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July 24, 2007

BSR Proposes Going Beyond Monitoring to Achieve Truly Sustainable Supply Chains
    by Bill Baue

The new report from Business for Social Responsibility posits a four-pronged vision for shifting supply chain management from a surveillance model to a comprehensive, proactive solution. -- In the globalization explosion of the late 20th Century, corporate pursuit of cheaper labor stretched supply chains like rubber bands encircling the world to reach regions where supplier labor rights, human rights, and environmental standards typically matched pay. Since before the turn of the century, nongovernmental organizations (NGOs) and corporate social responsibility (CSR) practitioners have attempted to pull standards up through factory monitoring and auditing, achieving some success.

�We�ve seen a real flowering of efforts on fair working and environmental conditions in supply chains, but progress has plateaued,� said Aron Cramer, CEO of Business for Social Responsibility (BSR), a nonprofit that helps its 250 member companies strive toward CSR best practice.

In mid-July, BSR released a report entitled Beyond Monitoring: A New Vision for Sustainable Supply Chains. As the title implies, the report maps a new supply chain landscape, shifting from periodic surveillance to �catch� negative practices to comprehensive, systemic change toward positive practices. The report proposes a four-pronged approach.

First, buyer internal alignment to address the �unresolved tension� (to quote a World Bank report) between buyers� commercial objectives and their desire to ensure fair working conditions. Second, supplier ownership of good working and environmental conditions in their workplaces in exchange for buyers securing long-term relationships. Third, empowerment of workers, who take a stronger role in asserting and protecting their own rights. And fourth, public policy frameworks in recognition of the limits of voluntary initiatives and the value of setting level playing fields. The report breaks new ground with the final two pillars, which have largely been neglected until now.

�This report shines a light on the broader and deeper efforts necessary in order for supply chain labor conditions to improve, and as such it's certainly a positive addition,� said Dan Viederman, executive director of Verité, a NGO that monitors and audits factories. Verité just announced a symposium in China on worker engagement and social responsibility in supply chains, touching on the third pillar of Beyond Monitoring. �The activities described in the report are some of the more promising thrusts in current supply chain CSR efforts.�

The report cites examples specific to each pillar, as well as a couple of emerging models that encompass elements of all four pillars.

Illustrating the first pillar (buyer internal alignment) are balanced scorecards that rate supplier performance in terms of social, environmental and sourcing performance, such as those used by Jones Apparel Group. Other examples extend to encompass alignment across companies: the Suppliers Ethical Data Exchange (SEDEX) and the Fair Factories Clearinghouse, which allow companies to share audit and remediation reports.

Flipping this strategy from buyers to suppliers yields a second pillar (supplier ownership) example. The Electronics Industry Code of Conduct (EICC) and the Global eSustainability Initiative (GeSI) are building the Electronic Tool for Accountable Supply Chain (ETASC), where suppliers can upload audit and self-assessment data to share with all their buyers.

Under the third pillar, Nike recently broke ranks with standard corporate practice by setting up a program to educate workers on their rights to freedom of association (to be implemented in all its contract factories by 2011.) Finally, the World Bank�s Foreign Investment Advisory Service (FIAS) works with governments and stakeholders in countries such as El Salvador, Ghana, Peru, Lesotho, Vietnam, and Jordan to use CSR to increase labor standards as a means of boosting national competitiveness.

The first model encompassing all four Beyond Monitoring pillars is the International Labour Organization (ILO) Better Work initiative, which grew out of its Better Factories Cambodia program. The second is a collaborative program in the information and communication technology (ICT) industry in China that partners BSR with FIAS, EICC, and GeSI, which is described in depth in a July 12 report.

Despite its comprehensive framework and plethora of examples, Viederman finds the report falling short on one count.

�The missing piece is a clear articulation of the intended outcomes, and then a willingness for all of us--corporations, NGOs, consultants--to rigorously hold ourselves to achieving those outcomes and communicating whether we have or not,� Viederman told �Unless we as stakeholders readjust our perspective to focus on the outcomes from these corporate activities, and help companies to do a better job on reporting on that impact, we might be back in the same place five years from now talking hopefully yet again about a new wave of corporate interventions.�

The report does acknowledge the dearth of �efforts to identify benchmarks for success� and the inadequacy of measuring success by the percentage of factories monitored�a �blunt instrument� that is �better suited to diagnosing the illness than providing a cure.� While the report may be short on specific outcomes, BSR has a clear vision of sustainable supply chains.

�Ideally, we move toward a comprehensive approach to supply chain management that aligns both philosophically and practically with the goal of adopting a full lifecycle analysis approach,� BSR�s CEO Aron Cramer told �Such an approach strives for true sustainability starting with product design through materials selection to the environmental conditions of production, including the health and safety of workers in factories and farms.�

�It also encompasses more concise supply chains, which lower social and environmental footprints,� Cramer added. �Increasing public demand for green products should have a salutary effect on greening supply chains. And ultimately, we need to green the end-life of products so they feed back into the supply chain as recycled material�that helps close the loop, with supply chains playing an important role in sustainable product lifecycles.�

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