Trends: Etireno: a new chapter in the history of supply chain issues
August 01, 2001
Flash back
In the last issue of Briefing, we outlined some key pressures on companies to take a closer interest in the social impacts of their supply chains – focusing on the growing tendency for aid/development NGOs to call companies to account for conditions in developing countries in which they have some involvement. They increasingly do this publicly, through attention-grabbing headlines targeting those companies’ consumers. We noted how the slave ship Etireno brought a new group of companies under the spotlight, enlarging the debate beyond those with the simplest, most readily traceable supply chains.
We highlighted some key – but hitherto largely unconnected – initiatives which have helped shape opinion – among NGOs, the public, and latterly some companies – about what supply chain issues companies need to address. In essence, they are environmental sustainability, labour conditions and human rights, and fair participation in world trade for people in developing markets.
Which companies are affected?
Now, some advice on how to think about your supply chain. Bear in mind this does not just apply to the companies we mentioned in our last article – clothes, horticulture, and now the more complex chain for the beverage crop business – cocoa, tea and coffee. Nor is it confined to industries we associate with countries in conflict, where the issues will always be highly political – oil and gas, diamonds, precious metals. Other sectors increasingly in the spotlight include tourism (land rights, construction) and the fishing industry (over-fishing) – neither of which have standard, buyer-driven supply chains. Banks are in the firing line – for who they lend to (more on the fuller value chain later). Further down the line are components for electronic goods such as the metals used to make mobile phones.
To remember the points below, think value CHAINS:
1. Clarify what you want to achieve
Before going any further, stop and ask yourself what you want to achieve at the end of the process we are about to recommend. What does your company stand for? Does that include being socially responsible? Do you want other people to see it as socially responsible? Then you must recognise that your social impacts extend beyond your owned and operated business. Is it fair for the person at the far end of your supply chain – growing a crop for example – to be struggling to make ends meet, whilst your company profits? Could you justify this? What message does this send round the world about capitalism and free markets? Big proportions of a company’s economic value can stem from its supply chains. It must have a policy on how to ensure this value is distributed as fairly as possible. This – and the advice below – may seem obvious, but our experience is that it is very relevant to many companies.
Even if you do not aspire to be a socially responsible company, if you do not take action your reputation is at risk: you could face a consumer boycott; you will not be fulfilling the requirements of the Turnbull Committee or the Company Law Review to disclose information about your business that could affect its future performance.
2. Hear the questions.
Start by ‘hearing’ the kind of questions that might be asked about your company. Do you manufacture or sell anything using materials that have been grown or sourced elsewhere. What are they? Flowers or vegetables? Wood? Fruit? Tea, coffee or cocoa? Fish? Gold or other metals? Oil? Who is involved in getting those products from their raw state to you? The farmers who grow them? A processor? Are they driven overland? Shipped? Flown? All these links in the chain are, to a greater or lesser extent, your stakeholders.
3. Assess the full value chain
Having looked at your supply chain -your ‘backward linkages’ as a company – look at your ‘forward linkages’ – who else you involve in bringing your product to market. They are also your stakeholders. The diagram on the right, produced by Mick, when at the Natural Resources Institute, traces just three types of chain for bringing three, very different crops to market.
4. Impose priorities
This process seems daunting. It need not be. A company that makes and sells fruit juice should think first about the conditions in which the Mexican immigrants in California grew and picked the fruit – but not overlook the provenance of the carton in which the juice is sold. This is not something you will necessarily have the resources to tackle all at once. Your brand – what you are known for – will help you prioritise. The public could reasonably expect you to have thought about all the different players involved, and to have some principles on how you will treat them, and standards you expect. For example, could you contribute to fairer wages and better conditions for the fruit growers – through advice on farming techniques, how to access other markets, better equipment, or safety procedures for handling pesticides? Could you help protect their environment for future generations? What about the trucks carrying your product through surrounding towns. Is there a safety issue? Pollution? If you are a small player, with limited influence, could you get together with other buyers to correct abuses? You see the approach. The public would not necessarily expect you to be taking active steps to address all of these issues at once. Don’t ignore them, though, just because they may not have a high profile – yet.
For banks the position is clearer still – their impact on the environment through sourcing is nothing like as significant as their impact through lending.
You need to go through this thought process, so that you can prioritise the issues in your value chain.
5. Navigate the different agendas
Another reason for having your own objectives clear is to enable you to navigate your way through other agendas. A tempting option at this stage is to sign up to a set of standards or join an initiative that is active in one or more of the areas you are concerned about, as a kind of safe haven. But bear in mind that this route may not take you where you want to go. Let us go back to the coffee company to illustrate this. The amount you pay for your coffee really does impact the livelihoods of farmers who grow your coffee beans, and you want to improve their lot. But the organisation you sign up to seems more concerned about trade union rights. Is that what the coffee growers want? Did anyone ask them?
We are not advising against ever joining anything. But think about what resources you have to give to them,as they can be time-consuming – do you want to be a passive subscriber in many of them, or very active in a few? That said, you will probably gain from sharing experience with other companies. There is some safety in numbers. An accreditation or seal of approval from a third party may help show you mean business. But look carefully at whose interests an initiative is really representing.
Also, check how broad the range of issues covered is. It is encouraging to see the growth of national organisations which genuinely represent workers’ issues, and/or attempt to look at CSR issues in the round, rather than a narrow focus on one or two issues. The Export Flower Growers’ Association of Zimbabwe is one such (http://www.samara. co.zw); the Kenya Flower Council another (http://www.africaonline.co.ke kfc/ responsibility.html); Florverde, a Colombian initiative, another (http://www.colombianflowers.com). Sometimes the voices you need to hear are the quietest.
Beware of oversimplification too: the ethical investment movement risks encouraging investors to pull out of sectors or countries with higher social and environmental risks – agriculture in Zambia, for example – curtailing much-needed investment in the developing world. Who put their hand up to that as an objective? Companies can usefully talk to the ethical investment community to ensure this isn’t overlooked.
6. Share information – or be ready to
You may not be ready to rush into a full social report. But be ready with information about your policies when you are asked for it, as you increasingly will be. Some companies now publish supplier codes of conduct, but not all share them as widely as United Utilities (http://www.unitedutilities.com/ for_your_information), Adidas (policy on social and environmental affairs and standards of engagement – http://www.adidas.com), McDonalds (http://www.mcdonalds.com/corporate/social/ animalwelfare), Marks & Spencer (www2.marksandspencer.com/the company/ourcommitmenttosociety/ ethical), Procter & Gamble (vendor relations guidelines on http://www.pg.com), Sainsbury’s (http://www. j-sainsbury.co.uk/ csr/codeofpractice) and Sara Lee (http://www.saralee.com/corporate_overview/supplier_selection.html). Shell is exemplary in publishing information on suppliers with which it has terminated relationships because they fall short of its standards (http://www.shell.com).
Who’s ahead?
So, which companies are grappling with these issues? B&Q’s much-cited work on being a better neighbour, is a good example – their goal is that “the quality of life of everyone in our entire supply chain should be better as a result of trading with us” (http://www.diy.com/bq/templates). This is a good way to think. Littlewoods, an active member of the Ethical Trading Initiative, has given long-term contracts to its suppliers in developing countries, building trust to encourage them to change their labour practices (http://www.littlewoods.co.uk/corporate/corporate_information/supplier/htm). Cadbury has interesting work in progress, and, dare we say it, some of the tobacco companies, which are putting some exceptional work into sustainable agriculture. Also, talk to Pentland, the branded sportswear and fashion company, which has gone far beyond labour issues in thinking about what CSR means for its supply chain (http://www.pentland.com).
The social and environmental impacts of getting your company’s act together on its value chain could be far beyond what you could imagine. Even if you are not interested in being socially responsible, don’t wait until the journalists are knocking on your door.
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