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Auditing, visibility and collaboration: The keys to a socially responsible supply chain

In the September issue of the Supply Chain Management Review, Andreas Wieland from Berlin Technical University and I have published a thoughtpiece on the application of social responsible criteria to the supply chain. As we discussed this concept, it became clear that three key elements lay at the foundation of creation of social responsibility when it came to outsourcing.

A program to audit suppliers across multiple tiers of the supply chain is an important first step. That process begins with a supplier code of conduct which provides a baseline for evaluating a supplier’s basic labor and human rights policies. Based on a supplier code of conduct policy, audits should target tier-one suppliers to ensure compliance with the code shown here; using a scorecard can help to quantify supplier performance on social impacts. Metrics about safety standards, discrimination, labor conditions, child labor, and wages can be made a part of every assessment of every supplier, as well as every business case; countermeasures to react to unacceptable values of these metrics can also be implemented.  This also includes tier 2 suppliers, implying that the entire global supply chain from end-to-end is beholden to a single global code of conduct. This standard also applies to business ethics, and is increasingly being adopted as a “one standard” view of the world by many global FMCG and retail companies.

Adopting technology to drive visibility is the second step.  Labor condition violations are most likely to happen in market regions that have poor infrastructure and are limited in their ability to invest in appropriate technology and systems that enable visibility. However, as part of the investment in their supply chains, retailers can help suppliers establish IT systems that render supply chain processes more transparent. Although a conventional IT network may not be in place in emerging regions, mobile technologies are already prevalent in these markets. Those familiar devices can be coupled with software that is able to cope with “big data” combined with multiple data feed devices. Together, they can create tracking capability of products from raw materials to the final consumers.

The third piece is around collaboration within the industry.  Very few companies can successfully manage a socially responsible supply chain in low cost regions on their own. For that reason, collaboration is an important final component. This can take a variety of forms. One way to collaborate with other companies from the same industry is to commit to joint standards. One such standard relates to fair trade. For example, the Fair Wear Foundation, a European non-profit organization aims at improving labor conditions and provides rules to be applied by its member companies. The foundation ensures that improvements are made by these companies.  Another example is Nike’s sustainability index, which eventually became the HIGG index adapted by the entire apparel industry. Corporate social responsibility isn’t easy – no one said it would be.  But it’s time to start down that road – before more lives are lost.