to come with alternatives to current models. In the first Fairphone that will be released in December 2013, conflict-free tin and tantalum from the Democratic Republic of the Congo has been integrated in the manufacturing of the phone, but that’s only a first step. By growing a movement of people who can share best practices and by creating a platform for discussion, Fairphone aims to raise the bar for the industry meanwhile giving people a choice for fairer electronics.
Bas has a background in interaction design and is an active member of the Maker Movement. He supports open design principles. He has set up projects such as the Waag Society’s Fablab and the Instructables restaurant (an open source restaurant). He is co-editor of the book “Open Design Now”.
Supply Chain Management and Corporate Social Responsibility
Two recent disasters in the garment industry, the Tazreen Fashions fire (2012) and the Rana Plaza building collapse (2013), have caused outrage over the lack of social responsibility across global supply chains. In our new article, The Socially Responsible Supply Chain: An Imperative for Global Corporations, Robert Handfield and I discuss three core principles that are essential for ensuring socially responsible business practices and successfully managing the extended global supply chain: First, a program to audit both products and suppliers needs to be implemented; this program must go beyond direct relationships with tier-one suppliers. Second, visibility is important for those categories of supply that cannot be directly controlled; hereby, electronic and smart technologies promise new opportunities. Finally, collaboration is needed to successfully managing a socially responsible supply chain; this includes collaboration across the industry, with local partners, and with universities. It is time to become serious about socially responsible supply chain management.
Wieland, A., & Handfield, R.B. (2013). The Socially Responsible Supply Chain: An Imperative for Global Corporations. Supply Chain Management Review, 17 (5), 22-29
Responsible Sourcing Insights
Sedex is a nonprofit organization dedicated “to driving improvements in ethical and responsible business practices in global supply chains”. Their new six-part “Responsible Sourcing Insights Films” series tackles key challenges in responsible supply chain management.
Full Product Transparency (Guest Post by Ramon Arratia, Interface)
In his new book, Full Product Transparency, sustainability pioneer Ramon Arratia argues that we have to move from corporate to product sustainability. I am happy that Ramon followed my invitation to contribute to my blog:
The conventional approach to exercising corporate responsibility in a company’s supply chain is to draft a company supplier standard and then audit for compliance using that document. Positive and usually well-intentioned, the impact is inherently limited by the narrow scope of the dialogue and the teacher–student nature of the relationship. The typical 700 questions questionnaire sent to suppliers usually asks meaningless things such as: “Does your organisation have an environmental policy in place?” Or: “Does your organisation have an environmental management system (EMS) in place?” This is just bureaucracy for the sake of it, taking lots of time from both parts and adding little transformative value to the real environmental impacts of the products. The ideal question for suppliers is: “Send me the environmental product declaration (EPD) of your product and your plan to radically improve it”. After all, you are not buying the whole company. Besides, around 80% of the environmental impacts of products are not in the manufacturer’s realms but in their supply chain.
Ramon Arratia is a sustainability director at Interface and has previously been employed in similar roles at Vodafone and Ericsson. Interface is the winner of the International Green Awards 2012. Ramon is also a blogger of Cut the Fluff.
Creating Added Value beyond Corporate Boundaries
Some months ago, Symrise, a global supplier of fragrances, flavors, active ingredients, and aroma chemicals, has won the German Sustainability Award 2012 in the “Germany’s Most Sustainable Initiatives” category for its approach to procure vanilla in Madagascar: Symrise closely collaborates with more than 1,000 vanilla farmers and “the entire procurement process takes place locally, from cultivation and harvesting, to the fermentation of the beans, all the way through to extraction”. The company partners with NGOs, development organizations, and farmers’ associations to ensure “that its projects in the areas of environmental protection, income diversification, nutrition, health and education continue to blossom over the long term”. Symrise benefits from these activities by receiving reliable access to top-quality raw materials. This initiative demonstrates how social responsibility, environmental protection, and business success can go hand in hand. It is also an example of good supply chain management, as added value is created beyond corporate boundaries.
Bangladesh Clothes Factory Fire
At the end of last month, a garment factory fire in Bangladesh killed more than 100 people and injured many more. Let us view this tragedy from a supply chain perspective. Supply chains are typically customer-focused. The incident suggests that customers expect cheap prices, but are not willing to pay for social standards. The lowest possible labor costs seem to be the single criterion for Western retailers when selecting suppliers. In Bangladesh, mostly women and often children are exposed to risks from lacking fire safety standards in factories. Who is to blame? Brands whose marketing experts create new consumer needs? Consumers who do not know a product’s supply chain? Retailers who are forced to select the cheapest suppliers to survive competition? Suppliers who do not invest in fire safety? Human rights groups urge Western governments to press retailers and apparel brands to join the Bangladesh Fire and Building Safety Agreement.
