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Global Compact Policy Dialogue: Supply Chain Management and Partnerships
(联合国供应链管理及合作会议)

12 – 13 June, 2003, UN Headquarters, New York

Summary Report of Supply Chain Management Sessions

Debbie O’Brien, Director, Business and Human Rights Program, Business for Social Responsibility

Outcomes: The following were identified as potential outcomes/next steps for the Policy Dialogue on Supply Chain Management.

All GC companies to seriously explore how best to go from top-down enforcement management strategies to empowerment, capacity building and training. Expectation is that the examples of good practice presented and the solutions suggested will facilitate Global Compact companies to take a more proactive approach in integrating the nine principles in the management of their supply chain management.

Increased awareness and understanding of the value that multistakeholder global initiatives have in solving supply chain management problems that are beyond the reach of individual companies or sectors. The following initiatives were presented at the meeting: Ethical Trading Initiative, Rainforest Alliance coffee initiative, Global Alliance, the Fair Labour Association and the Lawyer’s Committee for Human Rights database on compliance with labour standards. Expectations are that Global Compact participating companies will consider how best to actively support these types of initiatives.

In conjunction with the World Bank, the Global Compact will organize regional meetings to increase awareness of good practice and stimulate increased measures for capacity building among suppliers. The first meeting will take place in Brazil at the end of the year, and negotiations are currently being undertaken for meetings in Japan and China this fall. It is hoped that these meetings will generate sufficient experiences and practice to articulate an upstream analytical framework.

The Global Compact secretariat will work with industry associations, labour, NGOs and CSR organizations to identify existing tools and databases related to supply chain management. We will then develop a strategy for dissemination and awareness-raising through the GC website, the national networks and the regional meetings. A working group will explore the possibility of developing a simple, pragmatic business guide to implementing the nine principles in supply chain management.

Introduction and overview:

The first meeting of the Global Compact policy dialogue on Supply Chain Management was held in June 2003, in conjunction with the forum on Partnerships. Over 200 attendees including representatives from companies, NGOs, business associations, think tanks, the academic community and the UN system gathered to discuss how best to apply the principles of the Global Compact to their efforts to integrate Corporate Social Responsibility (CSR) practices into their global supply chain policies and practices.

Opening Plenary Session

Mark Malloch Brown, Administrator of the UNDP, challenged participants in the convening session to consider how globalization can work for all, including corporations. He asked companies to use their purchasing power to help develop small and medium-sized enterprises across the developing world. George Heller, CEO of Hudson’s Bay articulated the company’s efforts to collaborate with other companies to harmonize standards and develop joint implementation programs to leverage their collective power with suppliers. Barbara Krumsick, President and CEO of Calvert focused on the advantages of partnerships to add capacity, expand the influence and help develop a shared vision. Michael Posner of the Lawyer’s Committee for Human Rights (LCHR) discussed the need for clear and consistent measurements for ensuring compliance with existing standards, credible independent monitoring of conditions, increased public disclosure and transparency, and meaningful engagement with NGOs and unions in local sourcing communities.

Obstacles to effective implementation of CSR supply chain policies

The following themes were prevalent throughout the remaining presentations and ensuing discussions.

The current system emphasizes monitoring to the exclusion of remediation: Panelists agreed that despite an increased number of independent audits, workplace conditions remain poor because the focus on compliance lacks the needed sustainable component of assuring remediation. Some attribute the wide variation in the quality and type of auditing regimes as the source of the uneven conditions. There was disagreement about the importance of independent verification: some felt it was critical to guarantee an impartial assessment, while others believed that too many resources are currently devoted to monitoring, and could be better used elsewhere. Even those more focused on environmental issues agreed that the top priority for implementation of the principles is social issues, but that measuring their compliance and developing management systems remains a challenge.

Collective company action is critical: Much discussion was focused on the need for collaborative efforts amongst companies to increase leverage with suppliers, as expressed by the CEO of Hudson’s Bay. Sustainable compliance can only be achieved when all companies in a given industry express the same message to suppliers about the need to improve conditions. One panelist blamed the “free rider” problem for poor conditions, highlighting the disparity in the level of gravity with which companies remediate and punish factories unwilling to comply with standards in a sustainable manner. The

business audience needs to widen considerably to ensure genuine implementation of standards, both within and across industries

Conflicting performance measures within companies lead to inconsistent implementation schemes: Until true accountability for meeting environmental and labor standards is addressed in employee compensation, procurement and sourcing managers will not emphasize compliance above the sometimes conflicting demands of price, quality and delivery. The standards are not sufficient as a stand-alone policy; they must be integrated into core business strategies.

Despite years of work to improve conditions, many issues of non-compliance remain: Freedom of association and working hours were most commonly cited as areas of continued concern in the workplace. One panelist suggested that freedom of association must begin with true capacity building, occurring at the worker level. Legal obstacles to genuine freedom of association in places like China and Mexico were also highlighted. Meeting company standards ion working hours proves challenging because many workers want to work more than sixty hours a week. Many noted that specific issues in China, as the primary “supplier to the world”, must be addressed.

For companies new to the development of supply chain issues, a clear roadmap is missing for how to develop policy and implementation schemes: The GC principles on human rights and labor practices are ill defined and lack specificity – participants specifically mentioned work with indigenous peoples and sought clarity on what it means to be complicit in human rights abuses, particularly in cases where corporations cannot control outcome. Some companies claimed they lack sufficient resources to examine the practices of their suppliers. Many stated uncertainty about what criteria should be applied to prioritize application of supply chain standards, particularly in cases where companies have thousands of suppliers. The increased use of e-procurement to gather bids from suppliers makes it more difficult to develop longer-term relationships with suppliers, which some suggested may be necessary to ensure sustainable practices.

The business case is currently ill defined: It was commonly held that a clear methodology to measure the costs and benefits associated with responsible supply chain practices is lacking, particularly for the supplier. One panelist suggested that suppliers are lacking the adequate skills/technology to build capacity, and that companies can provide training and education on these issues in many cases. It is important to respect cultural values and develop strong relationships with suppliers to help assist in the development of sustainable management practices. One supplier commented that he is able to attract additional business based on his responsible practices, which does contribute in part to the business case.

Any supply chain policy must address workers?needs: Many panelists focused on the need for suppliers to survey their employees about their basic needs, and attempt to meet those needs. The living wage continues to be a difficult issue to address, because it currently lacks clear definition, and the full impact of its implementation is unclear. Some suggested that beginning with ensuring that minimum wages are paid would be a good

start. Others highlighted the potential danger that the supply chain discussion can become too focused on workplace, and ignore potential community outreach and empowerment that can address root causes of civil society problems, including living conditions of workers and raw materials

The role of governments must increase for sustainable solutions: Local governments need to take responsibility for enforcing existing standards, and raising legal standards to meet international standards

There is an increasing need for transparency of company actions and workplace conditions:

It was recommended that reporting of workplace conditions be routine, consistent, and complete within the scope that is laid out, and there currently is a dearth of consistent units of measurement to assess compliance across companies, countries, and categories.

Potential solutions for overcoming barriers: The following solutions were proposed to some of the obstacles identified:

Create tools for implementing and defining the Global Compact principles to help companies imbed them in strategic business strategies

Companies should develop incentives and rewards for good practices, including long-term commitments to responsible suppliers and performance standards for sourcing and procurement managers

Public education of consumers is crucial, to develop a stronger incentive mechanism for companies

Harmonization and collaboration of standards, systems, initiatives and suppliers is needed: Must have both collaboration and harmonization to strengthen collective power of companies, and share implementation systems and, most importantly, ensure successful remediation. It was suggested that a potential first step would include working within industry sectors, then across them. Provide services directly to workers, including meeting basic needs and education about legal rights

Use tools in place for environmental management systems and develop similar tools for social issues – potentially using ISO methodology

Implement policies for first-tier suppliers and put responsibility for sub-contractors on them as a first step so implementation is not overwhelming for those just beginning.

Learn from quality standards: what made implementation so successful and how can we apply lessons?

Develop shared database of information both to leverage collective knowledge and to learn from trends in specific locations

Create methodology so both companies and suppliers can measure business benefits and risks associated with successful implementation of supply chain practices.

 

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