Corporate supply chain social responsibility in the news

Today’s New York Times has a front-page story on how supply chain inspections of factories have become a vital link in the supply chain of overseas production.

An extensive examination by the authors reveals how the “inspection system intended to protect workers and ensure manufacturing quality is riddled with flaws. The inspections are often so superficial that they omit the most fundamental workplace safeguards like fire escapes. And even when inspectors are tough, factory managers find ways to trick them and hide serious violations, like child labor or locked exit doors. Dangerous conditions cited in the audits frequently take months to correct, often with little enforcement or follow-through to guarantee compliance.”

As we have discussed in previous posts, the issues associated with simple inspection is not enough to really address the shortcoming of an extended supply chain.  to truly be able to create a sound system of assuring responsible labor practices, we have advocated in our upcoming paper in the Supply Chain Management Review that a more holistic approach be employed.

The Times article notes that “unauthorized subcontracting, or farming work out, to an unapproved factory (as was the case for the Quaker Pet Group order in China), is “very, very common,” according to Gary Peck, founder and managing director of the S Group, a design and sourcing company based in Portland, Ore.”

 Integrating CSR into a supply chain strategy is not easy. Because of the singular emphasis on cost efficiency and supply assurance as the basis for supply chain strategy, other targets focusing on social aspects have often been ignored. This is made even more challenging by the apparent fact that customers are often unwilling to pay more for socially responsible products. Using this rubric, sourcing from regions with the lowest possible labor costs – often amounting to less than 50 dollars a month for workers – has been the most important criterion for Western retailers when selecting suppliers. Social responsibility not only competes with cost efficiency, but also with other targets such as customer requirements and flexibility. Introducing corporate social responsibility into this decision-making framework is going to require a new mindset and a commitment to change.

Still, social responsibility must become a fundamental part of a company’s vision, rather than just a concept or an aspiration. This has a number of implications.

• First, social responsibility has to become a daily practice and reflect the company’s values, voices, standards, and functional strategies.
• Second, it must be communicated externally, with defined targets to measure current progress.
• Third, CSR can be integrated into incentive systems, including bonuses, salary, and stock options.
• Fourth, as part of the “plan” element of the SCOR framework, companies can seek to make social responsibility a core part of supply chain strategy. This enables them to drive social responsibility as an integrated business strategy across multiple tiers in the supply chain.

Our upcoming paper is clearly timely, as this is an issue that is making front page headlines!